LAW122 Notes

- What is Law?
o A set of principles and rules that courts will enforce
o A way of thinking (or reasoning) about these principles and rules
o It is not just the result of a case (who won?) that matters. The reasons for the
result are where law happens. Law is bound up in the reasoning! So, it is
important to ask “why” and “how”, not just “who won”.
- Why Study Law in Business?
o 1. Business decisions have legal consequences, which affect profits and losses
 Some decisions impose liability, others create opportunities
 Negative: e.g. dumping pollutants into environment
 Positive: e.g. binding contractual party to promise
o 2. Law sets the framework for risk; it gives you tools to manage the risk
 e.g. insurance, exclusion and limitation clauses, incorporation
- Risk Management

o
o Businesses must understand and manage legal risks
 1. Identification: recognize legal risks
 2. Evaluation: assessment of legal risks
 3. Response: reaction to legal risks
- Sources of Law:
Civil Law
 Originated in Ancient Rome, largely written and practiced in France,
Quebec etc.
Common Law
 Originated in England, practiced in England, Australia, most of Canada
 Judge made law (dispute based), largely unwritten and based on procedure
- Public and Private Law
o Public
 Our life in the public square: governs our relationship with the
government and with society as a whole
 Ex: constitutional law, tax, criminal law

o
o Private
 Our private lives: governs matters of private concern and the relationship
we have with other private individuals
 Ex: tort, contract law, property law

- Hierarchy of Sources of Law

1. Constitution
2. Legislation:
a. Laws created by Parliament of Legislature
 3. Courts:
a. Interpret and apply constitution and legislation
b. Create and apply “common law”
- The Constitution
o Provides basic rules of society, including our legal and political systems
1. Highest source of law
a. Any law inconsistent with constitution: no force or effect
2. Difficult to amend
a. Requires consent of both Parliament and Legislatures of two-thirds of all
provinces with at least 50% pf population
- Federalism and Division of Powers
o Two levels of government: federal and provincial
o The Constitution divides legislative authority
 Federal government: ex. crime, bankruptcy, copyright (s. 91)
 Provincial government: ex. property, civil rights (s. 92)
o When a government legislates outside its authority, the law us ultra vires (beyond
the power of) and the law has no force or effect (s. 52)

o
- Federal Government Jurisdiction
o Ultra Vires
 Education, Civil Rights, Matter of a local nature within the province
o Intra Vires (s. 91)
 Banking, Copyright, Criminal Law, Trade
- Provincial Government Jurisdiction
o Intra Vires (s. 92)
 Education, Civil Rights, Matters of a local nature within the province
o Ultra Vires
 Copyright, Banking, Criminal Law, Trade
- Problem
 o What about ‘telecommunications’ and ‘air travel’?
o The Residual Power: the federal government has authority over everything that
is not specifically mentioned
- Conflicting Legislations
o Problem: Assume that both level of government create legislation that conflicts
o The Doctrine of Federal Paramountcy determines which law is preeminent
based on Constitution’s division of powers
- Charter of Rights and Freedoms
o Part of Constitution since 1982
o Rights and freedoms commonly affecting business:
 Fundamental freedoms ex. freedom of religion, expression)
 Mobility rights
 Equality rights
o Section 52: Constitution as supreme law
 Law inconsistent with Charter: “of no force or effect”

-
- Limitations on Charter Rights
o Charter only applies to government action
 Not directly applicable against private businesses
o Charter does not apply against corporations – but it may or may not apply in
favour of private business
 Some provisions extend to “everyone”
 art. 2(b) “everyone”: freedom of expression
 Other provisions only protect “individuals”
 art. 15: equality right
o Charter rights subject to “reasonable limitation”
  S. 1 balances individual rights and community interest
o Charter subject to “notwithstanding clause”
 Government can override some rights and freedoms but is very rarely used
- Several Ways to Attack a Law
o On the ground of a violation of division of powers
 Ex. it is ultra vires and therefore void
o On the ground of a violation of Charter of Rights
 It violates some fundamental rights
- Charter Remedies
1. Declaration
2. Injunction
3. Striking Down
4. Severance, Reading Down, Reading In
5. Damages

- Aboriginal and Treaty Rights

- Section 35 of the Constitution Act states:
o 35. (1) The existing aboriginal and treaty rights of the aboriginal peoples of
Canada are hereby recognized and affirmed.
o (2) In this Act, “aboriginal peoples of Canada” includes the Indian, Inuit and
Métis peoples of Canada.
o (3) For greater certainty, in subsection (1) “treaty rights” includes rights that now
exist by way of land claims agreements or may be so acquired.
o (4) Notwithstanding any other provision of this Act, the aboriginal and treaty
rights referred to in subsection (1) are guaranteed equally to male and female
persons.
- Treaty Rights
 o Outlined in the treaty document, an agreement between the Crown and Aboriginal
groups – as per section 35, Aboriginal, Inuit, and Metis peoples of Canada;
treaties may be written or oral
- Who is the Crown? Difference emanations, including:
o Imperial, Federal, Provincial
- Treaty Inclusions
o Affirmation of alliance between Crown, representing Britain/Canada and
Indigenous peoples.
o Recognition of hunting and fishing rights, perhaps harvesting.
o Provision of reserve allotments;
o Surrender of traditional lands (asserted by Canada, but disputed by First Nations);
o Annuity payments (minimal in treaties (eg $5/yr per person, but reference
Restoule);
o Provisions of supplies (grain, animals, twine, guns, blankets, etc.);
o Schools, Medicine chest, gifts to chiefs.
- Aboriginal Rights
o Collective rights that are associated with or emanate from a First Nation’s pre-
contact use and occupation of land.
o Attached to a location of use, but need not depend on existing land rights
o Thus, rights are place-based and dependent on methods of use (eg. title to land,
self-government, hunting and fishing, resource use), but may also be rooted in
traditional culture, customs, and methods (Van der Peet SCC, 1996), yet allow for
evolution of technology and practices (such as hunting & fishing rights, resource
use – Sparrow SCC, 1990; Van der Peet SCC, 1996)
- Duty to Consult
o S. 35 – recognizes and affirms rights and imposes a fiduciary duty on the Crown
[see Sparrow (SCC, 1990)]
o The Crown’s duty to consult plays a role in determining whether the Crown has
appropriately respected the Aboriginal and treaty rights in section 35
o The duty to consult exists where the Crown has actual or constructive knowledge
that its conduct has the potential to adversely affect a recognized or possible
Aboriginal or Treaty right, thereby requiring “meaningful consultation” with the
affected group;

o
o What triggers the duty to consult? (Legal test)
o The Crown knows or ought to know that its actions or decision:
1. could potentially have a harmful impact on
 2. a right that has already been established or may be credibly asserted
(Haida Nation SCC, 2004)
o What is the content of the duty to consult?
1. Strength of the rights claim
2. Seriousness of the harmful impact
o Does a First Nation hold a “veto” to reject a business proponent’s project?
o Is the duty to consult a mechanism to advance “economic reconciliation”?

- Canada’s Court System

-
- Court Hierarchy: Why it Matters?
o Hierarchy determines appeal route (where to go for a trial)
o Also determines what decisions are binding on courts (which rules court must
apply)
o All hierarchies end with Supreme Court of Canada (SCC)
- The Doctrine of Precedent
o Stare Decisis: Judges must follow previous decisions from courts higher in same
hierarchy: “Like cases must be decided alike”
o Precedent cases from prior judgments with similar facts
o Other court decisions in other jurisdictions (ex. provinces) may be persuasive but
not binding
o Rule of Law: we resolve disputes using the law, not brute force and not by the
private opinion of the judge hearing the case

o No precedents by Alberta Court of Appeal and Supreme Court of Canada

o Superior Court of BC and Saskatchewan Court of Appeal: Liability
o Superior Court in Quebec and Ontario Court of Appeal: No Liability

- How to Solve a Legal Question?

o Start with the facts:
 
Read carefully and understand the facts as they determine the relevance of
any legal points you make later
o Identify the relevant legal issues:
 What are the parties fighting about? What needs to be resolved? Ex. is the
contact enforceable? Has a committed a tor against B?
 The order of the issues matters; ex. was there an offer? Was there an
acceptance?
 Deal with one issue at a time
o Identify the Rule of law relevant to the issue
 Is there legal principle, rule or test relevant? State it in the abstract without
referring to the facts yet
 Cite supporting authorities
o Apply the law to the facts
 Identify the anchor fact = a fact given that links the law to the fact pattern
 Application = law + anchor facts
 Drive to your conclusion, which resolves the “issue”
- What to Avoid
o Too general introduction and conclusion
o Irrelevancy
o Repeating facts unless incorporated as part of the discussion of the legal issue or
application
o Facts of cases cited unless distinguished
o Vague statements and unsupported generalizations since law is a precise and
detailed subject
IPAC Rules

Ex.
You live in the city of Peterborough. City Council recently created By-law 2720, which states:
1. No bill, poster, sign, or other advertisement of any nature whatsoever shall be attached to any public property, including any pole, post, or other
object which is used for the purpose of carrying the transmission lines of any telephone, telegraph, or electric power company within the limits of
the city of Peterborough.
2. Every person who contravenes this by-law is guilty of an offence and liable to a penalty not to exceed two thousand dollars ($2,000.00)
exclusive of costs for each and every such offence.
You operate a nightclub that regularly features live musical performances. You advertise those performances by posting signs on telephone poles.
You have been charged under By-law 2720. You are worried about the possibility of paying a fine, but you are more worried about the general
effect that the by-law will have on your business. You simply cannot afford to buy advertising space in newspapers or on television. If you cannot
attach your advertisements to city-owned poles, you will not be able to effectively advertise at all.
Is it possible for you to successfully challenge By-law 2720 under the Charter of Rights and Freedoms? Explain the arguments that you would
make to a court. Explain how the city would likely respond if the court agreed that the by-law violated your Charter rights.

IPAC for nightclub owner

I: Does the Charter apply to the problem?
P: Charter of Rights: 2b: media of communication (advertising)
A: City of Peterborough’s by law violates the fundamental freedom (2b), media of
communication because it limits the nightclub operator from advertising their club
C: Yes, it applies to the nightclub operator and (2b) rights have been violated
IPAC for Government
I: does the Chater apply?
P: Charter of Rights section 1: reasonable limits
A: The rights protect public safety, government costs
C: Up to the judge
Ch 2: Litigation and Alternative Dispute Resolution
The Litigation Process
Who Can Sue and Be Sued

 Individuals: Any adult can sue or be sued (citizenship not required).

 Minors / Mentally incapacitated: Must act through a litigation guardian.
 Corporations: Legal “persons,” can sue/be sued.
 Unincorporated groups: Generally cannot sue/be sued; must name individual
members (exception: trade unions).
 Government: Can be sued under specific Crown Liability legislation; restrictions
apply.
Class Actions

 Allow one or a few plaintiffs to sue on behalf of many.

 Used when individual claims are small but collectively large (e.g., Garland v.
Consumers’ Gas Co.).
 Common uses: product liability, mass torts, discrimination, banking/service fees,
securities, price-fixing, etc.
 Requirements for certification:
1. Common issues among claimants.
2. Representative plaintiff who fairly represents the group.
3. Notification to potential members (usually opt-out).
4. Preferable procedure for handling claims.
5. Court certification – allows case to proceed as a class action.
 Purpose: Makes lawsuits viable against large defendants and promotes efficiency.

Legal Representation

 Self-representation: Allowed, but risky; courts discourage it for complex matters.

 Lawyers: Must meet education, bar, and Law Society requirements.
o Must carry liability insurance and follow a code of conduct.
o Misconduct = fines, suspension, or disbarment.
o Privilege: Communications are confidential.
 Paralegals: Licensed (especially in Ontario) for limited areas (e.g., Small Claims Court,
tribunals).
o Must be trained, insured, and follow conduct rules.
o Cannot appear in higher courts.

Pleadings

 Statement of Claim: Filed by plaintiff, outlines complaint and desired remedy.

 Statement of Defence: Defendant’s version of events and denials.
 Counterclaim: Defendant’s claim against plaintiff.
 Reply: Plaintiff’s response to defence/counterclaim.
  Demand for Particulars: Request for more detail.
 Default Judgment: If defendant fails to respond, plaintiff wins automatically.

Pre-Trial Process

 Examination for Discovery: Each side questions the other under oath to gather
evidence.
o Aims to clarify issues, encourage settlement.
 Settlement: Most cases (~95%) end here, often through negotiation.
 Pre-Trial Conference: Meeting with a judge to assess the case; encourages settlement.
 Mediation: Neutral mediator helps parties reach an agreement (mandatory in some
provinces).

Trial

 Usually judge alone (jury rare in civil cases).

 Plaintiff presents first, then defendant.
 Evidence:
o Ordinary witnesses (first-hand facts).
o Expert witnesses (opinions/analysis).
 Examination-in-chief: Direct questioning by the calling party.
 Cross-examination: Opposing party questions the witness.

Court System & Precedent

 Hierarchy: Each province has its own courts; all end with the Supreme Court of Canada.
 Doctrine of Precedent (Stare Decisis): Lower courts must follow higher court rulings
within the same hierarchy.
 Persuasive Authority: Decisions from other provinces or foreign courts are not binding
but may be persuasive.
 Federal vs. Provincial: Separate court systems; one does not bind the other.
 Rule of Law: Legal disputes are resolved through laws, ensuring fairness and
consistency.

Administrative Law & Tribunals

 Purpose: Government delegates decision-making to specialized tribunals for efficiency.

 Tribunal: Quasi-judicial body composed of experts rather than judges.
 Examples of Tribunals:
o Competition Tribunal – unfair business practices
o International Trade Tribunal – trade/dumping issues
o Employment Equity Tribunal – workplace discrimination/pay equity
o Workplace Safety and Insurance Appeals Tribunal – safety disputes
o Human Rights Tribunal – discrimination and accommodation cases
 Court Oversight: Courts may conduct judicial reviews but rarely overturn tribunal
decisions.
Alternative Dispute Resolution (ADR)

 Definition: Methods for resolving disputes outside of court.

 Why ADR: Litigation is expensive, slow, public, and often harms relationships.

Neutral Party
Type Binding? Confidential Relationship Cost/Speed
Party Control

Negotiation No No Full Yes Excellent Very Fast

Mediation Mediator No High Yes Excellent Fast

Usually Faster than

Arbitration Arbitrator Moderate Yes Moderate
Yes court

Negotiation: Direct settlement between parties.

Mediation: Facilitated discussion to reach a compromise; non-binding.
Arbitration: Neutral third party decides outcome; usually binding.

Case Problem:
Ch 3: Torts
Structure:
1. Primary Liability (PL) brings forward a lawsuit – in the “statement of claim”, the PL has
to set out the facts that prove the elements of the tort
2. PL – the onus is on the PL to prove the elements of the tort
3. Defenses – are available to the Def’d and the type of defence may vary according to the
type of tort – “the statement of defence” sets out Def’d’s facts
4. Remedy – in the statement of claim, the PL request a remedy for example, compensation
Three aspects of all Torts:
- PL has to prove:
1. Wrongful conduct of the Defendant (def’d)
a. What constitutes wrongful conduct differs for each type of tort
2. Causation of harm by the wrongful conduct
a. There must be a direct connection between the wrongful conduct of the def’d and
the harm suffered by the PL – this connection is causation
3. Harm to the PL
Introduction to Tort Law
- Starting the Legal Analysis: Suppose you are given a set of facts and asked to “spot the
issue”. Where do you start?
- Ask yourself:
o Is this a tort or a different type of legal wrong?
o If this is a tort, what kind of tort is it? (intentional, negligent, strict liability)
o Now, what tort specifically is involved?
Tort Law
- A failure to fulfill a private obligation imposed by law
- Tort Law includes almost every sort of private law wrong outside of breach of contract
- Social Purpose: Tort law discourages people from committing private wrongs by
requiring them to compensate & restore the wronged party
- Tortfeasor (defendant) is a person who commits a tort
Tort vs. Crime
- Tort = Private Wrong
o Parties involved: breach of obligation to a person
o Action: claim by individual plaintiff
o Remedy: usual remedy of compensatory damages
o Held: liable – balance of probabilities
- Crime = Public Wrong
o Parties involved: breach of obligation to society
o Action: prosecution by Crown
o Remedy: usual remedy of punishment
o Held: guilty – beyond a reasonable doubt

Tort vs. Contract

- Tort
o Source of Obligation and Enforceability: regardless of any agreement between the
parties
o Damages: as if the tort had not occurred
o Risk: unexpected: might require more than a person is able to give
- Contract
o Source of Obligation and Enforceability: only by or against a party to the
contract; doctrine of privity
o Damages: as if the contract had been performed
o Risk: obligations known in advance; always possible to limit the obligations to
promises that can be fulfilled
 o

Remedies
- General Remedies for Torts
- 1. Compensatory Damages within the limits of
o Remoteness
o Mitigation
- 2. Punitive damages (outrageous or reprehensible wrong
- 3. Nominal damages
- 4. Injunction
Types of Torts
- Strict Liability
o Applies to very risky activities and injuries causes by wild or exotic pets or
wandering cattl.
- Intentional
o Committing battery by shoving someone or throwing something on another
person’s lawn
- Negligence
o When harm is caused carelessly

Vicarious Liability = being liable for another’s torts

 - Statures may hold one person responsible for another’s torts
- Employer often vicariously liable for employee torts
Justification for vicarious liability
- Enhances compensatory function
- May enhance deterrence function
- Fairness: business bears cost of operation
Two Issues: Scope and Effects
Scope of Vicarious Liability in Employment
- 1. No vicarious liability for independent contractor
o Sometimes preferable for a business to have work performed by an independent
contractor (example of “risk shifting”)
- 2. Vicarious liability for some employee torts
o Employer-authorized acts
o Acts closely connected to the employer-authorized acts

Employee vs. Independent Contractors

1. Control: over when, where, and how the work is done
2. Property: whose equipment and premises are used
3. Regular pay: how is the work paid? Salary or lump sum at the end of a project
4. Integrations: level of integration into employer’s business. Does the worker have other
clients
Effects of Vicarious Liability
1. Victim can sue both employee and employer
a. Employee directly liable for own tort
b. Employer vicariously liable for employee’s tort
c. Employer also directly liable if it committed separate independent tort
d. Ex. careless training of careless employee or failure to properly screen candidates
2. Employee generally liable to employer
a. But employer’s right seldom enforced
- Remember:
o Employers may be vicariously liable for employee’s tort, even if employer was
not careless and didn’t do anything tortious
Vicarious Liability – General Approach
- Remember general approach to legal matters:
o I: what is the legal issue?
o P: What is the legal test?
 o A: apply to these facts
o C: conclude your analysis
- For vicarious liability, the legal test applied to an employer is:
o 1. Is this an Employee? / or Independent contractor
o 2. If so, did the employer authorize the employee to do the tortious act; or
o 3. Did the employer authorize the employee to do any other closely connected
act?

Case Brief 3.1: Cowles v Balac (2005) 29 CCLT (3d) 284 (Ont SCJ)

David Balac and Jennifer Cowles began dating in 1996. He worked as an accordion player and studied at Sheridan College; she worked as an
“exotic dancer.” On a warm spring day, they visited African Lion Safari (ALS). ALS offers a unique wildlife experience. In a typical zoo, the
animals are enclosed and the customers roam freely from one exhibit to the next. At ALS, the roles are reversed. The animals roam freely within
their reserves and it is the customers who are enclosed (in their own vehicles) as they drive through the park. Not surprisingly, ALS has become
very popular with people who want a close encounter with wildlife. Where else can a family sit in safety while its van is swarmed by monkeys!

Jennifer and David’s wildlife encounter was, tragically, too close. Shortly after they had entered the tiger reserve, their car was attacked by the
big cats. Although the facts were rather sketchy, the judge found that the initial attack startled David, who accidentally hit a button that rolled
down Jennifer’s window. A Siberian tiger named Paca then lunged through the window and mauled the couple. The injuries were severe. Because
of permanent scarring to her scalp and hip, Jennifer would never again work as a “featured dancer.” David fared even worse. In addition to
physical injuries that prevented him from playing the accordion, he suffered psychological injuries that further limited his employment prospects.

The Court awarded $1,701,032 to David and $813,169 to Jennifer. It identified two bases on which ALS could be held liable.

I: Strict Liability The trial judge additionally said that ALS could have been held liable for the
accident even if its employee had taken every conceivable precaution. A special rule applies to
certain types of extraordinary risks. Consequently, a person who is hurt by a wild animal is not
required to prove that the animal’s owner intentionally or carelessly did something wrong. It is
enough for victims to show that their injuries were caused by the danger in question

P: Legal Principle – “a business that displays dangerous, unpredictable, wild predators… in out-
of-control settings… should be strictly liable for any damage that occurs”

Case Problem: Rochard owns and operates a drug store. Because business is often slow during
the day, and because he worries about robberies, Rochard regularly brings his dog, Sid, to work
with him. Sid has been a bit of a mixed blessing over the years. He has provided good
companionship and his aggressive nature has discouraged loiterers from hanging around the
store. At the same time, Sid has occasionally frightened customers and on a couple of occasions
he has tried to bite small children. Rochard’s luck recently ran out when Sid did, in fact, attack
and severely injure Talisa, a young girl who was visiting the store with her father. Although
Rochard feels very sorry for Talisa, he denies that he is responsible for her medical bills. As he
correctly points out, he did not intentionally cause Sid to attack Talisa. On the contrary, he took
every reasonable precaution to prevent the incident from occurring. Rochard therefore insists that
he cannot be held liable in tort. Is he correct? Explain your answer.

I: Strict Liability

P: Dog Owner’s Act, “one free bite policy”, “unusually dangerous”

A: does not state does has bit anyone before and does not state the dog as unusually dangerous.
Also does not state that the dog bit the young girl.

C: Dog owner is not liable

Ex. Bazley v. Curry

- Facts:
• Charitable organization operated a residential care facility for emotionally troubled
children.
• It employed Curry to act as a substitute parent (bathing and putting children to bed).
They screened and investigated all employees properly but failed to discover he was a
pedophile.
• Curry sexually assaulted a number of children within the facility. The P sued the
organization as vicariously liable.

I: Is the organization/employer vicariously liable

- How does the court characterize Curry? Employee or Independent Contractor
P:Employer is liable for torts committed during the course of employment ex.
1. Acts the company authorized an employee to do or
2. A tortious act closely connected to employment relationship
A: nature of employee’s authorized activities (intimate parenting) increased the risk of
wrongdoing-combination of job-created power and job created intimacy

Ex. Rafik Berjak was hired to clean and deliver vehicles for EconoCar, a car
rental agency. Although Rafik drives very safely in his own vehicle, he tends
to be rather careless when he is behind the wheel of one of his employer’s
vehicles. Not surprisingly, then, he was recently involved in an accident while
driving a truck owned by EconoCar. Although that truck did not suffer any
serious damage, the car that Rafik crashed into requires $10,000 in repairs.
Rafik has admitted that he was at fault, but as he explained to his girlfriend,
he was not worried. “What’s the worst that could happen? I’ve already quit
my job and found a new one. And obviously, EconoCar is on the hook for
repairing the other guy’s vehicle. I’m totally out of the picture.” Is Rafik
correct? Explain your answer.

I: is Rafik liable or is EconoCar vicariously liable?

P: Threshold question: is rafik an employee or independent contractor? Employee
Employer is liable for torts committed during the course of employment
1. Acts the company authorized an employee to do or
2. A tortious act closely connected to employment relationship
A: nature of employee’s authorized activities increased the risk of a crash happening on the job
C: EconoCar is liable for the paying the damages to the victim and EconoCar can sue Rafik for
causing the crash and quitting the company. Therefore making Rafik liable for the accident.

Exam Practice Question:

#1 Julian Hudson is a young entrepreneur who recently opened an “all ages” club aimed
at teenagers and young adults and club is doing well after first month of operations. No
alcohol is sold, and two security guards are hired each night to guard against drug use.
But, Hudson has concerns:
1. Drug use seems common in the club when the club is crowded on Saturday and
Friday nights,
2. Heat and perspiration tends to make the dance floor slick with condensation.
1. For the business, Hudson can develop and apply a risk management strategy? True or False (1
Mark)
2. Explain your answer (2 marks)
True. He can develop a risk reduction strategy to reduce the amount of drug usage and heat and
perspiration that occurs in his club. He can reduce the amount of drug use by limiting the number
of people in the club at one time. As overcrowding was the main inhibitor of drug use, by
limiting the number of people in the club at one time he can reduce the amount of drug being
used in his club. He would need the security guards to either turn people who are suspicious of
drug use or communicate with club workers to keep the club from overcrowding. This strategy
will also help the issue with the perspiration on the dance floor and the heat in club as with less
people in the club there will be less body heat and perspiration.

Ch 4: Intentional Torts
2.A. Trespass to Land
- Trespass = The defendant improperly interferes with the Plaintiff’s land
PL proves
1. Intention
2. Land
3. Interreference
4. Improper (Improperly interferes with the land)
5. Defendant argues and defence:
o Consent = not “improper”
 o Legal authority = not “improper”
Russo v. Ontario Jockey
Facts:
Russo, the plaintiff, was a very skilled bettor and had won a lot of money at horse racing tracks
owned by the defendant, the Ontario Jockey Club. So, the defendant served her with a notice
while she was at Woodbine Racetrack in Toronto that required her to leave the premises. The
notice also said that if she returned to any of the defendant’s premises, she would be charged
with trespassing. Russo sued
Issue: (I)
So, what are the parties fighting about? What question needs to be resolved here? Can the
Ontario Jockey Club legally keep Russo off their property (Woodbine Racetrack and other
racetracks owned by the Club)? The property is open to the public.
Legal Test: (P)
What are the constitutive elements of the tort of trespass? (Hint: this case is more about consent
and property that is open to the public than trespass.) 1) Intention; 2) Land; 3) Interference, 4)
Improper. The Law says that there is implied consent to be on property that is open to the public.
But that consent can be withdrawn with notice, as long as a person is not excluded for reasons
that violate the Human Rights Act.
Application (A)
Let’s identify some “anchor facts” here:
• The Jockey Club = privately-owned property, open to the public
• Russo was told to stay away
• The reasons for excluding her do not violate human rights codes
Now apply the law to these facts:
• Since the Club is private property and since it withdrew consent for Russo to be on the
property, Russo no longer has the right to be there. The Club can now exclude her, and if she
returns, she is trespassing.

Specific Approach to Trespass to Land

1. Trespass to Land
• i.e. D physically goes on, over, or under; builds/grows/puts something on, over or
under; takes something from on, over, or under another person’s property.
2. Legal Test
• Was there improper interference with land? Was it (the act) intentional?
• Do any of the Defences Apply?
• Did D get Consent
• Did D have Legal Authority (some public officials have authority)

Remedies for Trespass to Land

• Damages:
• Compensatory, nominal, or punitive
• Injunction:
• Preventing ongoing trespass
• Requirement to remove trespassing structure
• Removal of Trespassers:
• Arrest of trespassers – p. 92
 • Only - reasonable force in arrest
• Conversion
• Occurs when the defendants interference with the plaintiff’s chattels is serious
enough to justify a forced sale

Assault: Definition: Occurs when the defendant intentionally causes the plaintiff to reasonably
believe that offensive bodily contact is imminent.

 No contact required – based on belief, not physical harm.

 Belief: The plaintiff must reasonably believe contact will occur (e.g., swinging a fist,
pointing a gun).
 Reasonable belief: Even if harm was impossible (e.g., unloaded gun), assault exists if a
reasonable person would think harm was possible.
 Imminent contact: Threat must be immediate, not future (e.g., “I’ll hit you next week” =
not assault).
 Offensive contact: Can exist even without fear — any offensive threat counts.
 Example: Swinging your fist at someone = assault; punching from behind (no
awareness) = battery, not assault.

Battery: Definition: Occurs when the defendant intentionally causes offensive bodily contact
with the plaintiff.

 Contact: Includes direct or indirect contact (e.g., object, clothing, item being held).
 Offensiveness: Everyday contact (e.g., brushing past in a crowd) isn’t battery; unwanted
or nonconsensual touching is.
 Consent: Actions done against the person’s will can be battery, even if beneficial (e.g.,
unwanted medical treatment).
 Business relevance: Especially important for security/bouncers—improper force can
create liability for both employee and employer (vicarious liability).

Invasion of Privacy

 No general tort of invasion of privacy in Canada, but related torts offer protection.
  Courts reluctant due to: freedom of expression, difficulty defining privacy, and
measuring damages.
 Related torts:
o Trespass to Land: Entering private property (e.g., sneaking onto land for
photos).
o Breach of Confidence: Sharing private info (e.g., private photos, confidential
details).
o Intentional Infliction of Mental Distress: Outrageous conduct causing serious
emotional harm.
o Abuse of Private Information: Publishing private facts (e.g., Naomi Campbell
case).
o Misappropriation of Personality: Using someone’s image without consent for
commercial gain.
o Negligence: Publishing info against court orders.
 Emerging Tort – Intrusion Upon Seclusion (Jones v Tsige):
o Recognized in Ontario; protects against deliberate, unauthorized invasion of
personal privacy.
o Adopted in some provinces, rejected in others (e.g., BC).

False Imprisonment

 Definition: Confinement of a person within a fixed area without justification.

 Confinement: Can be physical or psychological; must be complete (no reasonable
escape).
 Consent: A full defence (e.g., bus passengers, airport searches).
 Authority:
o Police: Can arrest with reasonable suspicion of a crime.
o Private citizens/security guards: Can arrest only if a crime is actually being
committed.
 Malicious Prosecution: Wrongfully causing someone to face criminal charges; must
prove malice and lack of reasonable cause.
 Risk for Businesses:
o Wrongful detention of customers can lead to liability.
o Safer to call police and let them act.
o Excessive or unnecessary force increases liability risk.

Ch 5 Deceit – False Statements

Definition: It occurs when the Defendant makes a false statement that the Defendant knows is
false/untrue and with which the Defendant intends to mislead the Plaintiff, and which causes
the Plaintiff to suffer a loss as a result of having reasonably relied on the false statement.

Deceit 4 Part Legal Test

- Plaintiff must prove on the Facts, all 4 elements of the tort of deceit
1. Defendant made false statement
 2. Defendant knew statement was untrue/false (when s/he made it) or was reckless in
determining truth
3. Defendant intended to mislead the plaintiff
4. Plaintiff reasonably relied upon Defendant’s statements, thus, the Plaintiff suffered a loss

Element 1. Was a False Statement Made?

- The requirement of false statement can be satisfied in many ways:
1. Def’d expressed something that is Positively untrue (footnote 17 Canaccord v Pilot)
2. Half-truth by failing to update information:
• e.g., sale of business – profits are presented as ‘gross’ profits when in fact the numbers reflect ‘net’ profits
– false statement
• e.g., information provided before the deal closes becomes inaccurate because of dramatic change in the
market, and the seller remains silent .. Giving the wrong impression of information

False Statement: What About Silence?

3. The general rule in the commercial world is caveat emptor (Latin for “let the buyer beware”):
• The seller is usually not obligated to volunteer information
• The buyer is responsible for asking questions and making investigations
However, in some cases there is a duty to disclose essential information to the buyer:
• The seller of a house must disclose hidden defects
• The buyer of an insurance policy must disclose important information concerning his or
her risk-profile

Elements 2 & 3: Knowledge and Intention

- The tort of deceit requires both:
1. Knowledge:
• PL must prove the defendant knew the statement is false, at the time it is made
• Carelessness & Ought to have known the statement was false
• This is not enough to satisfy deceit (although it may amount to negligence).
2. Intention to Mislead:
• The Court must be satisfied that the defendant intended to deceive the plaintiff

Element 4: Loss and Reasonable Reliance

3. The plaintiff must suffer a loss as a result of reasonably relying upon the defendant’s
false statement:
1. Liability where the false statement refers to past or existing/present fact.
2. Not opinions nor predictions nor puffs:
No reasonable reliance: if defendant offered an opinion, predicted the future, or made a
boastful statement (“puff”). No liability for inaccurate prediction of the future.

3. Sometimes an opinion may imply a statement of fact.

E.g.: Suppose I persuade you to buy my car by lying: “This little miser will go 300 kilometers
between fill-up”.
A Court might find that my prediction includes a statement of existing fact regarding the
vehicle’s current rate of gas consumption.
What is a Puff? versus Facts
- Puffs:
o “this is the most stylish car you will ever drive”
o “this car outranks and outpaces all others in its class”
- Facts:
o The car has leather interior
o The car was voted #1 by dealer’s association in 2011

Remedy – Deceit
Compensatory Damage
- The Plaintiff is entitled to be put into the position they were before the defendant lied
o i.e., as if the defendant had never made the false statement
- (NOT the position they would have been if the defendant’s statement had been true).

Business Torts
Conspiracy

 Definition: Two or more people agree to act together to cause the plaintiff financial loss.
 Types:
o Lawful Act Conspiracy: Defendants act lawfully but with primary intent to
harm the plaintiff. Hard to prove — must show intent to injure.
o Unlawful Act Conspiracy: Defendants act unlawfully (e.g., commit a tort or
crime) and should have known it would harm the plaintiff. Easier to prove.
 Key Point: Law punishes group efforts to injure economically, not individual
competition.

Intimidation

 Definition: Plaintiff suffers loss due to defendant’s threat to commit an unlawful act
against the plaintiff or a third party.
o Two-Party Intimidation: Defendant directly threatens the plaintiff (e.g., “Close
your business or I’ll hurt you”).
o Three-Party Intimidation: Defendant threatens a third party to harm the plaintiff
(e.g., union threatens employer to fire employee).

o
  Requirements:
o Threat of unlawful act (crime, tort, breach of contract).
o Threat must be effective (victim or third party gives in).
o Intention to harm not required; liability exists if harm was a foreseeable result.

Interference with Contractual Relations

 Definition: Defendant intentionally causes a third party to breach a contract with the
plaintiff.
 Elements:
1. Knowledge – Defendant knew of the contract.
2. Intention – Intended to cause breach (even if for self-benefit).
3. Causation – Defendant’s actions led to the breach.
4. Loss – Plaintiff suffered damage.
 Example: Lumley v Gye – inducing an opera singer to break her contract.
 Remedies: Plaintiff can sue both the breaching party (contract) and the inducer (tort), but
cannot double recover.

Unlawful Means Tort

 Definition: Defendant commits an unlawful act against a third party intending to

cause the plaintiff economic loss.
 Key Features:
o Parasitic: Based on an existing wrong to a third party (e.g., tort, crime).
o Intention: Defendant must intend harm to the plaintiff.
o Actionable Wrong: Unlawful act must be civilly actionable by the third party
(not just unethical or regulatory).
 Example: Tarleton v M’Gawley – firing a cannon to stop trade with the plaintiff’s ship

1. Land-Based Tort
a. Nuisance: Defendant unreasonably interferes with the Plaintiff’s use and
enjoyment of their own land
b. Ryland v Fletcher (Strict Liability): Defendant strictly liable for non-natural use
of land if something escapes their property and injures plaintiff
1A. the Tort of Nuisance
Definition:
• Occurs when the defendant unreasonably interferes with the plaintiff’s use and enjoyment
of their own land.
The Legal Test:
• Whether the interference caused by the defendant is unreasonable or not.

Unreasonable Interreference
- Factors to consider when assessing “unreasonableness”:
• Type of nuisance
• Nature of the neighbourhood
 • Time and day of the interference
• Intensity and duration
• Social utility of interference
• Defendant’s motivation

Defences
Statutory Authority:
• The defendant caused nuisance while acting under legislation
• But only if the defendant’s nuisance was an inevitable result of compliance with the
statute.
• It doesn’t matter who was there first.
• What matters is what the neighbouhood is now like. Urban Sprawl means that farmers
may find that they become nuisances

Remedies
• Damages for loss of value to property
• Injunction (to stop the interference), but only under certain circumstances. Overall social
good must be considered.

Case: Poor Old Macdonald

• Old MacDonald moved to the Ruraltania area about 35 years ago. There were not many cities nearby:
just kilometres and kilometres of farmland. He started a poultry farm (chickens and eggs), which he
farmed successfully for many years. But urban sprawl has led to big changes in Ruraltania. The land
around Old Mac’s farm has been bought out by developers. The suburbs have arrived in Ruraltania,
and the suburbs do not like the smell of chicken farms.
• Old Mac’s farm is now surrounded by suburb housing. The local homeowners want to shut Old Mac
down. They say that the smell of chicken manure interferes with their enjoyment of their property.
No one likes Sunday brunch on the deck with mimosas and the smell of chicken manure.

Questions:
1. For what tort should the local homeowners sue Old Mac?
2. Are the homeowners likely to be successful? Explain why or why not.
3. What remedy should the homeowners seek? If they can establish liability, do you think a
court would aware them this remedy?

1C. Ryland v Fletcher

• Definition: The Defendant can be held strictly liable for a non-natural use of land if
something escapes from the property and injures the Plaintiff.
• Legal Test: Plaintiff Must Prove:
1. Non-natural land use created special and unusual danger
2. Escape from defendant’s land
3. Loss or injury to plaintiff

Possible Defenses to Rule in Rylands v Fletcher

• Plaintiff consented to non-natural land use
• Unavoidable act of God or third party caused escape
• Injury inevitable result of defendant’s exercise of statutory authority
2 Defences to Intentional Torts
- Full defences
o Consent
o Legal authority
o Self-defence, defence of property
o Necessity
- Partial Defences
o Provocation
o Contributory Negligence

Self Defence and Third-Party Defence

• Definition
• Right to protect oneself from actual and threatened violence
• Elements
• Defence to torts of assault and battery
• Available only if person at immediate risk
• Limit on Defence - Cannot use more force than necessary in circumstances
• Also allowed to defend third party
• e.g. parent protecting child

Limits to Defence of Property

• Force used to respond to threat must be proportionate and reasonable.
• Self-defence and defence of third party are broadly defined because they protect human
life and well-being. There is more room for the use of force, even lethal force.
• But the defence of property is less generous.
• If only threat is to land and chattels, may never be reasonable to deliberately
cause death or serious injury

Consent
• Plaintiff consented to interference with his/her body, property, or land.
• Consent must be voluntary and informed. It can be withdrawn or limited.
• There is implied consent in limited cases, e.g., implied consent to receive life-saving
assistance unless evidence to the contrary (DNR orders).

Necessity
• Definition: Defendant’s actions are justified by an emergency
• Elements
• Immediate action must be required to avoid calamity
• Benefits flowing from conduct weighed against harm
• e.g. doctor giving urgent medical care to unconscious patient
• e.g. tearing down house to prevent spread of fire
• Usually a complete defence but sometimes only partial defence
Consider American case:
• Emergency caused by storm caused ship to moor to dock
• Damage caused to dock during storm
 • Trespass was justified, however compensation required for damages

Partial Defences to Intentional Torts

• Allows court to reduce damages on basis of plaintiff’s own responsibility for injury
• Applies even though defendant committed an intentional tort
• Includes (among others)
1. Provocation
2. Contributory negligence

Provocation
Definition:
Words or actions that would cause a reasonable person to lose self-control
• Typically, defendant “snaps” after being taunted or insulted
• Tied to torts of assault and battery
• Defendant liable for attack, but plaintiff’s damages are reduced

Contributory Negligence
• Definition: Occurs when plaintiff partially responsible for injury that defendant tortiously
caused. The plaintiff’s own careless was a cause or added to the injury he or she suffered.
• Damages reduced to reflect plaintiff’s contribution to harm.
• Elements of the defence differs through Canadian jurisdictions:
• Some divide responsibility on basis of parties’ fault
• Allows defence to apply to any tort, including intentional
• Some divide responsibility on basis of parties’ negligence
• Courts have found the defence difficult to apply to intentional torts as
concept of negligence does not naturally fit intentional torts

Ch 6: Negligence

Elements of Negligence
1. Duty of care
• Why should the defendant care? (Relational Analysis – foreseeability and who is my
neighbour? - proxmity)
2. Standard of care = the Reasonable Person
• How should the defendant care? (Analyze the act or omission)
• Does the activity require special skills – “reasonable competent practitioner – e.g.,
surgeon)
3. Causation:
• Cause in Fact & Proximate Cause
• Who should care? (Is there a connection between what the defendant has done
and the injury suffered by the plaintiff?)
• All three elements must be met to impose liability for the tort of negligence and, of
course, harm to the PL, that PL can point to and prove.

- Definition:
o The careless causing of harm to a PL
 - Purpose:
o To compensate for harmful, risky actions conducted carelessly, but to allow for
careful risk-taking.

• Legal Test: p 135

The PL must prove that the Defendant:
1. Owed a Duty of Care – the def’d was required to act carefully toward the PL
2. Breached the Standard of Care by acting carelessly
3. Caused Harm to the PL
If the PL proves all three then, the Def’d may be liable

But, Def’d can avoid liability by proving a defence by arguing on the facts that the PL:
See page 152 - 154
1. Contributory Negligence: PL caused or contributed to the injury
2. Voluntarily: PL assumed the risk of being injured by the def’d
3. Illegal: PL Injured while engaged in some illegal behaviour

Test to Determine the Existence of Duty of Care

First: Ask: Is there a Precedent Case?
v i.e., On the facts, Does a similar case on the facts exist?
v Yes: rely on the precedent
• What is the name of the case? Manufactured product - beverage bottler
owes a duty of care to consumer
• What is the name of the case? Mother owed a duty of care to unborn
child – see ethical perspective 6.1 p 139

2. If NO precedent case exists then answer the following three questions:

1. Reasonable foreseeability – Was it reasonably foreseeable that the PL
could be injured by the Def’d carelessness?
2. Proximity: Do the parties share a relationship of sufficient proximity?
• Was the PL (or anyone) “close” enough to the defendant to
be affected by the defendant’s activity? – in other words,
who is my neighbor?)
3. Policy reasons: to deny a duty of care - why a mother does not owe a
duty of care to unborn child
• THERE is NO duty of care unless you can answer yes to all of these questions.

For there to be a Duty of Care, there must be:

ü Reasonable foreseeability, and
ü Proximity
But even if there is a duty of care, a court might not enforce it due to:
ü Public Policy reasons

Reasonable Foreseeability
• Objective test: Ask - Who is the reasonable person?
 • Would a reasonable person in the def’d position would have recognized that
possibility of the harm occurring?
• Toronto – January in an Ice Storm – A Slip and fall on icy sidewalk in front of
store
• In Florida? – Slip and fall in front of a store

Proximity: a relationship of proximity must exist

• Proximity means close and direct connection between parties: on the facts – does
proximity exist?
• Examples: (also – direct casual connection & reliance on representation)
• Physical
• Contractor and tools
• Careless driver hits a bridge
• Social
• parent and child
• Commercial
• Bar and drunk driver
• Manufacturer and consumer (Donoghue)
Asks should there be a general duty for the relationship?

Pro tip: Proximity and Precedent

- If courts have already established in a previous case that a category of relationship is
subject to a duty of care, then you can simply follow precedent and assume that, yes,
there will be a duty of care in future cases in the same category.
In the law -- Examples of well-established duties of care:
Doctor-patient
Lawyer-client
Manufacturer of goods – user of goods

Pro Tip: Proximity and Professional statements

• Negligent statements: (Doctor-patient
- Lawyer-client, financial advisor-client, banker-client)
• Seeking Balance: compensate the victims and the need to protect business from
disastrous consequences if held liable

Public Policy
• What effect would a duty of care have on society and legal system?
• open the floodgates for litigation
• Stock market loss
• Interfere with political decisions
• Professional regulatory bodies
• Hurt a valuable type of relationship
• Mother and unborn child

Standard of Care: Legal Test

- Apply – Reasonable Person Test:
 o what would a reasonable person in the position of the defendant have done?

Ethical Consideration: who is this “reasonable person”?

• Whether or not a defendant is liable depends in part on:
• ASK:
• Did the defendant act like this reasonable person?

The Reasonable Person Weights

• What is Severity of the Harm?: (Magnitude)
• What is the Likelihood of its occurrence?: (Probability)
• What is the cost of avoiding the harm?

Second Element: the breach of the Standard of care

• How should the def’d have acted?
• Std of Care is breached:
• When the def’d acted less carefully
• Consideration is given to:
• the objective reasonable person test

Standard of Care for Professionals

• Standard is higher than a reasonable person
• must act as reasonable professional
• no allowance for inexperience
• no allowance for exaggerated credentials
• Standard may be higher still for specialist or expert
• must act as a reasonable expert would act

Limits to Professional Standard

• Remember hindsight cannot be used: focus on information reasonably available to
defendant at the time
• DNA evidence
• “Errors of judgment” are different than carelessness
• Choice of medical procedure
• Compliance with approved or statutory standard of care

Standard of Care for Products

- Product Liability
• Harm caused by manufactured products
• Strict Liability in the US
• manufacturer liable for any defects
• Negligence in Canada
• manufacturer liable only for careless defects in design
• Manufacturer usually strictly liable for manufacturing defects

Causation
• Third Element: Who caused the harm?
 • The but-for test – p 149 – decides the issue
• Would the plaintiff still have suffered harm, “but for” the defendant?
• What happens if you take the defendant “out of the picture”?
• The onus is on PL to prove
• If the D had not acted carelessly, would the PL suffered the same loss
• If yes, the D cannot held liable
• If no, the D may be held liable
• Def’d must be a cause in fac and in law of the plaintiff’s injury

Applying the But-For Test

• What happens if we take the defendant out of the picture?
• If nothing changes, i.e., the plaintiff still suffers the same injury, then the defendant did
not cause the loss. It would have happened anyway.
• But if taking the defendant out of the picture changes the outcome, then the defendant is a
cause of the plaintiff’s loss. The defendant’s carelessness played a role in the occurrence
of the loss.

Kauffman vs TTC
Mrs. Kauffman was exiting a TTC station. She was going up an escalator, and the escalator had
metal hand rails, not rubber ones. Some young fellows ahead of her started to fight, and they
tumbled down the escalator. The youths fell on top of a businessman, who in turn fell on Mrs.
Kauffman. Poor Mrs. Kauffman was injured in the melee.
Mrs. Kauffman sued the TTC. She argued that the TTC was negligent because
(a) its escalator did not have a rubber hand rail.
(b) There wasn’t a security guard supervising people entering and exiting the station.
To prove factual causation, Mrs. Kauffman had to establish that:
(a) If there was a rubber handrail, she would not have fallen (and so the failure to have one
was a cause of her injuries), and
(b) If there had been a security guard present, she would not have been injured (so not having
a security present was a cause of her injuries).
The evidence, however, did not support Mrs. Kauffman’s arguments.
The court held that there was not enough proof that the injuries could have been prevented by
either a rubber hand rail or the presence of a security guard. Even if these things were there,
Mrs. Kauffman would still have fallen and been injured.
According to the But-for test, the TTC was NOT a cause of Mrs. Kauffman’s injuries.

Legal Causation: Remoteness

 - Rule: no liability if the loss is too remote
- Test: was the type of harm suffered reasonably foreseeable (even if how it happened was
not

Remoteness
- Duty of Care
o The scope of the people to whom you might be liable
- Remoteness
o The type of injury for which you might be liable

Defences
ü Contributory negligence
ü Voluntary assumption of risk (“volenti”)
ü Illegality – review

Contributory Negligence Test

• Apply the same tort analysis, focusing on the plaintiff’s actions:
• Did the plaintiff breach the standard of care?
• Was the plaintiff’s carelessness a cause of the plaintiff’s loss?

Impact on Liability
- The plaintiff’s damages will be reduced to reflect the plaintiff’s own contribution to
his/her injury.
- The judge will apportion liability, i.e., will decide what percentage of the loss should fall
on the plaintiff.

Voluntary Assumption of Risk

- Definition: Plaintiff freely accepted both physical and legal risk of injury (gave up right
to sue)
- Volenti is a complete defence: if the defendant can prove that the plaintiff freely
accepted both the physical and legal risk of harm, then there is no liability.
- Because of the harsh result (i.e., the plaintiff recovers nothing), the courts have adopted a
narrow approach
Establishing Volenti
- The Plaintiff must clearly accept the physical risk (“I accept that I might be harmed”)
and the legal risk (“I agree that I won’t sue you as a result”).
- To be valid, the defendant must have drawn the plaintiff’s attention to the exclusion
clause or waiver.
Ch 21: Basic Forms of Business Organization
Sole Proprietorship
- Created once person begins to conduct business
- As the sole proprietor

No Separation between business and proprietor

- Proprietor receives all the benefits and bear all the burdens
- Proprietor/owner entitled to all income
- Proprietor/owner liable for all obligations
- proprietor’s/owner’s assets available for business debts
- Business income (loss) on personal income
- Proprietor/owner cannot be employee of business

Risk Management
Advantages
- Simple to set up and dissolve
Disadvantages
- Unlimited personal liability (if sued) – 3rd party can take all your assets – including
personal assets
- Money raised often by personal borrowing may be difficult
Result
- Often viewed as sustainable for small businesses

Registration for Sole Proprietorships

1. Provincial registration for business name
a. Only if name other than personal name
2. Business license may be required
a. Requirements vary with type of business

Partnerships
- Partnership
o Exists when two or more people come together to pool their resources or
knowledge
o In the law: a key legislative (legal) principle: two or more persons carry on
business together with a view to a profit
o The partnership arises automatically when a relationship begins; s.2 Ontario
Partnership Act, 1990

o Factors that point to the existence of a Partnership

1. Sharing Profits/Loses
2. Own property together
3. Involved in management decisions
4. Joint authority for contracts and bank accounts
5. Equal access to business information
6. Holding each other out as parters or acquiescing
 7. Engaging in ongoing activity rather than one project

Petra vs. Kumar.

I: Is Kumar listed as a partner?
P: s.2 Ontario Partnership Act
A: Factors if they apply to Kumar being a partner
1. Sharing Profits/Loses - No
2. Own property together - No
3. Involved in management decisions – Yes but favours Petra
4. Joint authority for contracts and bank accounts - No
5. Equal access to business information - No
6. Holding each other out as parters or acquiescing – yes, name changed to
P&K assumes partnership
7. Engaging in ongoing activity rather than one project – Yes, Kumar was
involved form 2015-2019
- two or more persons carry on business together with a view to a profit: not applicable as
Kumar is an independent contractor of Petra’s business
C: Because not all of the factors are applicable to the business, it is not a partnership and
therefore Kumar is not entitled to receive part of the partnership

o Managing Risks of Partnership

 Examine any proposed relationship carefully to determine if it is a
partnership
 Insist contract states relationship is not a partnership
 Restructure relationship if it conforms to partnership definition
o Partnership Liability
 Rule: each partner is an agent of the partnership when acting in the usual
course of the business
 Ss.6-19 OPA sets out when a Partnership is liable in Tort or contract
 Any partner can create a liability for the partnership
 An exception exists:
 When the partner did not actually hold the authority ti act, and
 The other party to the transaction either know the partner lacked
authority or did not know that they were dealing with a partner
 Partner holds unlimited personal liability for obligation of the partnership
entity = thus, no separation – responsible or losses but receives benefits
Case Problem
Carol carried on a consulting business as a sole proprietorship. She met Steven Stevenson at a conference. Steven
told Carol that he was a “senior litigator and partner” in a mid-sized Saskatoon law firm and gave her a business
card that set out his name and the name “Stevenson, Smith, Jones, and Khan, Barristers and Solicitors.” Steven
asked Carol to do some work for the firm. Carol did the work and sent a bill for $20,000 to Steven. While providing
the services, Carol received letters from Steven on paper bearing, at the top, the same firm name as the business
card, and the full names of Stevenson, Smith, Jones, and Khan at the bottom. Steven did not pay. Carol sued Steven
along with Smith, Jones, and Khan. Assuming that Steven and the three other individuals named on the letterhead
were not partners, will Carol succeed in holding them liable for her account? What else would you need to know to
answer the question?
I: is the partnership liable for the debt
 o Liability – Ensuring compliance with fiduciary duty
o Fiduciary duty requires. Partner to act honestly and in good faith with a best view
to the partnership
o What happened if a partner breaches fiduciary duty? – ss. 28-30 OPA

- Limited liability partnership

o Often professional partnerships – ex. lawyers, accountants
 Individual partners not personally liable for professional negli. of partners
 The partnership entity is responsible for all obligations
 But once the partnership entity’s assets are exhausted can go claim against
an individual partner (except, for the partner that was negligent)
- Limited partnership
o Allows individuals to become partners but avoid unlimited personal liability
 You invest $5000 – limited partner
 Partnership is sued for $20,000 – your limit to your investment
o Created upon filing with provincial agency not when partners come together
o Requirements:
 At least one partner – “general partner” holds unlimited liability, and
 A “limited partner” with limited liability in the amount of the partner’s
investment
 Limited partners lose limited status if they control business, but not if they
merely advise management
 Limited partners can be employees of limited partnership
- Case problem
Mahnaz and Lisa made a lot of money from the sale of their technology business and are earning
significant income from their investments. They now want to start a film production business that they will
control. They will need to buy equipment worth about $1 million. They already have $750,000 to spend on
the equipment but are looking for some additional investors to contribute the remaining $250,000. Mahnaz
and Lisa anticipate that the business will lose money for the first three years but after that it will be
profitable. Based on these facts alone, what form of business organization would you recommend for
Mahnaz and Lisa?
- Limited partnership as they want investors and believe they won’t be profitable for the
first 3 years

Ch 7: Managing the Law, Contracts

- Contract (K) is based on an agreement between parties and is a legally enforceable

agreement

Legal Requirements of a Contract

1. Intention to create/enter into a legal relationship
2. Meeting of the Minds – reach a mutual agreement through a “process of offer and
acceptance”, thus, offer and acceptance
3. Exchange of value – they must enter a bargain by each giving consideration
Does it have to be in Writing?
- Generally, contract does not need to be in writing to be legally enforceable
- There are a few exceptions
 1. Intention to Create Legal Relations
- Rule: Parties must intend to create legal relations
- Objective Test: would a reasonable person think that the parties intended to create a
legally binding agreement?
- What is the Underlying Rationale?
o Protection of the reasonable expectations of the parties
o Readiness of each party to accept any legal consequences if they don’t perform K

Some Presumptions in Law

- Families/Social
o Presume that there is NO intent
- Commercial
o Presume that there IS intent
- Both presumptions are rebuttable (can be refuted/proved wrong)
- In a commercial setting: A Presumption Exists
o However, this presumption can be rebutted based on the facts surrounding the
“intention” in the situation
- What does this mean? – Rebuttal
o One of the parties to the legal dispute wishes to disprove that an “intention to
create legal relations” exists
o This party – holds the burden of persuading a judge that the facts point to no
intention
 How? – by offering evidence – examine the words used by parties? Or
circumstances

Intention: A Caveat – Contract and The Negotiation Process

- The document includes a clause – “subject to further negotiation” or “subject to formal
contract”
o Have the parties created a contract?
- However, if the parties begin to preform
o Is a K established based upon their actions ex. performance not document – Yes
or no

2nd Element: meeting of the Minds

- 2A. Offer
o Indication of a willingness to enter into a contract on certain terms
o Offers must be communicated:
 Written document
 Oral statement
 Conduct

Pro Tip: Risk Management Issue

 - Once the offeror (maker) communicates the offer, a contract comes into existence as soon
as reasonable notification of acceptance is given to the offeror. Once the contract exists,
neither party can change it unilaterally.
- So making an offer carries risk. What if you change your mind, but the offeree already
has accepted? What if you make the offer to more than one person and they all accept at
the same time?!

An Invitation to Treat: Offer or not?

- Initiation to treat = willingness to receive offers
o Person responding to invitation makes an offer
o Person making invitation may accept
- Objective “reasonable person test” to determine between offers and invitations
o Would a reasonable person believe the persona making the statement was
prepared to enter a contract upon receipt of an acceptance

The Life of an Offer

- Remember: Offer turns into contract by acceptance
- But offer may be terminated before acceptance
o Revocation – offeror withdraws the offer, at any time – offeror revoke any time as
longs as reasonably communicated to offeree
o Lapse of time
 Offeror can set termination date
 If not termination date set, court will infer reasonable time
o Death or insanity
o Rejection
 Offeree cannot subsequently revive offer
o Counteroffer
 Offeree responds to an offer but modifies the terms
 Effects: rejects old offer and creates new offer

Case: Dickenson vs. Dodds

George Dickinson was one of several people interested in buying a piece of land from John Dodds. On Wednesday,
John wrote to George, offering to sell the property and promising to hold that offer open until Friday morning.
• While George was considering his options on Thursday, he learned that John was negotiating with another
potential buyer. George immediately tried to find John to accept the offer. Although George failed to locate John
that night, he did manage to leave a letter of acceptance with John’s mother-in-law. Moreover, he caught up with
John the next morning and expressed his desire to buy the property.
• By that time, however, George had learned from a third party that the land had been sold to someone else.
• George sued John for failing to fulfill his promise to keep the offer open.

What did the court conclude:

- John’ promise – to hold the offer open till Friday – was unenforceable bc it was a
gratuitous promise
- John had not received anything in value in exchange for his promise to hold the offer
open till Friday – (option & elements of the contract)
Thus, the parties must fulfill the 3 elements:
Missing
1. Intention to create/enter into a legal relationship – “meeting of the minds”
2. Reach a mutual agreement through a process of offer and acceptance
3. Consideration must be exchanged. – i.e., exchange of value – each party gives up
something
2.B Offer & Acceptance: Promise or Performance
- Acceptance must respond to offer
o No contract if “cross offers”

Forms of Acceptance
- By Promise – bilateral contract
o Promise exchanged for promise, both parties have obligations
o May occur in words (written or spoken) or conduct may signify acceptance
(handshake)
o Silence
 Rule: silence alone cannot be acceptance
 Exception: silence plus prior agreement may be acceptance
- By Performance
o Ex. in response to a $100 reward poster for my dog … when is contract created?

Non-Instantaneous Communication
- Substantial delay between time eg. Letters, packages, fax
- The Postal Rule
o Acceptance is effective when and where it is sent – at the mailbox in Toronto
o Communication effective even if not received in Halifax
- Limitations on Postal Rule
o Can be eliminated by offeror, while the acceptance is in the mail system

Acceptance and Risk Management

- Offerors can include acceptable modes of acceptance in offers
- For example, state in the offer- “your letter is acceptance is only effective only when and
where you receive it.”
- Thus the Result: eliminates the postal rule.

Ch 8: Consideration and Privity

Consideration=Exchange of Value
- The creation of a contract involves a mutual exchange of value
- Law will no enforce gratuitous promises (nothing legal value given in exchange)

Forms of the Exchanged Value

- Consideration exists when a party either:
o (promise to) provide benefits to someone
o (promise to) suffer detriment to self
- Must move from each party-but not necessarily to other party

Problems with Consideration

 - Sufficient Consideration
- Past Consideration
- Pre-existing Obligation
- Promises Enforceable Without Consideration

Sufficient vs Adequate
Consideration must be sufficient
- Anything that law recognizes as having value ($, goods, land)
- Love & affection have no value
- Forbearance to sur (=give up right to pursue a lawsuit) is sufficient consideration if legal
claim is valid
Consideration does not need to be adequate
- “adequate” exchange of equal value
- Law does not protect people from foolish bargains

Past Consideration
- Must be a mutuality of consideration
- Consists of something that a party did prior to the completion of a contract
- No mutuality and therefore no consideration

Ex. While strolling on a beach, you discover Heena unconscious and face down in the water. You pull her ashore,
administer first aid, and bring her back to life. Shaken but grateful, she promises to pay you $10,000 every year for
the remainder of your life. When you try to collect the first payment, however, she says that she has changed her
mind and refuses to pay anything.

1. Does Heena have a moral obligation to pay any money to you? Does she have a legal
obligation to do so? ----No because the act was completed before the discussion of a deal
therefore past consideration

Ex. After being charged with a serious crime, Anthony Lampleigh wrote to Tammy Braithwait, a lawyer, asking for
assistance. After setting out the facts of the case and the precise nature of the allegations against him, Lampleigh
asked in his letter to Braithwait, “Will you please help me avoid prosecution on these charges?” Braithwait wrote
back in very simple terms, stating merely that she would “do everything possible to achieve the desired result.”
Braithwait then used considerable ingenuity, and expended considerable time and expense, in persuading the
government to drop the charges against Lampleigh. When Braithwait conveyed that news, Lampleigh gratefully
said, “Thank you so much. For your efforts, I will prepare a cheque for $25,000 and have it delivered to your office
tomorrow.” In fact, Lampleigh never sent any cheque to Braithwait. After the initial joy and relief wore off,
Lampleigh felt far less thankful and he now refuses to pay anything at all. Braithwait insists that she is entitled to a
contractual payment of $25,000, but Lampleigh argues that his promise of that amount was given in exchange for
past consideration and therefore is not enforceable. How would a court resolve the parties’ dispute?

Lampleigh does owe the $25,000 to Braithwait as although no money is mentioned before the act
is committed, the discussion beforehand is mutuality of consideration and it is implied that as his
lawyer she will complete the act and be paid for it.

Pre-existing Obligation
- Obligation that existed before the contract but that was not actually performed

Types of Pre-Obligation
 1. Pre-existing public duty
 Obligation that is owed by a public official
2. Pre-existing obligation to a third party
 Promise to perform a pre-existing obligation owed to a third party can be
consideration
3. Pre-existing obligation to the same party (Gilbert Steel Rule)
 Promise to perform a pre-existing obligation owed to the same party is not
good consideration

What about a Promise to Forgive Existing Debt?

- Promise to discharge debt upon part payment
- Unenforceable because no new considerations

Privity of Contract
- Privity is the relationship between contractual parties
- General Rule: Only parties to a contract can sue or be sued under the contract

Ex. Everlast Tire Co, which manufactures automobile tires, sold a shipment of tires to Automotive Wholesaler Inc.
Under the terms of that contract, Automotive Wholesaler was allowed to resell the tires below the price suggested by
Everlast if (i) the sub-buyer was a business in the car industry, and (ii) the sub-buyer promised not to resell below
the price suggested by Everlast. Automotive Wholesaler then sold the tires to AJ’s Used Cars Ltd. Under the terms
of that contract, AJ’s, which was engaged in the car industry as a used-car dealer, promised Automotive Wholesaler
that it would not re-sell the tires below the price suggested by Everlast. AJ’s also promised Automotive Wholesaler
that if it broke that promise, it would pay $100 to Everlast for each tire that was sold below the manufacturer’s
suggested price. In fact, AJ’s did sell 10 tires to individual customers at prices that were well below the price
suggested by Everlast. Everlast now argues that it is entitled to recover $1,000 from AJ’s. Is that true? If not, does
the result seem fair? And if not, what are the simplest means by which Everlast could have arranged the resale of its
tires so that it would be able to enforce the promise that AJ’s made to Automotive Wholesaler?

Ch 9: Representation and Terms

1.A Contractual Term

- Contractual vs. Pre-Contractual Statements
- What are Contracts?
o The communications made by parties during the course of negotiations

Pre-Contractual Statements
- Statements made during negotiations
o Puffs: mere sales words – no consequences
 o Representations: include party into contract – possible consequences
o Terms: contractual promises – certain consequences
 Eg. The statements you make in an offer become the terms of the contract
upon acceptance
o The legal Test: reasonable person thought that the parties meant this to be a term
of the contract?

Pre-Contractual Representations
- Words or statements made to include the other party into a contract
- These statements – do not become contractual promises
- May be actionable if they falsely induce contract
o Actionable if statement amounts to a “misrepresentation”
- Objective test: would a reasonable person have thought that the parties meant this to be a
term of the K?

How to distinguish?
- The intention of the parties is key to understanding the difference between representation
and terms:
1. Representations (pre-contract statement): made by one party to induce the
other to enter into an agreement (a puff) – no contractual obligation
2. Term of the agreement (contract term): a statement intended by both
parties to form a part of the contract
Misrepresentation
- Is a false statement of an existing fact that causes recipient to enter into a contract
1. A statement of an existing fact (false when stated)
2. That is false when made
3. May be actionable if it induced a contract
- Silence – no obligation to disclose; however, six exceptions
1. Facts are concealed
2. Distort a previous statement
3. Half-truth – Rule: can’t give a partial response if the unspoken words
would substantially alter the meaning of the statement
4. Duty of utmost good faith
5. Special relationship
6. Legislation requires disclosure

Inducement
- In order to be a “misrepresentation”, the false statement of fact must have induced
deceived party to enter into the contract
- Misrepresentation not actionable if:
o It did not induce, even if made with intent to deceive

A. Misstatement of Fact
- Not every misstatement is a misrepresentation
- Misrepresentation occurs only if the speaker claimed to state an existing fact
- People often make non-factual statements during negotiations:
o Opinion- beliefs or judgment
o Statement of future conduct
o Inaccurate description of the law
- Rule: in general, non-factual statements do not constitute misrepresentation, unless they
contain an implied statement of fact
A.1 Opinion
- Rule: a personal opinion is not usually a misrepresentation, unless it is in person’s area of
expertise
o Ex: You say to me: “I think you will find this model to be very thrifty, indeed”. In
fact, you know that this car you own is a notorious gas guzzler.
A.2 Statemen of Future Conduct
- A statement of future conduct is not a statement of fact; it’s about a person’s future
intentions
- Rule: not usually treated as misrepresentation, unless statemen of future conduct is made
fraudulently or described in terms of a present intention (intending v. promising)
o Ex. You say to me: “I certainly do not intend to sell the neighboring land to
Herb’s Sewage Treatment Facility”.
o This statement contains an indication of your present state of mind.

A.3 Inaccurate Descriptions of the Law

- Rule: Inaccurate description of law is not usually treated as misrepresentation, unless it
refers to the inaccurate descriptions of the consequences of the law – may point to
misrepresentation
- Example 1: You say to me: “Zoning law do not apply to the property”.
o This is a matter of law.
- Example 2: You say to me: “Zoning approval has been granted.”
o This is a matter of fact…May lead to misrepresentation ... recall:
Misrepresentation occurs only if the speaker claimed to state an existing fact

B. Legal Consequences of Misrepresentation

1. Only Contractual Remedy:
a. Recission (usually with Restitution)
2. Tort Remedy:
a. Damages

Recission
- The contract is cancelled with the aim of restoring the parties to their pre-contractual state
- We treat the contract as though it never existed
-
Restitution:
- Follows a recission: a giving back and taking back
- Unless:
o Affirmation by mislead party
o Restitution is impossible
o Third party rights involved

Remedy of Recession vs A Right to Damages

- Types of Misrepresentation
1. Innocent: Recission of contract
2. Negligent: Recission of contract and damages in tort
3. Fraudulent: Recission of contract and damages in tort
Limits on Remedies
1. No Misrepresentation
o Representee conducted own investigation.
o Evidently, was not induced to enter the contract
2. No Recission
o Affirmed the contract
o Not possible to undo contract
o Third party rights involved

Case Problem 2: Shawna and Sheila live in a small northern community where the roads are not always plowed in
the winter. After getting stuck in the snow one too many times, they decided their best option for a reliable vehicle
was a used 4×4 truck. Within a few minutes of stepping onto the lot of Farmer Jane’s Cars Ltd, Shawna and Sheila
spotted a truck they liked and Shawna asked the sales manager, Baltar, for some more information. While Baltar was
telling Shawna about the truck’s features, Sheila noticed that a decal was missing from the back of the truck. When
asked about the missing decal, Baltar told her, “When we received the truck at the dealership, there were a few
scratches and other marks that we touched up and painted, but that’s about it.” Baltar also told Shawna and Sheila
that the truck had new wheels and tires. Shawna and Sheila talked about the truck for a few hours that evening and
decided to buy it. The next day they finalized the paperwork and drove the truck home.
A few months later, Sheila lost control of the truck on a snowy road and crashed into a ditch. She was fine, but the
truck required repairs costing a total of $5,000. When the local mechanic, Tanya, had the truck on a hoist, she
noticed some damage to the body that she thought was from a previous accident. Tanya told Sheila about the older
damage. Sheila phoned the provincial insurance company and had a representative look into the claims history of the
truck. The insurance company representative told her that the record showed the truck had been reported stolen a
few years ago and had sustained $1,900 worth of damage at that time. It turns out that these damages were repaired
by the mechanics at Farmer Jane’s.
Shawna and Sheila are upset that they were not told about the full repair history of the truck and want their money
back. Will the couple be successful in proving that Baltar’s statement about the scratches on the truck amounted to a
misrepresentation that induced them to enter into the purchase contract? If so, are they entitled to rescission?

The statement that Baltar made to Sheila and Shawna was false when it was made and induced
them into the contract (buying the car).
- Misrepresentation
1. A statement of an existing fact: “When we received the truck at the dealership, there were a
few scratches and other marks that we touched up and painted, but that’s about it.”
2. That is false when made: “The insurance company representative told her that the record
showed the truck had been reported stolen a few years ago and had sustained $1,900 worth of
damage at that time. It turns out that these damages were repaired by the mechanics at Farmer
Jane’s.”
3. May be actionable if it induced a contract: Sheila and Shawna bought the truck
from Farmer Jane’s Cars LTD
- Restitution is impossible as the car sustained damage in the accident

Structure – Contractual Terms

- Legal Purpose
o Document Title; Document Purpose; Recitals
- Parties
- Terms and Conditions
 o

Contractual Terms
- Statement made during negotiation becomes enforceable obligation within contract
o Promise of future performance
o Actionable breach if not fulfilled
- Types of contractual terms
o Terms expressed by parties
o Terms implied by court or statute

A. Express Terms: Definition

- An express term is a statement made by one of the parties that a reasonable person would
believe was intended to create an enforceable obligation
- Even if the parties agree on particular terms and write them into a document, they may
disagree on the interpretation of those words

Methods of Interpretation
1. Literal Approach
a. Words are given their plain and ordinary meaning
2. Contextual Approach
a. Intentions and surrounding circumstances considered
3. Contra Proferentem
a. Ambiguities interpreted against person who wrote the clause
- In general, Canadian courts adopt a contextual approach to contract interpretation
- In standard for contract, they adopt the contra proferentem rule
B. Implied Terms
- Express terms may not fully reflect intention of parties; the contract may not contain all
the relevant terms
- Parties’ remaining intention may be implied by law
- That is, a contract may contain implied terms

Implied Term
- A contract may also contain implied terms
o Express terms may not fully reflect intention of parties
o Parties’ remaining intention may be implied by law
 Common law (implied by court)
 Statutory law (implied by statute)

Standard Form Agreement

- Mass-Produced documents (“take it or leave it”)
o Mortgage, Car Rental, Waivers
Signed Standard Form Contracts
- General Rule: People who sign standard form agreements are bound by all the terms
expressed in them (even if not actually read or understood them)
- Possible Exception: If there is no reasonable chance to read
o E.g.: customer required to quickly sign the document without enjoying a
reasonable opportunity to study its terms

Standard Form Ticket Contracts (No Signature)

- Terms often printed on tickets and receipts
- Enforcement depends upon notice
o Reasonable notice must occur before contract is created
o Heavier burden for unusual or harsh terms
o Perhaps no burden for obvious terms
- Enforcement depends upon assent
o Signature is best evidence of acceptance
 Generally effective even if term not read
- The enforcement of the terms in a ticket contract depends upon reasonable notice to
customers
o The question is whether the customer was given reasonable notice to read these
terms

Exclusion Clauses (or Waivers)

- Clauses to exclude or limit liability
o May exempt party entirely (not liable for any loss)
o May exclude certain liability (not liable for carelessly caused damage)
o May cap damages (liable limited to $500)
- Often included in standard form agreements
- Valid means of allocating risk
o Alert parties to need for insurance or extra care

For Requirements for Enforceability

1. Term must be clear and unambiguous
a. Ambiguities interpreted against drafter
2. Reasonable notice to affected party
a. Heavier onus for unusual or harsh terms
3. Assent by affected party
a. Signature is best evidence of acceptance of clause
4. Usually not enforced if unconscionable or unfair

9.3: Dave Saleski arrived at Snowy Valley Hills for a day of skiing. In order to access the ski lifts, he purchased a
lift ticket and affixed it to the outside of his coat.
Unfortunately, Dave was injured even before he enjoyed the first run. While waiting to be taken to the top of a hill,
the handle on the ski lift struck his knee and tore a ligament. Instead of hanging straight down from the lift, that
handle improperly protruded out to the side. Dave consequently sued Snowy Valley, alleging that it had negligently
maintained, operated, and supervised the lift.
1. The front of Dave’s lift pass carried a notice:
 1. PLEASE READ THE EXCLUSION OF LIABILITY AND ASSUMPTION OF RISK NOTICE ON THE
BACK.
The back of the ticket said:
1. NOTICE TO ALL USERS OF THESE FACILITIES: EXCLUSION OF LIABILITY— ASSUMPTION
OF RISK. THESE CONDITIONS WILL AFFECT YOUR LEGAL RIGHTS—PLEASE READ
CAREFULLY!
2. As a condition of the use of the ski area facilities, the Ticket Holder assumes all risk of personal injury
from any cause whatsoever including but not limited to the risks, dangers, and hazards of skiing; the use of
ski lifts; and negligence. The Ticket Holder agrees that the ski area operator shall not be liable for any such
personal injury, death, or property loss and releases the ski area operator and waives all claims with respect
thereto.
The same terms also appeared on brightly coloured signs where lift tickets were sold and in various other locations
throughout the ski area. In addition, an Alpine Responsibility Code was posted throughout the area, including the
ticket purchase area. One of its provisions said, “You must have sufficient dexterity, ability, and knowledge to safely
load, ride, and unload lifts.”
Dave claims that this limitation of liability clause does not form part of his contract with Snowy Valley because he
had no knowledge of it.

Four Requirements:
1. “NOTICE TO ALL USERS OF THESE FACILITIES: EXCLUSION OF LIABILITY—
ASSUMPTION OF RISK. THESE CONDITIONS WILL AFFECT YOUR LEGAL
RIGHTS—PLEASE READ CAREFULLY!”
2. Terms are labelled on ticket, ski pass, and presented when buying ticket
3. He purchased the ticket and therefore accepted the terms
4. Unfair as the negligence of the ski lift damage is on the Snowy Valley

The 4th term disproves the plaintiff’s fault as Snowy Valley is liable for negligence.

Ch 10: Contractual Defects

Incapacity to Contract
- Capacity: Legal power to give consent
- Remedy: Voiding a Contract (i.e. Avoid the legal obligations that the contract would
otherwise create

There are groups with limited power to give consent

- Minors
o Some contracts with minors are voidable, minors may elect to avoid contractual
liability, and should do so immediately, delay can be treated as affirmation.
o Minors who elect to avoid contracts must give back any benefits that they receive
under them
- Mentally incapacitated people
- Intoxicated people

Ex. Erin had always been independent. Shortly before her 17th birthday, she moved out of her parents’ house and
bought a used car, which she needed for her fledgling chocolate-covered-cranberry enterprise. She agreed to pay
$15,000 for the car, $5,000 as a down payment and the rest in monthly instalments over one year. She used the car
mostly to make deliveries and pick up supplies. After she had driven the car for three months, the bearings burned
out. Since Erin was in a position to hire a delivery person, she decided that she no longer wanted the car. Having
studied the basics of contract law in high school, Erin attempted to return the vehicle to the car dealership, claiming
that she had elected to avoid the contract. The dealership refused, having received an opinion from its lawyer that a
contract for necessaries is enforceable against a minor. Erin replied that the car was not a necessary, and that the
contract was therefore not enforceable. Do you think that Erin will be permitted to avoid her contract with the
dealership? Give reasons to support your position.
- Because she did not return the car in a timely fashion and instead used it for business
which is not a necessary, she cannot return the car

Mentally Incapacitated People

- Two situations:
1. Court declared person to be lacking in mental capacity: Void
2. No Court declaration, but person still lacks mental capacity to contract at the time
the contract is formed

Ex. Michael is a young man with a long psychiatric history. One day he decided to apply for a credit card from his
local bank. He filled out the forms, submitted them to the bank, and soon after received a credit card. Not fully
understanding the consequences of using the card for purchases, he quickly racked up thousands of dollars of debt.
After numerous missed payments, the bank brought an action in court to sue Michael for the balance owing.
Michael’s lawyer argued that the contract was voidable because of mental incompetence. He submitted medical
evidence to show that Michael was incompetent at the time he entered into the credit card contract. Will the bank be
able to sue for the outstanding balance? What additional piece of information would be helpful to make a conclusive
determination here?
- No court order of his mental incapacity, however the bank should have known about his
psychiatric history
- The contract is voidable and the bank is liable

Intoxicated People
- Intoxication may render contract voidable if
o The person must have been so drunk they could not know or appreciate what they
were doing
o The other party to the contract must have been alerted to the fat of intoxication
o Immediate action: the party seeking to avoid liability must make a prompt
election to avoid the contract once sober

Ex. Elwood is a pig farmer who is known to enjoy a drink or two. One day in July, after a weekend of particularly
heavy drinking, he staggered into the office of Pork Bellies of America and offered to sell all of his piglets. He
promised to deliver them in October, as soon as they were fattened up. Hank, Pork Bellies’s purchasing agent, saw
that Elwood was extremely drunk, but decided to write up the contract anyway since the price was a fair one. After
the deal was signed, Hank and Elwood went to the neighbourhood saloon to play darts and have lunch. The next
day, after sobering up, Elwood was reminded about their agreement. In fact, over the course of the next two weeks,
Hank and Elwood ran into each other on a number of occasions. Each time, Hank mentioned the deal, and Elwood
acknowledged it. In September, the price of pork nearly doubled. Consequently, Elwood sent Pork Bellies of
America a registered letter saying that he would not be delivering the pigs. He had decided to sell them to someone
else at a higher price. Pork Bellies has sued Elwood. Will the court allow Elwood to avoid contractual liability? Give
reasons to support your position.
- Elwood was drunk when consulting and confirming the contract with Hank
- Hank knew Elwood was intoxicated at the time but still decided to write up the contract,
“Hank, Pork Bellies’ purchasing agent, saw that Elwood was extremely drunk, but
decided to write up the contract anyway since the price was a fair one.”
- However, Elwood waited up to 2 months before wanting to void the contract. He did not
take immediate action to make a prompt election to avoid the contract once sober. A
 reasonable time to void the contract would be a few days sober because the pork market
fluctuates.

Defect: Unfairness During Bargaining

- If a disadvantaged party is pressured into an agreement or placed in an unfair position
during an agreement
- Contract may be voidable due to unfairness
o Duress
 Problems with the circumstance around the creation of the contract
 Duress of Person: Threat of physical violence against a person
 Duress of Goods:
 Duress of Economics:
 If avoided, the innocent party may choose not to perform, and to recover
an any payments made under the agreement
o Undue influence
 Abuse of a relationship to induce a contract
 May consist of oppression, persuasion, pressure, influence
 Influence: Pre-existing fiduciary relationship that causes a contract
to be created
 Thus, voidable PL can elect to void or not
 Legal Test: 1. Influence, 2. That causes, 3. A contract to be created
o Unconscionable transactions
 A bargain is presumed unconscionable if
 Substantial inequality of bargaining power
 Unfairness in terms
 Presumption is rebutted by the stronger party presenting proof that
 Bargaining process was fair, right and reasonable

Ch 11: Discharge and Breach

- A contract is discharged when the parties are relived of the obligation to do anything
further
- Defect problems: the issue arose as soon as the contract was created
- Discharge problems: the issue usually comes up during the life of the contract. Maybe
someone performs K or a party breach
- Contract is discharged by:
o Performance
o Agreement
o Breach
o Operation of law -> frustration

Discharge by Performance
- Performance – all obligations fulfilled
- A contract can be discharged through the performance of the terms
- Rule: parties must perform exactly as contract requires, except
- Time of the performance:
 o As a general rule: time is not of the essence: party can perform late even if K sets
a date (but, damages for lateness)
o But in some contracts – “time might be of the essence” – however may change by
a contract provision (boilerplate clause) or notice of time

Exceptions to General Rule

- Late performance
o But not if “time is of the essence”
 Innocent party option to refuse late performance & discharge the K for
breach
Discharge: Substantial Performance
- But not if entire “contract” clause
- General rule: obligations must be exactly performed, sometimes discharge if
substantially perform
- Ex. The Darjeeling Tea Company hired Hans Rooibos, an artist and carpenter, to produce and deliver 10
tea chests ornately carved from teakwood. The tea chests were intended to decorate the company’s various
offices around the world. The parties’ contract was very detailed in terms of expectations. Amongst the
many obligations that Rooibos undertook was a promise to complete the tea chests with varnish finish. The
total price was $25,000. Rooibos worked long and hard on the project. As the delivery date drew near,
however, he realized that he would not have time to both finish the tea chests for the Darjeeling Tea
Company and begin a new contract for another customer. Rooibos therefore delivered the 10 chests to the
company without varnish. The company now points to the contract, insists that Rooibos is in breach, and
refuses to pay any part of the price. It does so even though it is using the tea chests, as intended, in its
various offices. The chests were put to use after Earl Grey, another craftsperson, was hired to varnish them.
Somewhat curiously, given its tight-fisted attitude toward Rooibos, the company paid Grey $2,500 for a job
that normally would cost only $500. The company has not explained that extravagance. How much money,
if any, is Rooibos entitled to receive from the Darjeeling Tea Company?
- Rule: obligations must be exactly performed
- Contract was to build chests with varnish finish
- He breached the contract by not varnishing the chests however, it is a minor breach as the
value of varnish is $500 and the overall contract is worth $25,000, therefore he
substantially completed obligations of the contract and can discharge and would be paid
$24,500.

Discharge: Entire Contract Clause

- No payment due unless, and until all work is performed; thus, substantial performance
does not apply

Discharge by Agreement
- Parties can agree to end their contractual agreement

Accord and Satisfaction

- Occurs when a party gives up right to demand performance of the contract in reutnr for a
new benefit

Discharge by Breach
- Failure to fulfill a contractual promise
- When can a person discharge?
 o Depends on type of term breached
1. Condition: substantial term
2. Warranty: minor term
Condition:
- Relatively more important term
- Cuts to the heart of the contract
- Innocent party substantially deprived of expected benefit of contract due to its breach

Warranty:
- Innocent party would not be substantially deprived of expected benefit of contract due to
its breach

Ex. The defendant owns and operates DiNardo’s Mansion, a luxurious building that is available for conferences,
parties, and other events. The plaintiffs, Ellen and Richard, wanted to hold their wedding at the mansion. The
defendant’s sales manager told the young couple that, by the time of their wedding in November, the facility would
have a new, heated glass canopy over an outdoor courtyard, as well as a new two-tier fountain and waterfall that
would be ideal for photographs. The couple was impressed with the plans and emphasized the need for outdoor
facilities that would be suitable even near the end of autumn. They also indicated that the new improvements to
DiNardo’s Mansion were very important to them. The parties then agreed on a total price of $14,000 for 280 guests
(at a cost of $50 per person). The situation then went downhill. Instead of a glass canopy, the defendant installed a
canvas covering over its courtyard. Likewise, the planned waterfall was never built and the fountain was simpler
than expected. Worst of all, after the defendant’s manager left the organization, the defendant realized that the
agreed-upon price was far too low. The defendant contacted the plaintiffs, explained that the price should have been
doubled, and insisted that the “contract is impossible to execute.” However, after the plaintiffs told the defendant
that they were discharging the contract on the basis of his breach, he changed his mind and said that he would
honour the agreement. Unwilling to deal with DiNardo’s Mansion any longer, the plaintiffs took their wedding
elsewhere. Because the alternative venue was arranged at the last minute, it cost $18,000 and it could accommodate
only 200 guests. The plaintiffs have sued for breach of contract, but the defendant argues that he is not to blame
because he was willing to perform. Are the plaintiffs likely to win their case? Explain your answer.
- Condition: the party is substantially deprived of the glass canopy, water fountain, less
number of guests and higher price (14k to 18k) that was agreed upon in the contract.

When Contract is Frustrated (when it looks like a breach but isn’t)

- Test: contract is frustrated when a faultless event makes performance impossible or
radically undermines its purpose. Ex. contract is signed but house burns down
- Governing rules
o Doctrine of frustration applies only if neither party is responsible for the event
o Contract may determine who bears loss
o Default rules at common law and under statue

Ch 12: Contractual Remedies

- Rule: you are entitled to damages for breach of contract (money) not performance as
remedy
- Exception: you can sometimes receive performance via:
o Equitable relief
o Specific performance and injunctions
- Types of contractual damages
 -

Expectation Damages
- Plaintiff is the monetary value of the benefits the PL expected to receive under the
contract
o Plaintiff does not receive performance, but instead value of performance at time
of agreed performance
- How to calculate
o Expected benefit (the market value of what PL expected to get) – expected costs
(the remaining costs the PL had to pay)
- Ex. José agreed to sell a car to Maria for $5,000. Although she made a down payment of $4,000, he refused
to deliver the vehicle because he discovered that it was really worth $7,500. Assuming that José has
breached the contract, Maria will be entitled to recover expectation damages of $6,500
- Sold for 5000, downpayment = 4000, 1000 still owed, MV = 7500, she expected to
receive a car worth 7500 and she still has to pay 1000
- 7500 – 1000 = $6500
- Ex. José agreed to sell a car to Maria for $5,000. Although she made a down payment of $4,000, he refused
to deliver the vehicle. He did so despite the fact that the car was really worth only $1,000. Assuming that
José has breached the contract, Maria will not be entitled to recover any expectation damages. (However,
she may be entitled to restitution, as explained at the end of this chapter.)
- Sold for 5000, downpayment = 4000, 1000 still owed, MV = 1000, she expected to get a
car worth 1000,
- 1000 – 1000 = 0

Causation and Remoteness

- In order to recover losses
- Lose is not remote if either:
o Defendant actually knew about the risk of the loss or
o Defendant should have known of risk of loss based on reasonable person would
recognize the possibility
Ex. Classique Cars Ltd rents out limousines for $1,000 per day, almost invariably to people arranging wedding
parties. It is one of several companies to do so. On one occasion, Classique found that it was overbooked and did not
have enough limousines to meet its rental obligations. It therefore called Adam, with whom it had entered into a
rental contract a week earlier, and informed him that he would not be provided with a vehicle. Adam responded by
informing Classique for the first time that he did not want a limousine for a wedding party. He needed the car to film
a scene in a movie that he was directing. Adam also told Classique that if he did not receive a limousine, the filming
schedule for his movie would be set back one day at a cost of $50,000. If Adam sues Classique, identify two reasons
why he may not be entitled to recover $50,000 in expectation damages.
- Remoteness: lose is remote because defendant (Classique) did not about the risk of loss
that would occur from a delay in filming as he did not tell them.
- Therefore, it is an expected damage, and Adam is not entitled to the $50,000
- Also, Adam only informed Classique that the limo was not being used for a wedding after
it was cancelled and then informed them of the loss, Classique did not and should not
have known about the loss Adam would incur

Equitable Relief: Specific Performance

- Court order to perform contractual action
- Awarded if:
o PL has “clean hands”
o Damages inadequate: cannot buy substitute (heirloom, unique land)
o Mutuality: available to both parties
o No judicial supervision: once and for all order
o No personal services: prohibition on slavery

Injunction:
- Court order to obey contractual prohibition