222011 ONSC 3042 (CanLII).
Questions for Student Review
1. Explain consensus, its importance in contract law, and how such consensus is reached.
2. Distinguish an offer from an invitation to treat.
3. What must be contained in an offer for it to form a binding contract?
4. What role does the requirement of writing play in the formation of a contract?
5. What is an exemption clause and how is it treated by the courts?
6. Under what circumstances can an offer end before acceptance?
7. Explain the requirements for an option agreement to be binding.
8. What is required for acceptance of an offer and how can such acceptance be accomplished?
9. When and where is an acceptance effective?
10. What is the effect of the post-box rule and when does it apply? To what forms of com-munications does it apply?
11. When a unilateral contract is involved, how is acceptance accomplished?
12. When will an acceptance sent by email or fax be effective?
13. Explain what is meant by consideration and the contract rule associated with it.
14. Explain what is meant by past consideration and why the designation is important.
15. What is the effect in most jurisdictions of a creditor taking less in full satisfaction of a debt? Why?
16. Explain what is meant by promissory estoppel and why it is important.
17. What is the relationship between a sealed contract and the requirement of consideration?
18. Explain the effect of a contract between an infant and an adult on the parties to it. When will infants be bound by their contracts?
19. What must be proved to escape liability of contracts on the basis of insanity or intoxica-tion? List other situations where capacity may be a problem.
20. What is required for a restrictive covenant to be enforceable?
21. Explain what constitutes intention on the part of parties to a contract.
22. Explain the provisions of the Statute of Frauds and when a contract must be in writing.
23. What is the effect if the requirements of the Statute of Frauds are not met? Will anything else other than actual writing satisfy the requirements of the Statute of Frauds?
Questions for Further Discussion
1. Consider the creation and use of the post-box rule in terms of its original purpose, whether it met that objective, and whether its continued use can be justified today. In your answer consider whether the rule ought to be applied to communications between the parties other than acceptance and to different forms of communications, such as email and the internet generally.
2. It is arguable that the requirement of consideration in a contract serves no other purpose than to indicate that the parties intend their agreement to be binding. Do you think that the continued requirement of consideration in contract law serves any valid purpose today? What about the separate requirement of intention?
3. Consider the fact that in most jurisdictions only some forms of contracts have to be evi-denced in writing to be enforceable. Many jurisdictions have made important changes to these requirements. What do you think? Should only written contracts be enforceable in
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court? Should writing ever be required? In your answer consider the costs and use of legal resources as well as whether the purposes of justice in a broad sense are served by your recommendations.
4. People who are insane are given special treatment with respect to the contracts they enter into. If they are so insane they don’t know what they are doing, the contract isn’t binding unless the other party knew or ought to have known of the insanity. Should the only question be whether there was insanity? Would that be fair to merchants? Why don’t we treat contracts with infants the same way and allow the infant to escape the contract only if the adult with whom they were dealing knew they were contracting with an infant?
Cases for Discussion
1. Williams v. Condon, 2007 CanLII 14925 (ON S.C.)
Steven Williams was a pedestrian when he was struck and seriously injured by the defend-ant. The driver’s insurance company was State Farm Insurance, and for payments of
$2400 and $5300 he signed a complete release of all claims. He claimed the he did not even read the documents. Some time later, while still in pain and having difficulty work-ing, he approached State Farm for further benefits but was refused. State Farm took the position that the releases he had signed were final and the matter was ended. Williams testified that he had been consuming significant amounts of alcohol on a regular basis since the accident to mask the pain, and that he had been taking prescription and non-prescription medicines as well. He stated that on the date when he signed the releases he had consumed five or six king-size cans of beer and a couple of painkillers and that he was, according to witnesses, visually intoxicated. Also, he had been chewing gum to dis-guise the smell of liquor on his breath when he signed the release.
Explain the issues before the court, the arguments of the parties and the likely outcome.
2. Shafron v. KRG Insurance Brokers (Western) Inc. 2009 SCC 6, [2009] 1 S.C.R. 157, (2009) 301 D.L.R. (4th) 522 • [2009] 3 W.W.R. 577
Morley Shafron worked through his incorporated company Morley Shafron Agencies Ltd.
and then sold his shares in that company to KRG Insurance Brokers (Western) Inc. He con-tinued to work for them and as a term of his employment contract agreed, upon leaving, not to work in the same industry for a period of three years “within the metropolitan City of Vancouver.” In 2000, Mr. Shafron left KRG and went to work for an insurance com-pany in Richmond, British Columbia, a city immediately to the south and adjacent to the City of Vancouver. KRG sued claiming a breach of the restrictive covenant. Explain what arguments are available to Mr. Shafron to escape this restrictive covenant. Explain the likely outcome. In your answer consider whether this was an employment or a business relationship, and what difference that would make to the decision.
3. Stone v. Polon, 2006 CanLII 24712 (ON C.A.)
Stone and Polon were partners in an accounting firm that was dissolved when they both joined a larger firm. Eventually Stone left that firm and this action was brought to settle the accounts between the parties. The matter was submitted to the court, and the judge accepted Stone’s calculations as accurate with respect to the early years of the partner-ship. They could not agree on the calculations for the final years and agreed to submit the matter to arbitration. The arbitrator accepted Polon’s position that all of the accounts, even those dealt with by the courts, should be reviewed. Solon disagreed and withdrew from the arbitration. This action is brought to determine whether Stone was bound to
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proceed with the arbitration on those terms or not. What do you think? What are the arguments that both parties could raise and the likely outcome of the matter? Did they ever have an enforceable agreement to arbitrate the dispute?
4. Atria Networks LP v. AboveNet Communications Inc. 2007 CanLII 33115 (ON S.C.) Atria Networks LP wanted to acquire access to cable to establish a fibre-optic cable net-work with its partner throughout Ontario. They negotiated with MFN, which had a lease agreement with Telus, for the assignment of that lease giving them access to the Telus fibre-optic network in Ontario. But they also needed consent of MFN’s parent, the Ameri-can company AboveNet. Serious negotiations took place between Atria and AboveNet, with Atria thinking that an agreement had been reached. An important aspect of the deal for Atria and its partner was some sort of protection if something should go wrong, such as the lease with Telus being terminated. AboveNet took the position that they wanted a
“no strings attached” deal with no such built-in obligations. AboveNet took the position that no agreement had been reached and refused to honour the contract. Explain the issues before the court, the arguments of both parties, and the likely outcome.
5. Ontario (Minister of National Revenue) v. Sunset Recreational Vehicles Ltd. 2003 CanLII 30337 (ON S.C.)
Curtis Jutzi, the sole director and officer of Sunset, claimed to have entered into an oral contract with McGlynn Lumber for the sale of some land that McGlynn needed for access to certain woodlots for $35 000. Jutzi understood they would sell the property back to him when they were finished harvesting the trees from the adjacent lands and so retained title. The Minister of National Revenue was a creditor of Sunset and executed an order under the Excise Tax Act. When the Minister proceeded to sell the land, it was discovered that McGlynn Lumber had registered their interest against the title, preventing the sale.
This action is brought by the Minister for a declaration that McGlynn Lumber has no inter-est in the property and should be removed from the title. McGlynn takes the position that they are the rightful owners of the property pursuant to the oral agreement. What prob-lem does McGlynn face in arguing his position? Is there any alternative position he can put forward? Explain the likely outcome.
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