Professional Liability, Contract Formation, and Dispute Resolution in Law

Contractual Duties

Duty to perform services competently.

Fiduciary Duties

A duty imposed on a person who stands in a special relation of trust to another.

Tort Duties

Legal obligations arising from civil wrongs, leading to liability.

Fiduciary Duty

Requires the professional to act honestly, in good faith, and only in the best interests of the person to whom the duty is owed.

Breach of Fiduciary Duty

Occurs when a professional has a conflict of interest or prioritizes personal interests over the client's.

Negligent Misrepresentation

Involves providing careless or inaccurate information that someone reasonably relies on, resulting in financial loss.

Duty of Care

A legal obligation to ensure the safety or well-being of others.

Proximity

A close relationship where the professional must know the information will be used for a particular purpose.

Standard of Care

What a reasonably competent and experienced professional in the same field would do in similar circumstances.

Reasonably Competent Professional Test

Professionals must meet the level of skill, knowledge, and judgment expected within their industry.

Current Knowledge Standard

The standard is based on current, not outdated, professional practices.

Higher Standard for Specialists

A professional with specialized training must meet the standards of others in that specialty.

Inexperience Not an Excuse

Newer professionals are expected to meet the same standard as fully experienced ones.

Conflict of Interest

A situation where a fiduciary has competing interests that may undermine their duty to act in the best interests of a client.

Reasonable Reliance

The reliance on a statement must be reasonable for a claim of negligent misrepresentation.

Actual Financial Harm

There must be actual financial harm that resulted directly from the inaccurate statement.

Defenses in Negligent Misrepresentation

The plaintiff cannot prove one of the required elements or failed to mitigate their losses.

Example of Breach of Fiduciary Duty

If a professional secretly benefits from a transaction involving their client, they may be liable for breaching this duty.

Example of Negligent Misrepresentation

If an accountant gives incorrect financial advice without checking key information, and the client relies on that advice and suffers a loss.

Error in Judgment

A professional is not negligent if the decision they made is one that another reasonable professional could also have made, even if the outcome was poor.

Accepted Practice

If a professional follows generally accepted and approved practices in their field, this usually supports that they met the standard of care.

Codes of Conduct & Regulatory Standards

Professional rules, ethical codes, and regulatory guidelines are used to help determine what behavior was reasonable.

Causation and Reliance

Even if a professional falls below the standard of care, the client must show: They relied on the advice; The advice actually caused the harm.

Mediation

A neutral third party who is acceptable to all sides acts to assist the parties in reaching a settlement.

Arbitration

A dispute is referred to an arbitrator who adjudicates the matter and the parties agree to be bound by the arbitrator's decision.

Differences between Mediation and Arbitration

Mediation: Facilitator, a voluntary, collaborative process where the mediator helps the parties communicate, negotiate, and reach their own agreement. Arbitration: Decision Maker, a more formal, adjudicative process where the arbitrator makes a binding decision.

Benefits of Arbitration

Cheaper and faster than litigation, confidential, may help preserve future relationships, parties choose adjudicator/mediator.

Drawbacks of Arbitration

When there is a power imbalance between the parties, arbitration can be used to intimidate and abuse the weaker party; its impact on common law in specific cases; can be misused to defeat legal rights.

Definition of a Contract

A contract is a set of promises enforceable by law or an agreement that is legally enforceable. Created when the offer is accepted by the offeree.

Legally Enforceable

This means that if one party fails to live up to the promises in the agreement, the other party can bring an action to have a court enforce the agreement.

Three Essential Elements of a Contract

Consensus (offer and acceptance), intention to create legal relations, consideration is exchanged by parties.

Offer

Offer is a description of a promise one party is willing to make, subject to the agreement of the other party.

Offeror and Offeree

Offeror- the person who offers to enter into a contract; Offeree - the person who receives an offer.

Invitation to Treat

An invitation to the public to begin the bargaining process, examples are: advertisements, goods on display with a requested price.

Difference between Invitation to Treat and Offer

An invitation to treat is different from an offer because it allows the purchaser to define the terms of the agreement and then the owner gets to decide if they agree with their offer.

Nature of Invitation to Treat

An invitation to treat is an indication that a person is willing to negotiate or receive offers, but it is not an offer and cannot be accepted to form a contract.

Carlill v. Carbolic Smoke Ball

A case where the advertisement was a unilateral offer to the whole world.

Consideration

Buying/using the smoke ball was good consideration.

Intention to Create Legal Relations

Carbolic's deposit of £1000 showed this intention.

Communication of Offer

Offers must be communicated to the offeree (verbally, written, or through conduct).

Clarity of Offer

Offers must be clear and unambiguous.

Cross-Offers

Two offers do NOT make a contract.

Offer + Acceptance

Results in a valid contract.

Offer + Offer

Results in no contract.

Unsolicited Goods/Services

Consumers must explicitly accept in writing for a contract to form.

Standard Form Contract

A 'take it or leave it' contract prepared entirely by the offeror.

Characteristics of Standard Form Contract

Pre-drafted by one party, terms favour the offeror, offeree has no bargaining power.

Harsh or Unusual Terms

Must be specifically drawn to the customer's attention.

Termination of Offer

An offer can terminate by lapse, revocation, rejection, or counteroffer.

Lapse

Occurs when the stated time for acceptance expires or a reasonable time passes.

Revocation

Offeror may revoke anytime before acceptance.

Rejection

If the offeree rejects the offer, it dies.

Counter-offer

Rejects the original offer and replaces it with a new one.

Option (Irrevocable Offer)

A separate contract where the offeree gives consideration for the offeror to keep the offer open.

Acceptance by Promise

Offeree accepts by promising to do something.

Bilateral Contracts

Both parties become bound immediately.

Acceptance by Performance

Offeree accepts by doing the act requested.

Unilateral Contracts

Offer calls for performance, not a promise.

Example of Unilateral Contract

Reward → 'If you return my dog, I pay $500.'

Difference between Unilateral and Bilateral Contracts

Bilateral: Exchange of promises; Unilateral: Acceptance occurs only by completing the act.

Communication of Acceptance

Can be communicated verbally, in writing, by conduct, or electronically.

Instantaneous Communication

Effective when received by the offeror.

Non-instantaneous Communication

Acceptance effective when sent under traditional common law postal acceptance rule.

Electronic Transactions Act

Communication is effective when capable of being retrieved by the recipient.

Sufficient Consideration

Must have some value in the eyes of the law; even a small amount counts.

Example of Sufficient Consideration

A peppercorn can be sufficient consideration.

Not Adequate Consideration

Courts do not evaluate whether the parties made a fair or equal bargain.

Gratuitous Promise

A promise made without consideration—nothing is given in return.

Examples of Gratuitous Promise

A charitable pledge; Promising to give someone a car for free.

Past Consideration

NOT valid consideration; cannot form the basis of a contract.

Example of Past Consideration

If I mow your lawn voluntarily, and afterward you promise to pay me $50 → NOT enforceable.

Intent to Form Legal Relations

Determined by a two-step analysis: presumption and rebuttal.

Presumption in Commercial Context

YES, parties intended to create legal relations.

Presumption in Family Context

NO, parties did not intend to be legally bound.

Rebutting the Presumption

Can be rebutted with facts or evidence.

Carlill v. Carbolic Smoke Ball Co.

The company showed intent by depositing money 'to show sincerity.'

Old Law (Traditional Common Law)

Any modification to an existing contract required fresh consideration.

New Law (Rosas v. Toca, 2018 BCCA)

The court held that: 'In the absence of duress, unconscionability, or other policy concerns, contract modifications made without consideration should still be enforceable.'

Implications of Rosas v. Toca

Contract changes do NOT require fresh consideration in BC.

Request for goods or services

Creates an implied obligation to pay a reasonable price.

Quantum meruit

Payment for the value of services performed.

Example of request for services

You ask someone to paint your office without discussing price → you must pay a reasonable amount.

Key difference between request and gratuitous promise

Request → obligation to pay; No request + later promise → gratuitous and unenforceable.

Effect of a seal

A seal eliminates the need for consideration.

Effects of a seal

Makes a gratuitous promise enforceable and shows clear intention to be legally bound.

Requirements for a seal

Must be placed on the document at the time of signing.

Social context at the hockey game

Presumption of no intention to create legal relations.

Scenario 2 - Julie gives James her car for $0

This is a gratuitous promise → not enforceable, unless made under seal, or promissory estoppel applies.

Contracts made by a minor

Not binding on the minor but are binding on the other party.

Minor's repudiation

Minor may repudiate (refuse to be bound by an agreement) except for necessaries and beneficial contracts of service.

Necessaries

Includes food, clothing, lodging, medical attention, legal advice, and transportation.

Beneficial contracts of service

Refers to employment contracts that are binding.

Ratification of contracts by minors

If not repudiated in a timely manner after reaching the age of majority, they may become liable for the contract.

Contract unenforceability due to incapacity

The contract is voidable at the option of the incapacitated.

Proving incapacity

Person seeking to rely on incapacity must prove incapacity and that the other party knew or ought to have known of the incapacity.

Prompt repudiation of contract

Must repudiate the contract promptly.

Difficulty in ascertaining capacity

Practically, capacity is sometimes very difficult to ascertain.

Illegal by reason of a statute

Contract is not enforceable because it violates, directly/indirectly, legislation.

Illegal by reason of public policy

Contracts contemplating commission of a tort are not enforceable. Contracts prejudicial or contrary to public interest are not enforceable.

Illegal by reason of the common law

Same as public policy.