BLAW 1320: Representations and Terms — Chapters 9, 11 & 12
Representations and Terms – Chapters 9, 11 & 12 (Law 1320)
Note: This set of notes consolidates pre-contractual representations, contract terms, discharge mechanics, and remedies for breach as covered in the transcript. Where applicable, statements from the source are reformatted into concise bullet points and key definitions. LaTeX is used for explicit formulas, terms, and references.
Pre-Contractual & Contractual Statements (Chapter 9)
Overview of topics:
Pre-contractual and contractual statements
Misrepresentation (nature, consequences, types)
Contractual terms (express vs implied)
Standard form agreements
Plain language in contracts
Boilerplate clauses
Pre-Contractual Statements
Definitions:
Puffs: exaggerated statements about a product’s benefits; generally no contractual consequence.
Representations: statements that induce entry into a contract; may have consequences if false.
Terms: contractual promises; have certain consequences if breached.
Test for statements: parties’ objective intentions.
Consequences can vary based on whether a statement becomes a contractual term or remains a representation.
Statements During Negotiations
Table concepts (simplified):
Statement not inducing contract → no contract impact
Statement inducing contract → may become a contractual term
Statement containing a promise → may become a contractual term
Mere puff → remains a representation, with potential misrepresentation risk
Practical outcome: if a pre-contractual representation is false and induced the contract, it may become actionable as misrepresentation, or as a breach if it becomes a contractual term.
Pre-Contractual Representations
Key points:
Statements made to induce contract
Do not become contractual promises by themselves
May be actionable if they falsely induce contract
Actionable if the statement amounts to a “misrepresentation”
Example: "This car is very low mileage and had all its scheduled maintenance" (untrue) → potential misrepresentation
Misrepresentation – Definition
A misrepresentation is a false statement that causes a person to enter into a contract.
Elements involve the representor:
knowingly or negligently makes a false statement
the representor expected the representee to rely on the statement
the representee reasonably relies on the statement
the representee suffers damage
ext{Misrepresentation elements: } egin{cases} ext{False statement} \ ext{Knowingly or negligently made by the representor} \ ext{Representor expected reliance} \ ext{Representee reasonably relies} \ ext{Damages suffered by representee} \ ext{(i.e., the four essential components)} \ ext{--- Result: potential entitlement to remedies} \ ext{In some cases, silence or partial disclosures may be treated differently (see below).} \ ext{Note: reliance and causation are crucial.} \
ext{Important distinctions: misrepresentation is a statement of fact, not opinion or law.} \ ext{Future predictions and opinions generally not misrepresentations unless they falsely imply fact.} \
egin{array}{l} ext{Statement of fact} \ ext{(can be misrepresented)}
ightarrow ext{see next section} \ ext{Opinions, predictions, or statements of law}
ightarrow ext{not misrepresentations unless they imply fact.}
ight. \
ext{End of elements}
ight.
Misrepresentations of Fact – False Pre-Contractual Statements
Not actionable as misrepresentation: predictions of future, opinions, implied statements of fact contrary to prediction or opinion, statements of law.
Actionable as misrepresentations: false statements of fact that induce contract.
Example: Assessing a claim like maintenance history against actual maintenance records.
Statement of Fact: Examples
Misrepresentation must be a statement of fact, not opinion, prediction, or law:
Opinion based on speculation: e.g., "I think the car is reliable" (not necessarily a fact unless presented as an expert fact).
Future conduct promises: e.g., "I will be promoted in five years" (future conduct; not a current fact).
Present intention statements: e.g., "I don’t intend to sell the land" (present intention; not a fact about the past or current state).
Statements about law: e.g., "Zoning laws don’t apply" (incorrect legal conclusions can be misrepresentations if they state a fact about the contract’s legal consequences).
Statements about legal consequences: e.g., "Zoning approval has been granted" (a factual status that can be misrepresented).
Silence as Misrepresentation
General rule: parties are not required to disclose material facts during negotiations unless specific conditions apply.
Situations where silence may give rise to misrepresentation:
Silence distorts a previous assertion
A statement is a half-truth (omission of material facts would alter meaning)
Contract negotiation requires utmost good faith
Special relationship exists (fiduciary or trusted advisor situations)
Statutory disclosure requirements exist (e.g., insurance contracts, conflicts of interest)
Facts are actively concealed
Silence – Duty to Disclose Changes in Circumstances
If circumstances change in a way that affects the accuracy of an earlier representation, there may be a duty to disclose.
A half-truth: cannot give a partial account if unspoken words would substantially change the understanding of the statement.
Silence – Fiduciary and Statutory Contexts
Some contracts require utmost good faith (e.g., insurance: disclose illnesses).
Special relationships of trust (fiduciary duty) may require disclosure (e.g., lawyer–client; fiduciary relationships).
Statutory requirements may mandate disclosure (e.g., some insurance contracts, director interests, division of domestic property upon separation).
Evidence of concealment can trigger misrepresentation claims.
Inducement
For misrepresentation to be actionable, the false statement must have induced the deceived party to enter the contract.
Misrepresentation does not have to be the only inducing factor; other factors may also contribute.
A misrepresentation is not actionable if:
It did not induce the contract even if made with intent to deceive, or
The recipient conducted independent inquiry or did not rely on the misrepresentation
Remedies for Misrepresentation
Potential remedies include:
Rescission: cancellation of the contract to restore parties to pre-contractual state
Restitution: restoring parties to their original positions
Damages in tort: monetary damages for harm
Rescission
A discretionary equitable remedy that cancels (unravels) the contract, treating it as if it never existed.
Often accompanied by restitution; available for innocent, negligent, and fraudulent misrepresentation.
Restitution
Restoration of money, land, or goods to restore the original position.
Available for all types of misrepresentation, but may be denied if restoration is impossible, if third-party rights are affected, or if the contract has been affirmed after discovery of misrepresentation.
Damages (Remedies in Tort vs. Contract)
Damages are monetary awards for wrongful loss; exist for torts (fraudulent or negligent misrepresentation) but not for innocent misrepresentation (typically).
Types include: expectation, reliance, account of profits (disgorgement), nominal, punitive, liquidated.
Types of Misrepresentation (Three Types)
Innocent misrepresentation: misrepresentation where the defendant is innocent, no knowledge of falsity; remedy is rescission (and possibly restitution); no tort damages.
Negligent misrepresentation: made carelessly or unreasonably; may incur liability even if the representor did not know it was false; remedies include rescission, restitution, and damages (tort of negligence).
Fraudulent misrepresentation: statement knowingly false, or made with no honest belief, or recklessly; remedies include rescission, restitution, and damages (tort of deceit).
Innocent Misrepresentation
Defendant innocent of wrongdoing; no knowledge of falsity; no carelessness in making statement.
Remedies: rescission (contract law) and possibly restitution; generally no tort damages.
Negligent Misrepresentation
Made carelessly or without reasonable care; liability even if the representor did not know it was false.
Must prove elements of negligence.
Remedies: rescission, restitution, and damages (tort of negligence).
Fraudulent Misrepresentation
A statement or silent misrepresentation known to be false, or made with no honest belief, or made recklessly.
Remedies: rescission, restitution, and damages (tort of deceit).
Contractual Terms
A contract may contain terms that were made during negotiations and become enforceable obligations within the contract.
Types:
Express terms: words spoken or written that create enforceable obligations.
Implied terms: terms inferred by court or statute to reflect parties’ intentions.
Terms can be enforceable even if not written (parol evidence considerations).
Express Term
A term is express if a reasonable person would believe it was intended to create an enforceable obligation.
Proof of express terms:
Oral agreement: what words were spoken (evidence-dependent)
Written agreement: terms are easier to prove
Written terms are subject to the parol evidence rule: see below.
Parol Evidence Rule
General rule: parol evidence cannot vary written terms; parol evidence means evidence outside the written contract (conversations, memos, emails, texts).
Historically, courts focused on the contract language to discern intent.
Exceptions to Parol Evidence
Rarely used; exceptions include:
Rectify or fix a mistake in a contractual document
Prove a contract was never formed or is defective
Resolve ambiguities in the document
Prove the document is not the parties’ complete agreement
Establish a collateral contract (a separate agreement)
Contractual Interpretation Rules
Literal approach: give words their plain and ordinary meaning.
Contextual approach: consider intentions and surrounding circumstances.
Golden rule: give words ordinary meaning unless result would be absurd.
Contra Proferentum Rule
Ambiguities are interpreted against the drafter of the clause.
When there is ambiguity and multiple interpretations exist, a court may choose the interpretation that most prejudices the drafter.
This rule discourages drafting ambiguities in favor of the drafter.
Implied Term
Contracts may contain implied terms not fully reflected in express terms.
Implied by law (statute) or implied by the court (common law).
Terms Implied by Court
Implied only when necessary to reflect the parties’ intentions; not implied merely to improve contract quality.
Key tests: business efficacy (term needed for contract to make sense), usage and custom, previous dealings, agreement’s legal character.
Terms Implied by Statute
Statutes may automatically include terms or prevent removing terms.
Some terms are mandatory; others are default terms that parties can modify.
Common in commercial agreements (e.g., Sale of Goods Act, consumer protection laws).
Standard Form Agreements
Mass-produced documents with take-it-or-leave-it terms.
Pros: reduce transaction costs, consistent terms, years of judicial interpretation.
Cons: possible consumer abuse, often drafted by the economically dominant party; customers may not read them.
Exclusion Clauses (or Waiver)
Clauses to exclude or limit liability.
Can exempt entirely, exclude certain liability, or cap damages.
Often found in standard form contracts (e.g., ski lift tickets, car rentals).
Valid means of allocating risks; alert parties to the need for insurance or care.
Exclusion Clauses – Elements and Enforceability
Two key elements for an effective exclusion clause:
The party assumes all the risks of the activity.
The party waives all legal rights to sue for damages arising from those risks.
Enforceability considerations:
The clause must be clear and unambiguous; apply contra proferentem for ambiguity.
Reasonable notice to affected party.
Assent by affected party (signature is strong evidence; initials near onerous provisions may be required; sobriety proofs in some contexts).
Typically not enforced if unconscionable or unfair.
Standard Form Ticket Contracts and Signed Agreements
Standard form ticket contracts: terms often on tickets/receipts; enforcement depends on notice.
Reasonable notice required before contract formation; heavier burden for unusual or harsh terms.
Signature generally proves assent; terms may be binding even if not read, with exceptions for rushed or unusually onerous terms if reasonable notice was provided.
Boilerplate Clauses
Boilerplate: standard provisions reused across contracts (e.g., force majeure, confidentiality, arbitration, jurisdiction, entire agreement).
Purpose: minimize contract administration problems and interpretation issues.
Types of Boilerplate Clauses
Common types
Exclusion clauses (above)
Force majeure
Confidentiality
Arbitration
Jurisdiction
Entire agreement clause
Boilerplate Clauses – Key Concepts
Force majeure: protects parties from non-performance due to events outside their control.
Confidentiality: restricts disclosure/use of confidential information.
Arbitration: disputes resolved outside court.
Jurisdiction: determines which court and laws apply.
Entire agreement: contract contains all terms agreed; avoids pre-contractual inducements/extensions.
Plain Language in Contracts
Motivation: reduce legalese for clarity; business benefits include reduced training needs, better customer relations, fewer disputes, and potential cost savings.
Examples of plain language movement:
Government of Canada communications policy requires plain language.
Canadian Bankers’ Association aims for plain-language mortgage documents.
Examples of plain-language drafting:
Before/After examples show complex legal phrasing simplified for clarity.
Managing Risk in Standard Forms
Use tested forms with a proven record; use clear language for onerous terms; provide reasonable notice; obtain explicit consent (e.g., initials) for onerous terms.
Take Aways (Chapter 9)
Reflection prompts about surprises and terms encountered when clicking “I agree.”
Chapter 11 – Discharge of Contracts
Overview: Discharge by performance, agreement (and related concepts), operation of law, and breach.
Discharge by performance: fulfillment of obligations; exact performance generally required; time is usually not of the essence unless contract says otherwise.
Tender of payment: money payment; debtor’s obligation to tender in a reasonable manner; legal tender rules; if a tender is refused, no obligation to repeat.
Tender of performance: performance of goods/services; substantial performance may discharge or partial discharge with damages for defects.
Discharge by Agreement:
Option to terminate: unilateral right to discharge; often limited by contract terms.
Conditions: true condition precedent (contract comes into existence only if event occurs), condition subsequent (contract ends if event occurs).
Accords, satisfaction, and release: new agreement or new consideration; substitute obligations; discharge of old rights.
Variation: changes to existing contract with new terms; requires consideration and surrender of original rights.
Novation: replacement of contract with a new contract – same/different parties; discharge of old contract.
Waiver: abandonment of right to performance; can be enforceable without consideration; typically requires clear intent and reliance; retraction possible on notice unless unfair.
Termination by agreement: reflects mutual consent to end the contract.
Discharge by Operation of Law:
Frustration: performance becomes impossible due to unforeseen events (covered in Chapter 10); parties may be discharged.
Limitation period: rights may be unenforceable after a time but not extinguished.
Bankruptcy: inability to pay debts; discharge may occur unless caused by misconduct.
Discharge by Breach:
Breach defined as failure to fulfill contractual promise.
Depends on term type breached:
Condition: substantial term; allows discharge and damages or continue with damages
Warranty: lesser term; damages but not discharge
Intermediate: variable importance; may be treated as condition or warranty depending on circumstances
Breach types and consequences
Defective performance: most common breach; may reject non-conforming delivery unless defect is trivial
Deviation: failure to follow agreed route or method in carriage of goods; can affect limitation/exclusion clauses
Anticipatory breach: breach anticipated in the future; remedies may be available immediately
Self-induced impossibility: one party makes performance impossible
Effect of Discharge for Breach
Parties are relieved of future performance but contract may still govern issues like limitation clauses and exclusions; contract continues for liability purposes
Chapter 12 – Contractual Remedies
Chapter 12 Overview: Damages (legal remedies), equitable relief (specific performance, injunctions), exclusion clauses, unjust enrichment.
Remedies for breach of contract (Overview):
Damages (monetary)
Equitable relief
Restitution for unjust enrichment in specific circumstances
Discharge (Chapter 11) and other relevant remedies
Damages (Overview – Table of Types)
Damages types (descriptions):
Expectation: place plaintiff in the position as if contract performed; forward-looking; "Give me what I expected to get!"
Reliance: place plaintiff as if contract never arose; back-to-base; "Give me back what I lost!"
Account of profits (disgorgement): defendant’s gain; "Give me what you never should have received!"
Nominal: symbolic damages for a breach without actual loss; small amount (e.g., $10)
Liquidated: pre-estimated damages agreed in the contract; enforceable if a genuine estimate of loss; not a penalty
Punitive damages: punish outrageous conduct; more common in U.S.; require harsh conduct and independently actionable wrong
Damages – Calculation and Issues:
Expectation damages: based on expected benefits minus expected costs; forward-looking
Costs of cure vs. loss of value: if cure/deliverable repairs are possible or not; decide between cost of restoration vs end-value
Alternative performance: damages based on the least onerous acceptable alternative performance
Intangible losses and emotional distress: generally recoverable only if contractual benefit reasonably included peace of mind; often treated like other losses
Remoteness and mitigation: damages must be not too remote; mitigate losses by reasonable steps; duty to mitigate
Issues for Expectation Damages:
Calculation difficulty and speculative losses
“Cost of cure” vs “loss of value” concepts
Remoteness and causation
Mitigation of damages
Alternative performance and intangible losses
Remoteness rule: foreseeability at contract formation; risk disclosure prior to contract
Causation and Remoteness
Loss must be caused by breach and not too remote
Foreseeability test at the time of contract formation; no hindsight
If risk was known or should have been known, damages may be recoverable
Mitigation of Damages
Duty to mitigate losses; claimant must take reasonable steps to minimize losses
Damages reduced if losses could reasonably have been avoided
Expenses incurred in mitigation are recoverable
Reliance Damages
Value of resources wasted in reliance on the contract; backward-looking; "Give me back what I lost!"
Usually elect between expectation or reliance damages
Reliance damages may be denied if the contract was unprofitable
Account of Profits (Disgorgement)
Monetary value of a benefit the defendant obtained by breaching the contract; remedy may focus on plaintiff’s loss or defendant’s gain
Nominal Damages
Breach actionable per se; symbolic recognition of wrong; small amount
Often avoided in practice due to court costs; may be awarded when there is no actual loss
Punitive Damages
Punish outrageous conduct; require harsh, vindictive, or malicious conduct and an independently actionable wrong
Not as common in Canada as in the U.S.
Liquidated Damages vs Penalty
Liquidated damages: genuine pre-estimate of possible losses; agreed by contract; substitute for proving actual loss
Penalty: not a genuine estimate; generally unenforceable; damages do not reflect actual losses
Equitable Remedies
Specific Performance: court order to perform contractual obligations; discretionary and only when damages are inadequate
Injunction: court order to stop or restrict certain actions; generally broader than specific performance and can be used to restrain ongoing wrongful conduct
Conditions for Specific Performance: damages inadequate, mutuality, judicial supervision, personal services restrictions
Specific Performance – Key Criteria
Inadequacy of damages: cannot be adequately compensated by monetary damages (e.g., land, unique items)
Mutuality: available against a party if it could be ordered against that party as well
Judicial supervision: order to be enforceable and final
Personal services: cannot compel performance of personal services like entertainment; anti-slavery principle
Injunction – Key Concept
Court order to obey a contractual prohibition (or to stop prohibitive conduct)
Generally broader scope than specific performance; can prohibit a range of actions
Exclusion Clauses (Chapter 12 context)
Unjust Enrichment (Restitution)
Exclusion Clauses and Consumer Protection
Unjust Enrichment: Restitution
Reverse transfer of value where defendant gained a benefit at plaintiff’s expense without contract or tort; restitution not of the actual transferred item but its value
Independent cause of action; available where contract does not exist or is discharged
Requirements: enrichment to defendant, corresponding deprivation to plaintiff, absence of legal or equitable reason for enrichment
Take Aways – Chapter 12
Considerations of liquidated damages drafting and enforceability
Practical questions on balancing remedies and contract drafting to manage risk
Practical Connections and Ethical/Philosophical Implications
Pre-contractual honesty and good faith: silence and misrepresentation duties shape trust in commerce.
Plain language movement aligns with accessibility and fair dealing, reducing disputes and enabling informed consent.
Boilerplate clauses raise questions about power dynamics in standard-form contracts and the need for transparency.
Economic efficiency vs fairness: standard forms reduce costs but may disadvantage consumers; enforcement must balance freedom of contract with protection against unfair terms.
Remedies reflect policy choices: compensation targeted to restoring position (expectation/reliance), disgorgement to deter wrongdoing, and equitable relief when monetary damages are insufficient.
Key Formulas and Legal References (LaTeX)
Misrepresentation elements (conceptual):
ext{Misrepresentation}
ightsquigarrow ext{false statement} imes ext{induces contract} imes ext{reliance} imes ext{damage}Parol Evidence Rule (conceptual):
ext{Parol evidence cannot vary written terms} ext{, subject to exceptions (rectification, ambiguity, lack of formation, collateral contract)}Time is of the essence (conceptual):
ext{If time is of the essence, late performance may discharge the contract}Expectation damages (conceptual):
ext{Expected benefit} - ext{Expected cost}Liquidated damages vs penalty (conceptual):
ext{Liquidated damages}
eq ext{Penalty}; ext{must be a genuine pre-estimate of loss}Specific Performance criteria (conceptual):
ext{Inadequacy of damages} ext{ and } ext{Judicial supervision} ext{ and } ext{Mutuality} ext{ and } ext{No ongoing personal services}
This compilation captures the core points, definitions, examples, and rules from the transcript across Chapters 9, 11, and 12. For exam preparation, focus on the distinctions between misrepresentation types, the conditions for inducement, the available remedies and their prerequisites, the nature of express vs implied terms, the Parol Evidence Rule and its exceptions, the interpretation rules for contracts, and the criteria for specific performance and injunctions. Also, be prepared to discuss risk management strategies in Standard Form and Boilerplate clauses, including plain language initiatives and consumer protections.