BLAW 1320 Comprehensive Notes – Contracts, Land & Personal Property

Contract Formation (Chs 7 & 8)

• Nature of Contracts

  • Contract = legally enforceable agreement; distinguishes from a mere promise or morally-binding “comfort letter”

  • Primary duty: perform promises ⇒ breach triggers secondary duty: \text{damages} (mirrors torts: duty not to harm ⇒ damages if breached)

• Tort vs Contract (risk & remedial lens)

  • Tort duties imposed by law; apply irrespective of relationships; compensation looks backward (“as if tort never occurred”)

  • Contract duties voluntary; enforceable only by parties (privity); compensation looks forward (“as if contract performed”)

  • Contractual risk ≈ predictable & limitable; tort risk often surprises and may exceed ability to pay

• Essential Elements

  • Intention to create legal relations

  • Objective test at formation moment: would reasonable person think parties meant legal consequences?

  • Presumptions (rebuttable): commercial dealings ⇒ intent; domestic/social ⇒ no intent

  • Meeting of the Minds (Offer + Acceptance)

  • Offer: unequivocal willingness to contract on stated terms

  • Acceptance: unqualified assent; creates contract instantly

  • Consideration: exchange of value (promise ↔ promise, act ↔ promise)

  • Capacity & Legality

  • Capacity issues: minors (<18 yrs in CAN), mental infirmity, intoxication etc.

• Offer Mechanics

  • Must be communicated as an offer (undelivered letter or mistaken context ≠ offer)

  • Distinguish “invitation to treat” (displays, ads, catalogues) ⇒ responder becomes offeror

  • Life-cycle: Creation → (acceptance) OR termination via revocation, lapse, death/insanity, rejection, counter-offer

  • Revocation rules

  • Free until communicated; ineffective until reasonably brought to offeree’s attention

  • Special cases: Firm Offer (gratuitous; unenforceable unless under seal); Option (supported by consideration or seal; binding)

  • Tendering

  • Contract A (bidding fairness) forms when bid submitted; Contract B (performance) forms upon award

  • Bidders barred from revoking after closing; owners must select fairly

• Acceptance Nuances

  • Methods: words, conduct, handshake; silence alone never acceptance unless prior agreement

  • Distance communications

  • Instantaneous (phone, email, text): effective when & where received

  • Non-instantaneous (mail, some faxes/emails): “postal rule” ⇒ effective when & where sent, even if lost; offeror can displace by stipulating

  • Unilateral contracts: offer invites performance (e.g., lost-cat reward). Contract arises only on full performance; offer can be revoked before completion yet unfair revocations discouraged (Carlill v Carbolic Smoke Ball)

Consideration (Ch 8)

• Nature & Functions

  • Ensures reciprocity; each side gives a benefit or suffers detriment

  • Must “move from promisor”, but need not flow to other party (e.g., pay 5000 to your brother if you transfer car to my sister)

• Sufficiency vs Adequacy

  • Any objective value counts (peppercorn, 1); courts ignore fairness of bargain

  • Love & affection ≠ consideration

  • Forbearance to sue is valid if underlying claim is bona fide (even if ultimately invalid), otherwise not

• Temporal & Pre-existing Issues

  • Past consideration = no consideration (cannot bargain for what’s already done)

  • Pre-existing duties

  • Public duty (police, fire): no new consideration

  • Duty owed to third party: yes (new benefit to promisee)

  • Same duty to same party: no (risk of economic duress); contract amendments require fresh consideration (e.g., earlier completion, additional work)

• Debt Compromises

  • Part-payment of debt generally unenforceable without new consideration, seal, statutory variation or promissory estoppel

• Promises Without Consideration

  • Seal: red wafer or printed mark next to signature substitutes for consideration; historic mechanism, still common in guarantees/confidentiality agreements

  • Promissory Estoppel (shield not sword)

  • Elements: existing legal relationship; clear promise not to enforce rights; reasonable reliance; innocent conduct by promisee

  • Effect: suspends/varies rights; can be withdrawn prospectively with notice

• Privity & Exceptions

  • Only contracting parties may sue/be sued

  • Exceptions

  • Assignment (equitable, statutory, operation of law) transfers rights

  • Trusts: beneficiary can enforce

  • Statutory rights (e.g., life-insurance beneficiaries)

  • Employment “Himalaya clauses” protect employees if: intended & acting within scope

  • Assignment rules

  • Equitable: oral/written, notice advisable, subject to equities

  • Statutory: written, absolute, notice mandatory ⇒ assignee sues in own name

  • Obligations cannot generally be assigned; vicarious performance allowed

Pre-Contract Statements & Misrepresentation (Ch 9)

• Categories of Negotiation Statements

  • Puffery: sales talk, no legal effect

  • Representation: induces contract; actionable if misrepresentation (false fact)

  • Term: becomes contractual promise; breach sounds in contract

• Misrepresentation Elements

  • False statement of existing fact (not opinion, future intent, law) that induces contract; relied upon; damages ensue

  • Silence generally allowed but duty arises if previous statement now false, half-truth, utmost good faith contract, fiduciary relationship, statute compels disclosure, or active concealment

• Types & Remedies

  • Innocent: rescission (+restitution) only

  • Negligent: rescission + damages in tort of negligence

  • Fraudulent: rescission + damages in tort of deceit; punitive possible

  • Rescission barred if: impossibility of restitution, third-party rights, affirmation, lapse of time

Contractual Terms (Ch 9)

• Express Terms

  • Evidence: written terms subject to parol evidence rule (can’t vary clear writing except for rectification, non-formation, ambiguity, incompleteness, collateral contract)

  • Interpretation tools: literal, contextual, golden rule; contra proferentem for ambiguities

• Implied Terms

  • By court: business efficacy, obviousness, usage/custom, previous dealings, legal character

  • By statute: Sale of Goods, consumer laws; some mandatory

• Standard Form & Boilerplate

  • Reduce transaction costs; risk of imbalance

  • Exclusion/Waiver clauses: must be clear, reasonably brought to attention, accepted (signature/initials), not unconscionable; onerous terms require high notice

  • Boilerplate types: force majeure, confidentiality, arbitration, jurisdiction, entire agreement

  • Plain language movement improves clarity; reduces disputes & training costs

Discharge of Contract (Ch 11)

• Modes

  • Performance (incl. tender of payment/performance; time of essence provisions)

  • Agreement: option to terminate; conditions subsequent/precedent; rescission; accord & satisfaction (new consideration); release (seal); variation (minor change + consideration); novation; waiver (promissory estoppel-like)

  • Operation of Law: frustration, limitation periods, bankruptcy

  • Breach: failure of condition/warranty/intermediate term; anticipatory breach; defective performance; deviation; self-induced impossibility

• Term Classification & Remedies

  • Condition: serious; innocent party may terminate + damages

  • Warranty: minor; only damages

  • Intermediate: “wait-and-see”

Remedies (Ch 12)

• Legal (Monetary)

  • Expectation (benefit of bargain) = \text{expected gains} - \text{expected costs}; subject to causation, remoteness, mitigation; issues with cost-of-cure vs diminished value

  • Reliance (wasted expenditure); bar if contract inherently loss-making

  • Account of profits (disgorgement)

  • Nominal (\le 10) symbolic

  • Liquidated damages (genuine pre-estimate) enforceable; penalty unenforceable

  • Punitive damages: rare; require independent actionable wrong + egregious conduct

• Equitable

  • Specific performance: unique goods/land; prerequisites – inadequacy of damages, mutuality, no constant supervision, not personal services, claimant “clean hands”

  • Injunction: order to refrain from breach; broader availability, less intrusive

• Unjust Enrichment

  • Elements: \text{enrichment} of defendant, corresponding deprivation, no juristic reason ⇒ remedy is restitution (value, not necessarily original asset)

Property in Land – Interests & Leases (Ch 15)

• Real Property Scope

  • Traditional “carrot” (centre → sky); modern: reasonable depth & height

  • Fixtures: chattels sufficiently affixed become part of land (tenant’s fixture removable w/o damage & within reasonable time)

• Estates

  • Fee Simple: largest bundle; subject to zoning, tort duties, expropriation (forced sale for public purpose with compensation)

  • Life Estate: exclusive possession for life; no right to devise; liable for waste; reversion/remainder interests specified

  • Leasehold: exclusive possession for definite period; forms via contract

• Shared Ownership

  • Joint Tenancy: identical interests, right of survivorship ⇒ last owner takes all; severed by sale, agreement, partition

  • Tenancy-in-common: undivided but unequal shares; no survivorship ⇒ passes via will/intestacy; common in business succession

  • Condominium/Strata: fee simple in unit + co-ownership of common property; managed via strata corp & fees

• Non-Possessory Interests

  • Easement: right to use neighbour’s land; dominant/servient; created express, implied, prescription, statute; positive/negative

  • Restrictive Covenant: promise limiting servient’s land use; must benefit dominant land; runs with land if negative

  • Mineral lease / Profit à prendre: right to extract resources; may require separate surface lease

• Leases

  • Writing required unless \le 3 years (varies)

  • Tenancies: fixed, periodic, at will, at sufferance

  • Termination options: consent, assignment (entire term), sublease (less than full term), early termination clauses

  • Commercial lease covenants: rent (gross/net), quiet enjoyment, repair/maintenance allocation, taxes, insurance; remedies include eviction, distress, damages; mitigation duty may differ by region

  • Residential leases: heavily regulated (rent control, repair obligations, no distress, landlord must mitigate)

  • Risk: lease vs purchase analysis (cost, cash flow, obligations, investment, flexibility, control, market changes)

• Indigenous Land Interests

  • Aboriginal title (exclusive); Aboriginal & treaty rights; reserve lands, impact-benefit agreements; modern treaties create varied estates (fee simple, land code)

Real-Estate Transactions & Mortgages (Ch 16)

• Registration Systems

  • Registry (deeds): chain of title search; buyer bears risk; priority by registration time unless notice/value issues; title insurance common

  • Land Titles (Torrens): indefeasible title certificate; mirror, curtain, insurance principles; emerging “deferred indefeasibility” to curb identity/mortgage fraud

• Unregistered Interests: short leases, prescriptive easements, public utilities, tax liens, writs of execution

• Purchase Process

  • Risk management team: agent, lawyer, appraiser, surveyor, inspector, environmental auditor

  • Agreement of Purchase & Sale often conditional precedent (financing, zoning, inspection)

  • Closing: remove conditions, adjust pre-payments, transfer deed/transfer form; remedies: damages, specific performance (land unique), purchaser/vendor liens

• Mortgage Fundamentals

  • Mortgage = security interest + loan covenant

  • Parties: mortgagor (borrower), mortgagee (lender)

  • Systems: Registry → title transfers to mortgagee; Land Titles → charge registered, title stays with mortgagor

  • Equity of Redemption: mortgagor’s residual right to redeem even after default; multiple mortgages possible (“redeem up, foreclose down”) – priority by registration

• Default Remedies

  • Sue on covenant (personal liability) – barred in some western provinces for residential property

  • Possession (rare; lender wants not mud)

  • Foreclosure (cuts equity & junior liens; harsh; less used)

  • Sale (judicial or power of sale) – proceeds distributed by priority; deficiency judgment may follow unless barred

Personal Property, Bailment & Insurance (Ch 17)

• Personal Property Categories

  • Tangible vs intangible; acquisition via purchase, gift, finding, creation; loss via sale, destruction, abandonment, becoming fixture

• Bailment

  • Temporary transfer of possession & control with obligation to return; distinguishes licence (no transfer of control)

  • Duties

  • Bailor: deliver safe goods, warn of defects, pay agreed charges; bailee may assert lien/right of sale for unpaid charges

  • Bailee: reasonable care (higher if paid or valuable/fragile; lower if gratuitous); burden of proof shifts – bailee must disprove negligence once loss shown; common carriers under strict liability (war, act-of-God etc. as defences)

  • Sub-bailment: bailee entrusts goods to third party; requires bailor’s consent (express/implied); sub-bailee owes care & possibly suable by owner

• Insurance Principles

  • Liability (third-party) vs property (first-party) coverage

  • Indemnity: never profit; insurable interest required; over-insurance ⇒ contribution; under-insurance ⇒ co-insurance clause proportion formula \frac{\text{coverage}}{\text{required}} \times \text{loss}$$

  • Subrogation: insurer, after paying, stands in the insured’s shoes against the wrongdoer

  • Business-specific covers: business interruption, hacker, key-person, life/health/disability, fidelity & surety bonds

Key Take-Away Questions (per lecturer prompts)

• Why is a “firm offer” label counter-intuitive? Because it suggests stability yet is actually a gratuitous promise lacking consideration and thus revocable unless sealed.

• Be cautious when giving contractual indulgences—without seal or estoppel you may forfeit legal rights.

• Do you understand what rights you waive by clicking “I Agree” on digital contracts?

• Distinguish contractual conditions vs warranties – ask if breach deprives substantial benefit.

• Drafting liquidated damages: must be genuine pre-estimate, not punitive; align with risk profile.

• Tenant can only sub-lease what they possess: a subtenant’s rights limited by head lease.

• Mortgage mantra: “foreclose down (senior to junior interests), redeem up (junior pays senior to save equity)”.

• Insurance & vicarious liability: insurer may subrogate against negligent employee unless policy or employment law bars.