Standard Form Contracts/ Exclusion Clauses
What are the 3 questions a court must ask before invalidating an exclusion clause?
(1) is the clause incorporated?
(2) does it cover the breach in issue?
(3) should the courts invalidate it anyways?
CLCM is easy to satisfy in two situations. Name these situations.
(1) raise instincta - subject matter does not exist at the time of formation
(2) raise sua - mistake as to title
What is the name of the case that resulted in England rejecting ECM?
Great Peace Shipping v Tsavliris Salvage (2002)
What is an entire agreement/contract?
An agreement/contract that consists of a promise to pay entire money in exchange for performance of entire obligation.
What is the question that you ask to determine whether something is a term or representation is?
Would a reasonable, objective person say that this was INTENDED to be a term? (If the answer is no, then it is a representation by default.)
What is the rule from L'Estrange? What are the exceptions to this rule?
There is a strong presumption that a signatory intended a document to be binding because a signature shows assent. Exceptions include (1) if it amounts to misrep/fraud (2) if non est factum applies (3) Karoll/Tilden Rent-a-Car exception (if party presenting the documents knew or ought to have known at the time that the customer did not know about the exclusion clause or the extent or nature, then there is an obligation on that party to bring it to the attention of the signor, and if they do not, then it is not binding)
Why did the court rule that there was no CLCM in McRae v Commonwealth Disposals Commission (1951)?
Because risk was allocated to the company who sold the rights to the boat. The boat never existed and they impliedly promised that it did because it does not make sense to sell rights to something that does not exist.
The common mistake doctrine (in CLCM and ECM) addresses which principle of contracts?
Consensus ad idem. If parties are mistaken as to the terms, then there is no meeting of the minds.
When can an opinion be characterized as a fact?
- Smith: an opinion can be characterized as a fact if the facts behind the opinion are not wholly known to both parties, and it is impliedly expressed as though there are facts to justify the opinion.
Was the innocent party substantially deprived of the entire benefit of the contract? (In other words, did the parties intend for a breach of this term to generate a right to repudiate?)
Using Karoll & Tilden Rent-a-Car, what is something that should be considered to determine whether a party is put on notice that the signatory does not understand the nature/extent of the clause?
Whether the clause is usual and consistent with the activity (such as skiing waiver; Karoll) or, alternatively, whether it is unusual and inconsistent with the activity (such as paying extra for insurance yet the insurance not covering even a sip of alcohol)
Why did CLCM not apply in the Bell and Lever Brothers case?
Because the contract they made was not essentially different from the contract they believed it to be. The contract they made was to terminate the employment, which is the contract that they thought they were making.
What is the test for equitable common mistake?
the fundamentally different test: 1) parties were under a common misapprehension either as to the facts or their relative rights (2) the misapprehension was fundamental (3) the party seeking CM is not at fault (4) third party rights are not affected
What are the four issues that need to be addressed in misrepresentation?
(1) is there a statement of false fact?
(2) was the statement of false fact innocent or fraudulent?
(3) did the statement of false fact induce the other party into the contract?
(4) do any bars to recission apply?
What are the two things that a guilty party must establish to satisfy the court that they have substantially completed the contract?
(1) that the thing is substantially completed (what is left = trivial or unimportant)
(2) that the reason the performance is incomplete is not due to abandonment
When can an exclusion clause be struck down due to public policy? (3)
(1) if it shows egregious criminality
(2) if it shows serious fraud coupled with exposing the public to risk
(3) if it opts out f social policy legislation
What is the essentially different test, as it was re-articulated in Great Peace?
(1) common assumption as to the state of affairs
(2) No warranty by either party that the state of affairs exists (Idea of risk allocation – McRae
(3) Non-existence of the state of affairs must be attributable to party arguing for the mistake (Miller)
(4) Non-existence must render the performance of the contract impossible
- IMPOSSIBILITY IS WHAT MAKES IT ESSENTIAL DIFFERENT (GP)
(5) Mistake relates to vital part of consideration or background circumstances surrounding the performance of the contract that were thought to exist when the contract was formed
There is a factor considered in Solle + Butcher in deciding whether the fundamentally different test is satisfied that would NOT be considered under the essentially different test. What is this factor?
Price.
Redgrave v Hurd (1881) ruled on a legal presumption. What is this legal presumption?
if the false statement was a material statement that was intended to induce the innocent party, then the court will presume that the innocent party was induced and the onus shifts to guilty party then to show on a balance of probabilities that innocent party was not induced
What is the ratio that comes from R v Ron Engineering in the context of unilateral mistake?
A bidder cannot argue unilateral mistake regarding Contract A because they are the one who accepts Contract A upon submission. However, if the party notifies the owner of their mistake after submitting the bid, they can argue unilateral mistake regarding Contract B because the owner is then put on notice of the mistake regarding the offer for Contract B.
In Hunter Engineering, there were two approaches that were advanced by the judges regarding the approach that Canada should follow for invalidating an exclusion clause - what approaches were these?
- Bertha Wilson suggested that Canada ask if there was a fundamental breach at the time of the breach and whether they were deprived of the consideration (Lord Denning's fundamental breach approach)
- look at the time of formation to determine whether the clause was unconscionable
What is the critique that Professor Hunt had about Lee v 1435375 Ontario Ltd (2013)?
- applying caveat emptor to CM is problematic because it could be applied broadly to all purchase agreements
- taking a broad view of risk and fault shrinks the operation of CM since threshold matters need to be crossed before any of the tests are applied.
In Solle + Butcher, we see an exception as to when fault would not apply to the party seeking the CM - what is this exception?
If the party seeking CM is at fault, but they were not careless or negligent, then fault is not allocated to them (ex: how the tenant asked lawyer about rent legislation).
What is the test for unconscionability and how was it applied in Uber?
Step 1: is there an inequality of bargaining power (procedural unfairness)?
Step 2: Is there an improvident bargain (substantive unfairness)?
Application in Uber
Step 1: yes, there is - H was powerless to negotiate and could only click "I agree" - there was also cognitive asymmetry; he would not have expected the arbitration clause
Step 2: yes, there is - they are not paid well - drivers would have to pay a large sum (despite their low pay) to get their pay issue resolved - Uber could not pay at all for a month and get away with it because of the arbitration clause
What are three ways that a risk can be allocated to a party in the doctrine of common law mistake (using case law we covered)?
(1) if a party impliedly or expressly promised that the thing is true (McRae)
(2) if the risk was allocated impliedly (ex: industry custom in supplier context) or expressly (Miller)
(3) if caveat emptor ("buyer beware") applies (Lee)