APPEDIX A - UVic LSS · Web viewUsually conflict between oral representation and written K or...

Contracts Final Outline 1

Interpretation of Contracts

Goal: Ascertain true intention of parties at time of K – Consolidated-Bathurst o Don’t apply literal meaning if the results would be unfair/unrealistico Where words could be constructed two ways, the more fair way it favoured

But, no ambiguity then interpret in accordance w/ true intent regardless of fairness b/c presumption that parties intend legal consequence of their words. – Eli Lilly

Apply objective approach to K interp, not subjective assessment of state of mind – ATCO Look to the factual matrix, surrounding circumstances, commercial context b/c K’s are

not made in a vacuum – Reardon Smith No ambiguity = no need for extrinsic evidence – KPMG Usually evidence of prior negotiations is inadmissible – Prenn Interpretation must give meaning to all parts of K. Don’t assume any part is redundant –

BG Checo Subsequent conduct is admissible when there are two possible interps might be

considered – Re CNR Related agreements may be admissible when part of a larger scheme Contra Proferentem ambiguous terms to be constructed against person who drafted

unclear term

Sattava Capital v Creston Moly 2014 SCC – Current approach Common sense approach focussed on intent of parties and scope of their understanding Read K as a whole giving words ordinary and grammatical meaning consistent with

surrounding circumstances know to the parties at the time of formation Look to context – purpose of agreement, nature of relationship Surrounding circumstances will be considered by should never overwhelm words

themselves Extrinsic evidence should consist only of objective evidence of background facts at the

time of formation

Terms added after K completed? - Loychuck


Parole Evidence RuleTechnically rule about admissibility of evidence, but operates substantively – face of written K prior representation or statement has no force or effect. Usually conflict between oral representation and written K or excluded by entire agreement clauseEvidence of collateral agreement that contradicts main agreement not admissible – Hawrish SCC 1969 (bank guarantee binding) Evidence of subjective intent of parties not admissibleCan still admit evidence:

when written K is not whole agreement, interpret and ambiguous point, to show invalidity, to show there was a misrepresentation, to show there was a mistake re. the nature of the agreement, to rectify a error or mistake putting agreement into writing to show there was a condition precedent to show there was a separate agreement or warranty to show there was unconscionability to show K was modified or terminated to support a claim for equitable remedy

Administrative ease, prevent fraud/perjury, certainty, commercial efficacy, prevent unfair surprise, control agents/employees.

Revamped into a presumption Gallen v Allstate Grain BCCA 1984Farmers purchase buckwheat seed on oral assurance that it would smother weeds. Clause in the K said would not be resp. for the productiveness of the seed or the crop. Allowed claim b/c there no conflict between yield exclusion but is liable for loss from weeds. Accepted there was a warranty after running Bentley test

1) If warranty then evidence becomes admissible2) Try and interpret warranty and exclusion harmoniously3) No contradiction then Hawrish is irrelevant4) If contradiction then Hawrish = strong presumption in favour of written K, but clear

evidence that oral warranty meant to prevail = oral warranty prevails. Strength of presumption: weak adds a term -- varies k -- contradicts k strongStrong presumption that written K trumps. General exclusion clause will not override a specific representation on a point of substance which was intended to induce the making of the agreement unless intended effect was specifically brought to attention of party to whom representation was made – Zippy Print (franchise profits)Is the entire agreement clause clear and specific?

Consumer transaction parol evidence does not operate to exclude evidence relating to the understanding of the parties – Trade Practices Act, s.29Factors influencing application: intended to be whole agreement? – clarity? – read by parties (knowledge) – standard form? – experience – nature or rep. clarity/specificity/ signif


Standard Form K and Exclusion ClausesSignature rule: Signed K is binding b/c deference to written K. L’Estrange (Eng. CA) 1934

Exceptions for fraud, misrepresentation, unconscionability – limited to reasonably expectations of parties

Contra proferentum rule – read written K against the drafter in case of ambiguity –Gallen

Tilden Ont CA 1978 – paid for extra coverage but fine print voided coverage in wide variety of ways.K won’t be binding if condition was unreasonable and was not explicitly brought to the attention of the signor.Circumstances matter – speed of transaction, fine print, length of documentWhere party seeking to rely knows signer is unaware of onerous provision then must take reasonable measures to draw term to attention of signerMust have reasonable notice of onerous term. Note Tilden has been used sparingly

Ochoa BCSC 1996 – reasonable person may not understand legal sense of negligence so waiver must include more than just the word negligence.

Karroll BCSC 1988 – Ski race collision. Karroll had signed waiver indemnifying Silver StarTilden only applies in special circumstances where person had reason to know of other’s mistake re. terms. Tilden not applied b/c Karroll knew this doc would affect her rights, the release was consistent w/ purpose of K, hazardous activity, short K, had signed releases before.Circumstances to apply Tilden – Hasty, informal, clause not consistent w/ rest of K, no chance to read, long K, lots of small printTest for Tilden apply:

1) In the circumstances a reasonable person would have known she did not intend to agree to the release, and

2) That in the circumstances the D’s did not take reasonable steps to bring the content to her attention.

Signature rule still given most weight. Presumed to indicate agreement by parties. Waivers are generally upheld

Unsigned document – reasonable notice doctrine applies


Fundamental Breach – Exclusion/Limitation of Liability Clauses/Waivers/Releases Fundamental breach is dead – use the Tercon Analysis

Repudiatory breach: breach of K entitles innocent party to treat K as at an endFundamental breach: asks if party can rely on exclusion clause after conduct fundamentally breaches the K

Karsales 1956 Denning held exemption clauses only help when party fulfilling K. – Rule of Law approachShift to Rule of Construction in Suisse Atlantique 1967 and Photo Production 1980 (security burned down shop – k over does exclusion clause apply to this situation?) – must interpret if the exclusion clause applies to a certain situation

Canadian Approach – Hunter Engineering 1989 (gears failed shortly after 1 year warranty) primarily a rule of law, problems evident, conflict about use of unsconscionability. Plas-Tex 2004 held that non-disclosure of resin problems unconscionable and therefore voided exclusion – questions of uncertainty, lack of fairness, autonomy of parties, unfair surprise

Tercon Contractors v BC SCC 2012 BC issues RFP and selects contractor technically ineligible under rules of RFP- exclusion clause said participants can’t claim anything arising from RFP

Test for Exclusion Clauses1) Matter of interpretation, does the exclusion clause apply? – Depends on courts interp of

intent of parties at time of K. Consider:a. Potential terms of K written or oral?b. Extrinsic evidence categorization – actually term of K?c. Galen analysis re. admissibility under parole evidence ruled. Contra proferentum against ambiguous exclusion clause? e. Requirement for reasonable notice? Tildenf. Possible to save clear oral warranty Zippy Print?

2) Was it unconscionable at the time of the K? (8) 3) Any public policy reasons to refuse enforcement? – criminality, fraud, abusive conduct

At heart about fairness and main fairness doctrine is unconscionability.

Loychuck – parties agree on part 1, argument that it was unconscionable b/c company had total control of activity – dismissed b/c no power imbalance. Policy argument around total control dismissed w/ statement it is an issue for the legislature

Tercon examples of policy points to step in on was food suppliers that knowingly or recklessly sell contaminated food - Conduct that approaches criminality or egregious fraud are examples where policy can override freedom of K.

Loychuck – These examples when party seeking to rely on exclusion clause knew it was putting public in danger through substandard product/service or was reckless in whether it was doing so. Conduct must be so reprehensible that it would be contrary to the public interest to let it avoid liability.


FrustrationDistinct from mistake in that it deals with an assumption regarding future eventsQuestion again of who should bear the risk of the unforeseen eventIncreased cost or difficulty in carrying out the K not enough for frustration. Must fall so far outside realm of contemplated risks that it constitutes fundamental change in bargain.Taylor v Caldwell music hall burned down – imply condition of continued existence of subject matter into KKrell v Henry Coronation cancelled - Held: parties discharged from further performance

OLD test for frustration: - reflects shift to destruction of commercial purpose for K1) What is foundation of the K in all the circumstances? 2) Was performance of K prevented? 3) Was the event that prevented contemplation such that it was not in the reasonable

contemplation of the parties at the time?KBK v Safeway Safeway K for sale of land to developer based on zoning formula and city subsequently changes zoning bylaw making proposed development impossible. New test

1) Basic Underlying Assumption: Element of K or circumstance disrupted by the event must be fundamental/foundational such that it would be tacitly assumed by parties as a precondition of performance ie music hall in Taylor or continuation of conditions Krell

2) Substantial Hardship: a. Major impact on economics of transaction Davisb. More than a mere increase in expense Davisc. Change is permanent Foliad. Deprives one of the parties of substantial intended benefit of K National Carrierse. Must be so signif that “unjust to hold the party to the literal sense of it’s

stipulation in new circumstances” National Carriers3) Unanticipated Risk: frustrating event must be unanticipated Krell – occur after formation

– not foreseen (not a risk allocated by parties, not a risk that should have been addressed by parties)

4) No Allocation of Risk by K5) No Fault: event is beyond control of the parties and is not caused by one of them. Taylor

Frustration can’t be self-induced. Remedial Consequences of Frustration Test is met then parties relieved of future performance obligation – K not void so what about costs incurred from partial performance. Originally loss lies where it falls ApplebyProblem is this leaves losses to pure chanceFibrosa restitution damages allowed: unjust enrichment

Limited to monetary payment – not apply to expenses incurred in reliance on K

Frustrated Contract Act s.5 Reliance losses are equally compensable – if there is a loss from frustration then it is divided into two, split and equally apportioned. Includes any money spent - for the benefit of the K. – if it’s just a deposit (money not actually gone) then restitution


DuressDuress make K voidablePao On “a coercion of will so as to vitiate consent … in a contractual situation commercial pressure is not enough” -- makes K voidableCategories of duress:

Duress to person – threats to family etc. Duress to goods or property – threat to take/damage property or extortionate payment

required for recover (pawnbroker) Economic duress: only recently accepted as sub-category of duress.

o Econ pressure not enough b/c K’s often take place in circumstances of unequal bargaining power

o Coercion of will difficult to apply b/c involves inquiry into psych state of the person. Also should choice to accept hard bargain result in K being set aside.

Modern Test: Universe Tankships v Transport Workers Federation (1982)1) Compulsion of the will of the victim. Factors:

a. Did coerced party protestb. Were alternative courses availablec. Was the independent legal adviced. Did coerced party take steps to avoid K

2) Assess legitimacy of pressure exerted in light of the nature of the pressure – threat of unlawful action? – and the nature of the demand – what was being demanded from victim

3) If victim expressly or implicitly approved the K after pressure ceased then no relief. Scott

This is about consent, not fairness but there is overlap. Subsequent cases have emphasised lack of alternative and legitimacy of pressure – legitimacy is difficult though when not unlawful (threat to fire employee or breach K w/o modification?)

Duress in K Modification Nav Canada Finds that illegitimate pressure is not a condition precedent to finding econ duress in K modificationTest:

1) Promise extracted as a result of pressure whether a demand or a threat – usually threat of breach and withholding future performance

2) Coerced party has no practical alternative but to agree to demand to vary underlying K3) Assuming first two criteria are met, did coerced party consent to the variation. Factors:

a. Was promise supported by consideration?b. Did coerced party make promise under protest or w/o prejudice?c. If not did coerced party take reasonable steps to disaffirm the promise as soon as

practicable? Neither good faith nor ILA are defencesParty seeking to rely on variation must show there was not duress – or that other party subsequently affirmed K and thus cannot raise duressFocus on impact on the victim


Undue InfluenceResults in transaction being voidable. Court can rescind.

Geffen Test1) There must be a relationship of dependence. 2 categories:

a. Actual undue influence – must show the wrongdoer exerted undue influenceb. Presumed undue influence: Relationship of persuasive influence: De jure:

i. Fiduciary relationshipii. Trustee/beneficiary

iii. Solicitor clientiv. Doctor/patientv. Priest worshipper

vi. Parent/childvii. De facto – other relationships that give rise to influence (ie husband/wife)

2) Manifest disadvantagea. Don’t need to show manifest disadvantage if gift or donation. b. Commercial transactions – must show that the K worked unfairness either through

the complainant being disadvantaged or that D was unduly benefitted. 3) If 1 & 2 are established then onus shifts to D to show that transaction was entered w/ “full

free and informed thought” Considerations:a. Show no actual influence was deployed in the transactionb. ILA sought? c. Magnitude of disadvantage is cogent evidence of whether influence was exercised

Royal Bank of Scotland 2001Spousal guarantee issue – undue influence in marital situation of using house as guarantee then subsequent bankruptyBanks must now meet w/ spouse separately whenever benefits flowing to one over the other. Explain risks, and extent of liability, including that if S1 goes bankrupt the indemnity will be useless, urge them to seek ILA


UnconscionabilityK is voidableApplies at time of K formationMust be: Morrison (widow persuaded to borrow money and lend it to the men)

1) Inequality in bargaining powera. Contextual factors include: economic resources, knowledge, need, disability short

of legal incapacityb. Common categories: Not set like undue influence, but often involves pre-existing

relationship ie familial 2) Substantial unfairness: Must have more than inequality of bargaining power, the bargain

must be substantially unfair.Creates a presumption of fraud that the stronger must repel by showing the bargain was “fair, just, and reasonable, or that no advantage was taken

At the end it all comes down to the question: Is the transaction, seen as a whole, sufficiently divergent from community standards of commercial morality such that it should be rescinded? – Harry BCCA 1978

Loychuck – no unconscionability to require release for participation in dangerous activity – no power imbalance – not an unfair release.

Business Practices Consumer Protection Act Note that BPCPA applies before during or after transaction – s.8BPCPA creates presumption of unconscionability that must be rebutted by the supplier. Reverses the burden of proof. S.9(2)s.8(3) court must consider: undue pressure, whether supplier took advantage of infirmity, ignorance, illiteracy, age, inability to understand nature of transaction, whether the price grossly exceed prices of similar subjects.


Illegality and Public Policy

Restrictive Covenants If a restrictive covenant is ambiguous it will likely be unenforceable – Shafron (metro-van) Restrictive covenant is assumed to be unenforceable. To be enforceable must have be reasonable re the activity, the time, and the geographyTwo types of severance to deal with problematic restrictive covenants

1) Notional severance: reading down of provision to make it enforceable2) Blue pencil: strike out small parts that are too restrictive to make clause enforceable

Note that courts will use severance sparingly b/c they don’t want to save these clauses – this would encourage very broad drafting and then courts giving the strongest legal interp if contested. Restraint of trade issues

Common Law Illegality

Courts won’t help a person who founds their cause on an illegal/immoral act – Holman 1775Categories traditionally recognized as contrary to public policy/common law:

K injurious to the state K injurious to the admin of justice K affecting marriage (restricting the when and to whom) K to benefit from a crime K to commit a tort/common law wrong

Note that stricter scrutiny is applied to employment K’s Some jurisdictions have found K’s around surrogacy to be contrary to public policy Assisted Human Reproduction Act

Statutory IllegalityCannot enforce K that is in contravention of a statute whether explicitly or implicitly.K is illegal in formation when it is prohibited by statuteK is illegal in performance when performed by one of the parties in a manner prohibited by statute.

Still v minister of National Revenue 1997 (EI application after starting work when not entitled to, became permanent resident mid-K) Good faith and now legal immigrant

Modern approach. StillIllegality does not lead automatically to void. May declare it void but grant relief under guise of exception, could declare it legal and binding – will only rescind if statute expressly requires it or it is against public policy to enforce K Look at factors:

Look to purpose of statute being violated Does it have its own punishment scheme Potential consequences of invalidating K Social policy reasons for prohibition Look to class of person for whom prohibition enacted


Good FaithEarlier iterations of good faith concepts3 general categories:

1) Duty to cooperate in achieving objective of the agreement - Dynamic Transport2) Limits the exercise of contractual discretionary powers –discretion must be exercised

reasonably, honestly and in light of purpose for which conferred – McKinlay Motors 3) Preclude party from evading contractual obligations – MDS Health Group4) Recognized categories where good faith expected:

a. Insuranceb. Franchisor-franchisee c. Employment – manner of dealing with termination

Duty of honest performance – arises from general organising principle of good faith – Bhasin v Hrynew Concern that good faith leads to uncertainty – lack of clarity around meaning of good faith

Consumer ProtectionAddresses disparities between manufactureers/seller and consumers in knowledge, bargaining power, and resources.

Economic reasons for gov’t interference in marketplace: Monopoly: Ensure competitive marketplace Externalities: regulation of product safety and pollution Information Failures: address asymmetry of information between consumers and

manufacturers - prohibits fraud and deceptive practice – mandatory disclosure practices – gov’t provision of information

Transaction costs: pursuing complaints costs money and time. How best to do this? Public goods: goods such as consumer education will be under-produced by the market

so gov’t must supply this. Non-Economic rationales for gov’t interference:

Paternalistic Concerns: transaction may not be in consumers long-term best interest. Capacity issues, unconscionability protection of vulnerable

Redistributive Concerns: Interest rate, rent controls, statutory warranties, etc.

Sale of Goods ActDoes not apply to services or used goods, not apply business to businessApplies to any transaction taking place in BCThese protections cannot be waivedImplied conditions re. description (s.17) quality and fitness (s.18) and samples –same quality as actual product (s.19)s.20(1) cannot K out of these conditions except in case of used goods or in context of commercial/business sales.20(2) and term of K of sale or lease purporting to negative or diminish conditions and warranties in s.s 17-19 is severable and void.

Business Practices and Consumer Protection Act


Consumer: individual, whether or not in BC, who participates in a consumer transactionConsumer Transaction: is a) supply of goods and services that are primarily personal, family, or household, b) a solicitation, offer, advertisement or promotionGood: personal property, fixtures, credit/prepaid cards, no security or insuranceSupplier: person, whether or not in BC, who participates in a consumer transaction and applies whether or not privity of K existsSupply: includes the supply of goods or services or real property to a consumer through a sale lease, assignment, award by chance, or other disposition

s.3 – can’t K out of the acts.5 – cannot engage in deceptive act or practice and onus is on supplier to prove they did not if it is allegeds.8 unconscionable act can take place before, during or after K. s.9 – must not engage in unconscionable act or practice and burden will be on supplier to prove they did not engage in unconscionable practice if allegeds.10 if unconscionable act proven then K is voidable

Loychuck – Just b/c a statement is untrue does not make it deceptive – A consumer can’t allege a statement was deceptive unless they can prove they relied on it. – website statements were not deceptive b/c they related only to infrastructure. Unconscionability bar and test same as common law

Other important matters addressed in the BPCPA direct sales contracts (door-to-door sales) funeral services contracts future performance contracts (where consumer to obtain goods and or services in the future) distance sale contracts (internet sales) unsolicited goods time share contracts prepaid purchase cards consumer credit and debt collection

Remediess.171 – person other than supplier who suffers damage or loss from contravention of act can sue the supplier who engaged in or acquiesced to the contraventions.172 – A person other than supplier, whether or not affected by a consumer transaction may bring action in BCSC for a) declaration that supplier is contravening this act or b) an injunction restraining a supplier from contravening this act

Rushak v HennekenDealer said used Mercedes was good vehicle, one of best in Vancouver, turned out very rusty and mechanical problemsHeld Breach of Act

Describing the car in laudatory terms when he knew there may be rust was misleading b/c it was an unqualified opinion when there is factual knowledge it may well be wrong. Not mere puff

Must refrain for any potentially misleading statements Statement is misleading if leads a purchaser ‘astray into making an error of judgement’


Remedies No K = restitution of benefits Equitable mistake = broad remedial discretion Frustration = relieved of future performance, restitution of past benefits and/or sharing of costsFairness doctrines = K voidable, court can set aside on terms or order restitution/damages

Interest Purpose Measure JusticeRestitution Prevent unjust

enrichment of SBenefit to D Corrective

Reliance Prevent loss to P Loss to P RestorativeExpectation Secure benefit to P Expected benefit of P Distributive

Expectation DamagesGeneral measure is ED – Wertheim effective sanction, easier to calculate, promote business arrangements, market ordering by protecting future entitlements Place P in the same position as if K had been performedReliance + lost profits – mitigation can also include lost opportunity to do something elseSale of goods K – difference between K price and higher market price + incidental costs or lossesFaulty performance – difference in value between what was contracted for and what was received – Hawkins

Reliance DamagesUsually sought when ED are too speculative or uncertain – McRaeCan claim for money spent in reliance on the K and lost opportunityCausal relationship between promise, breach, and expense so burden then shifts to D to show that even if promise had not been broken expense would have been incurred. McRaeCan’t exceed ED. If P would have lost money if K performed then no compensation b/c no losses – Bowlay Logging Can claim expenses pre-K if they were in reasonable contemplation of the parties at the time – ie movie star signs K after some prep has been done then backs out. Network awarded reliance damages for costs both before and after K was signed – Anglia TV Sunshine Vacations (kiosks in Bay stores) – established loss attributable to breach but not lost profits (uncertain) so was give reliance damagesConcept of efficient breach – breaching K is good when increases benefit to everyone


Loss of Chance Just b/c damages cannot be assessed with certainty does not relieve wrongdoer of necessity to pay damages for breach” – Chaplin (beauty contest, 50 finalists – 12 acting Ks)Today usually arises in land development projects around need of seller to use best efforts to obtain rezoning. Proof of damages not part of liability enquiry. There is strict liability: breach = entitled to damages – FollandFour requirements for loss of chance damages Folland :

P must show lost chance due to D’s conduct Chance must be sufficiently real and significant to rise above mere speculation (20%

chance has been assessed to give rise to damages) Outcome did not depend on P’s own conduct Loss of the chance must have had some practical value

Calculation is the probability of winning (ie 10%) multiplied by amount you could have won (ie $100) – so .1 x $100 = $10

Cost of Performance v. Diminution of ValueOwner can K to do something that will reduce property value and court will enforce ED for breach in form of either cost of performance of diminution of value.

2 US cases split on the issueGroves Cost of performance awarded even though five times value of property –(grade issue) Breach was wilful and not in good faith, in construction Ks contractor usually must remedy default. Peevyhouse strip mine not reclaimed even though K specified it should be. Cost of performance 29,000 value of property under 5,000 diminution of value about 300. Court awarded diminution. Proportion, windfall, reclamation clause incidental

Radford (UK) sale of half of land w/ condition privacy fence be built. Court order cost to perform b/c seller paid for fence in price adjustment, privacy is not an econ issue. Erection of fence essential term

Middle Ground Ruxley Electronics HL – Pool too shallow by 9”. Cost to rebuild 21,000 pounds. Consumer surplus recognizes that they did not get what bargained for to make home more comfortable, convenient and match personal tastes. So reflects subjective value of something. Usually 5,00-10,000 awards


Remoteness General rule: Entitled to damages that were in the reasonable contemplation of the parties, either b/c they naturally arose and were in the usual course or b/c they were in the reasonable contemplation of parties b/c special circumstances were communicated - HadleyEntitled to damages if: HadleyWithin the reasonable contemplation arising naturally in the course of things; orReasonable contemplation of parties due to notification of special circumstancesThis was pre-limitation of liability and the corporate veil

Victoria Laundry – liable for damages in reasonable contemplation (normal profits) but not for those not in reasonable contemplation (profits from a special K not disclosed to D at time of K)Note that parties can include express K provisions to limit the type or amount of damages in case of a breach.

Factors when assessing remoteness:1) Degree of probability/foreseeability of loss – ordinarily expect in the circumstances2) Communication of special circumstances – fact and timing of communication and level

of detaila. P communicated part was for a job but did not specify the type of work – no claim

for lost profits Scyrup b. Did D assume responsibility? Not conclusive but important factor. If employee

who likely has better knowledge makes representation/guarantee this will a factor – Cornwall

3) Defendant’s Knowledge – general and of P’s business in particulara. Hadley were carriers – didn’t know use. Victoria Laundery – boilermakers were

specialists. b. If D has only transitory relationship then liability might be reducedc. Where consumer expectations are reasonable and created by D then liability

might result even though transitory relationship4) Nature of D’s Business – Expertise, what is offered to P5) Nature of Product/Service – second hand or top of line? 6) Sophistication of Parties – usually more sophisticated more likely damages will be

foreseeable. 7) Ordinary allocation of risk – custom of the trade

a. Should be about fair and reasonable risk allocation b. More efficient for businesses to get business interruption insurance than for

carriers to have 3P liability insurance8) Proportionality – compare K price and nature of service with risk

a. Anomalous to impose extensive liability for breach of K to provide ordinary service at low cost


MitigationGeneral rule: P must take reasonable steps to avoid loss – what is reasonable will depend on the factsBurden of proving P ought to have mitigated is on DUnfair surprise v reasonable expectation – fair allocation of risk (P often in position to mitigate, D is not) – promotes efficiency – avoid econ waste

Commercial context mitigation may require dealing with company that breached K. PayzuException is personal service Ks such as employment b/c of trust, loyalty, and confidence concerns. Payzu

Must mitigate w/i reasonable time of breach – what is reasonable is case dependent Damages are assessed at time of breach – mitigation must also take place at time of breach. Court can take into account special circumstances making it unreasonable to require the P to mitigate immediately – Asamera Oil

Lack of funds on part of P does not justify not mitigating. – exception if breach of K was related to financing or is the reason for lack of resources. If loss it completely avoided through mitigation there are no damages – British Westinghouse Pezzente – w/ pets mitigation difficult. Would not spend 10,000 to fix 350 stereo. Euthanize?


Non Pecuniary (Monetary) DamagesHistorically no damages for mental distress/non-economic interests –Addis

Then pigeon hole categories created from 1974-2005 K for pleasure/enjoyment/peace of mind – damages usually pretty small

o Holidays – Jarviso Weddingso Disability insurance – Warringtono Need not be essence of K, sufficient if it is a major or important part Farley

Petso Dog died in air hold – Newello Kennel loses dog Ferguson o Absconds with cat - Weinberg

Physical discomfort caused by sensory experience – Wharton luxury car makes odd noise Employment – where there is an actionable wrong, not firing ie mental distress,

defamation, fraud – Vorvis

Current rule since 2006Fiddler v Sun Life Assurance (denial of longterm disability benefits)Court should ask what the K promised and provide compensation for those promisesGo to Hadley v Baxendale – what was in the reasonable contemplation of the parties at time of KFurther 2 requirements: Fiddler

1) An object of the K was to secure a psychological benefit that brings mental distress into reasonable contemplation of parties - need not be dominant part, only issue is was it part of the bargain?

2) Degree of mental suffering caused by the breach was enough to warrant compensation. Usually no compensation in employment scenario unless independent actionable harm around fraud, attacking employees reputation, dismissal to avoid paying pension etc. Keays


Punitive Damages – Whiten (insurance company trying to deny fair compensation for fire)About deterrant and denouncement Very rare but occur in insurance cases– use only when facts show bad faithTwo requirements

1) Conduct must be highly reprehensible –high handed, malicious arbitrary2) Conduct must be an independent actionable wrong apart from main cause of action.

Policy considerations Exceptionality – this is an exception to usual rules of damages Rationality – there are 3 objectives one must apply

o Punishmento Deterrenceo Denunciation

Proportionality – must be proportional to the misconduct exhibitedo Blameworthiness of Ds conducto Vulnerability of Po Hamr or potential harm directed at Po Need for deterrenceo Taking account of other penalties assessed for the same misconduct. o To the advantage gained by the misconduct – should leave no benefit to D

Liquidated Damages and PenaltiesDeals with Ks that provide increased liability for damages for breach or forfeiture of payments/deposits for breach

Distinction between penalty and legit fair pre-estimate of damages ie delay in house completion $250/day is cost of hotel so liquidated damages. $2,500 is a penalty

Liquidated damages clause requiring payout of remainder of K was found to be a genuine pre-estimate of costs and not a penalty so allowed to remain – Supersave Disposals

Equitable Remedies

Specific performance – only available where award of damages would be inadequate Unique goods – specific painting Unique land – substitute readily available Semelhago Long-term supply K where P may go out of business

Not go-to b/c efficiency (no requirement to mitigate), Admin (courts don’t want to supervise) not about morality – K breach = damages Never for personal services

Negative covenant – promise not to do somethingRequirements for enforcement:

Must be a negative covenant Damages are inadequate Must not amount to compulsion to perform personal service (or be undue restraint on trade)

Warner Bros v Nelson Betty Davis wants out of K – but says she can’t perform anywhere else. Court says she can’t act elsewhere but could do other work. – won’t force starvation or personal service performance. OK that she might be tempted to go back by situation


Contract Drafting Building blocks

Definitions Operative provisions giving effect to K Representations and warranties – statements of fact Covenants – affirmative, negative, financial Conditions precedent – outs Remedial provisions – in event of breach Limitations of Liability Boilerplate

Leases Think about sprinkling in “within reason” or “acting reasonably” especially in areas where LL is allowed to make unilateral decisions Occupancy costs – ensure they do not include duplicationsTransparency around financial records?Check financing prohibition on inventoryRestrictive covenants? Who do they favour? Are they reasonable? CAM rentable space not rented spacePercentage rent? Issues around potential effect of renovations on retailer if forced to close for period or change locations – rent abatement? Who pays for the build out? Assignment options?

Commercial TransactionsStructuring – depends on relationship between buyer and sellerInvestigation/Due Diligence – necessary searches to assess status of the business Drafting and Negotiation – Buyer lawyer creates draft of purchase agreement, Asset definitions, price allocations, Employees, etc. Closing – formal handoverPost Closing – financial fallout and restrictive covenants


MistakeMistake = assumptions re. existing facts Frustration = assumptions regarding future eventsIf a party was mistaken about the content of a K then there was not meeting of the minds.

Only comes into play as last resort.Apply K formation principles first. Is there a K? Was there enough certainty? Raffles - Only effective in cases of serious ambiguity. Snapping up w/o disabusing offeree of mistake? Caveat Emptor generally applies in business-business transaction Does K allocate risk for mistakes? Exclude liability for mistakes?Raffles type where parties K over two different ships? OR Staiman type where court can impute definite agreement?

Contextual Factors: Price: may help determine the reasonable expectations of the parties Knowledge and Skill of Parties: Court unlikely to protect mistake of a person who

possesses or should possess substantial knowledge or skill Ease of Avoidance: who is in best position to avoid mistake? Who can avoid it cheapest? Common usage of the Trade: this can serve as context for what the parties expected. Snapping up- Knowledge of Ambiguity: If one party is aware of ambiguity they are

presumably responsible for clearing it up.

3 Categories of Mistake – Not formalCommon Mistake – Both parties make the same mistakeMutual Mistake – Misunderstanding where parties are at cross purposes (A thinks they are buying X, B thinks they are selling YUnilateral Mistake – One part is mistaken about an important issue concerning the K and the other party knows or ought to know of the mistake

Mistake as to FactThought the car was good and it’s not. If they simply thought the oats being sold were old then mistake of fact = Caveat Emptor – if it was a term of the K then see Mistake in TermsUsually Caveat Emptor – Smith v HughesSeller does not have to disabuse buyer of mistake so long as seller did not induce the mistake Not bound to communicate knowledgeSee equitable mistake though


Mistake in Terms (CL)Tends to be a mistake on both sides. A thinks K is about X. B thinks K is about Y.Smith v Hughes – old oats issue. 3 possible situations

1) Purchaser agrees to take oats thinking they are old – binding K, mistake of fact2) Purchaser agrees to take oats under belief vendor warranted them to be old – mistake to

terms, look to formation rules to see what was agreed3) Purchaser agrees to take oats thinking vendor warranted them old and vendor know about

misunderstanding and does not correct it – mistake as to terms - this was outcome of case

Objective reasonable person test.Would a reasonable person find that there was sufficient certainty as to terms? What terms? – subjective motives or intentions are not relevant

Ambiguity around a fundamental term w/ no reason to prefer one understanding over the other = void for mistake – RafflesOnly applies when so much ambiguity that reasonable person cannot infer common intention.

Stainman Steel “all the steel in the yard” – buyers expectation was unreasonable, buyer acting opportunisticallyTest

1) Can a reasonable third party infer a K and terms from the conduct of parties? 2) Only void if so ambiguous that the third party cannot infer common intention = no K

created.

Snapping up – If one party knew the other was mistaken about a fundamental term = no agreement between parties - HarthogAfter this common law argument go to equity to argue it was an unfair result b/c unilateral mistake.


Mistaken Assumptions (CL) Very high threshold. Goes to the basis for entering the K through external mistake – tends to be about one thing not written in K. Certainty, predictability (caveat emptor) vs. unfair surprise, and unjust enrichmentWas risk allocated? Fairness, will one party be unfairly treated if K enforced? Principle of caveat emptor is very strong.

Both parties must make the same mistake

Bell v Lever BrothersSeverance agreement for two employee, employer subsequently find that they engaged in insider trading so grounds for termination no notice or severance. Held that severance still to be paid b/c did not fundamentally change past performance which was at issue. Common assumption: Employment Ks could not be terminated prior to end of employment term. Mistake not available – certainty, predictability, power imbalance (employer bears risk)

3 categories of mistaken assumption – mistake nullifies consent = no K formed1) Identity of K parties: Intention to K with a specific party

a. If it matters who you were contracting w/ then K is voidb. If doesn’t matter then K will standc. Focus on who should bear the risk- can’t transfer what you don’t ownd. Also see Fundamental Mistake of Identity Below

2) Existence of subject mattera. Res Extincta: subject matter of K is assumed by both parties to exist, but actually

does not = K voidi. Also see McRae if vendor assures existence. Ie mistake not mutual

b. Res Sua: K for sale of item but you already own it = K void3) Quality of the subject matter = K void where

a. Mistake is by both parties, and b. Mistake is to the existence of some quality which makes the thing essentially

different from what it was believed to bec. Note that this will be decided based on what the K is actually about – how is it

essentially characterized. Note: cannot rely on own mistake to render K void

McRae v Commonwealth Disposals CommissionCommission sold rights to salvage oil tanker that did not exist. Commissions conduct reckless/irresponsible. – Contract not void for mistake2 different situations

1) K is subject to condition precedent that goods exist. They don’t = no K2) Vendor promises goods are in existence. They aren’t = K exists w/ risk on vendor


Fundamental Mistaken Identity Void ab initio - no offer thus void from the startCases of the rogue – which innocent party should bear loss? Easier for seller than buyer to limit riskHowever, common law traditionally favours property owner under idea of nemo dat Recall we are dealing with a 3P who is Bona fide purchaser for valueSale of Goods Act s. 26(1) sale by person not owner = no good title transferred

Cundy (written K made to person rogue impersonating) no offer to rogue so no K so title stayed with A - void

Phillips (face to face K w/ cheque for ring) assumed person intended to K with person standing in front of him so K concluded and property passes to C Face to face = presumption you meant to K with that person

Lewis acceptance based on false identity = fraudulent misrepresentation and A has right to rescind. But there is a K so if B transfers to C before rescission then C holds title. B had voidable titleSale of Goods Act s.28 if bought in good faith 3P can gain good title from voidable title if not voided beforehand

Shogun Apply normal rules of K formation look for intent of parties. – strong presumption that parties intend to K with individual with whom they are in personal contact.

Mistake in Recording – RectificationTest out of Performance Industries (Land option feet vs yds)

1) P must prove existence and content of prior oral agreement2) Must be convincing proof of oral agreement (more than BOP but less than BRD)3) P must provide precise wording for rectification 4) P must show that the D knew or ought to have known of the mistake in the written doc.

Presumption of Caveat Emptor very strong. Concern that broad use of doctrine will encourage lack of due diligence – possibility of fraudMorely Shafron (restrictive covenant metro area of Vancouver) Cannot use what a sensible agreement would have been to determine existence and content of prior oral agreement. Cannot use it to fix an ambiguous term intentionally used.

Mistakenly Signed – Non Est FactumNon est factum = K voidOnly available in case of fraud or forgery, orFor persons who are blind or illiterate and didn’t know what they were signing – Saunders Assumption that literate person of full age and understanding is bound by their signature. Not available where:

1) Signers negligence/carelessness in failing to take precautions which a person ought to have taken

2) Actual document does not differ fundamentally from what signer thought it wasMistaken person must prove they took all reasonable precautions – insufficient to say I trusted a friend Who should bear the loss between two innocents? Certainty


Equitable Mistake (Try CL Mistake First)Solle v Butcher – Butcher rented Solle an apartment at above rent controlled rate b/c Solle asserted that rent control did not apply. Relationship soured, Solle sued for difference between rent controlled rate and actual rate. Butcher claims mistake and asks for rescission. Can’t pass Bell test Test: equity will relieve from consequences of a mistake when K entered on basis of:

1) Unilateral mistake: mistake induced by material misrep (not fraudulent or fundamental) or if one party knowing the other is mistaken, lets him remain under this delusion and conclude a K on mistaken terms instead of pointing out the mistake.

2) Common Mistake: if parties were under common misapprehension of either the facts or their respective rights provided it was fundamental and the party seeking to set it aside was not at fault.

Could also be used in cases of: fraud, material misrep, mistake by one party and other remains silent, common assumption re fundamental fact or rights and petitioning party not at fault.

Great Peace – might not be available in Canada b/c of MillerRequirements from Great Peace

1) Must be a common assumption as to existence of a state of affairs2) No warranty given by either party – no risk allocation3) Assumption not fault of either party4) False assumption makes performance impossible (in this case ships were close enough it

was possible but expensive so no relief)5) State of affairs must at issue must be vital part of consideration

Miller If K provides for allocation of risk for relevant mistake then the K is valid and governs the result


APPEDIX A Sale of Goods Act

Condition may be treated as warranty

15 (1) If a contract of sale or lease is subject to any condition to be fulfilled by the seller or lessor, the buyer or lessee may

(a) waive the condition, or(b) elect to treat the breach of the condition as a breach of warranty, and not as a ground for treating the contract as repudiated.

(2) Whether a stipulation in a contract of sale or lease is a condition the breach of which may give rise to a right to treat the contract as repudiated, or is a warranty the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract.

(3) For the purposes of subsection (2), a stipulation may be a condition though called a warranty in the contract.

(4) If a contract of sale is not severable and the buyer has accepted the goods or part of them, or if the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

Implied undertaking as to title, and implied warranty of quiet possession

16 In a contract of sale or lease, unless the circumstances of the contract are such as to show a different intention, there is

(a) an implied condition on the part of the seller or lessor that(i) in the case of a sale or lease, the seller or lessor has a right to sell or lease the goods, and(ii) in the case of an agreement to sell or lease, the seller or lessor will have a right to sell or lease the goods at the time when the property is to pass or the lessee is to take possession of the leased goods,

(b) an implied warranty that the buyer or lessee is to have and enjoy quiet possession of the goods, and(c) an implied warranty that the goods are free from any charge or encumbrance in favour of any third party, not declared or known to the buyer or lessee before or at the time when the contract is made.


Sale by description

17 (1) In a contract for the sale or lease of goods by description, there is an implied condition that the goods must correspond with the description.

(2) If the sale or lease is by sample, as well as by description, it is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description.

Implied conditions as to quality or fitness

18 Subject to this and any other Act, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale or lease, except as follows:

(a) if the buyer or lessee, expressly or by implication, makes known to the seller or lessor the particular purpose for which the goods are required, so as to show that the buyer or lessee relies on the seller's or lessor's skill or judgment, and the goods are of a description that it is in the course of the seller's or lessor's business to supply, whether the seller or lessor is the manufacturer or not, there is an implied condition that the goods are reasonably fit for that purpose; except that in the case of a contract for the sale or lease of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;(b) if goods are bought by description from a seller or lessor who deals in goods of that description, whether the seller or lessor is the manufacturer or not, there is an implied condition that the goods are of merchantable quality; but if the buyer or lessee has examined the goods there is no implied condition as regards defects that the examination ought to have revealed;(c) there is an implied condition that the goods will be durable for a reasonable period of time having regard to the use to which they would normally be put and to all the surrounding circumstances of the sale or lease;(d) an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade;

Payment and delivery are concurrent conditions

32 Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions; that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods.


Acceptance

39 The buyer is deemed to have accepted the goods when(a) the buyer intimates to the seller that the buyer has accepted them,(b) the goods have been delivered to the buyer, and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, or(c) after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that the buyer has rejected them.


Business Practices and Consumer Protection Act Excerpts

Part 1 — Definitions and Application

Definitions

1 (1) In this Act:

"administrative authority" means the Business Practices and Consumer Protection Authority

established under the Business Practices and Consumer Protection Authority Act;

"administrative penalty" means a penalty imposed under section 164;

"associate", if used to indicate a relationship with a person, means

(a) a spouse, parent, child, sibling or business partner of the person, or

(b) a corporation of which a sufficient number of shares to elect a majority of the corporation's

directors is beneficially owned, directly or indirectly, by

(i) the person,

(ii) one or more of the persons referred to in paragraph (a), or

(iii) the person and one or more of the persons referred to in paragraph (a);

"compensation fund" means a compensation fund established under section 130 or the Travel Assurance

Fund continued under section 130;

"compliance order" means an order issued under section 155 by an inspector;

"consumer" means an individual, whether in British Columbia or not, who participates in a consumer

transaction, but does not include a guarantor;

"Consumer Advancement Fund" means the Consumer Advancement Fund established under section

139;

"consumer transaction" means

(a) a supply of goods or services or real property by a supplier to a consumer for purposes that are

primarily personal, family or household, or


(b) a solicitation, offer, advertisement or promotion by a supplier with respect to a transaction

referred to in paragraph (a),and, except in Parts 4 and 5, includes a solicitation of a consumer by a

supplier for a contribution of money or other property by the consumer;

"direct sales prohibition order" means an order issued under section 156 by the director;

"director", except in reference to a director of a corporation, means, subject to the restrictions specified

in a designation, the individual or administrative authority designated under section 175 as director;

"goods" means personal property, fixtures, credit and prepaid purchase cards, but does not include a

security as defined in the Securities Act or contracts of insurance under the Insurance Act;

"goods or services" means goods or services or both;

"inspector" means the director or a person designated as an inspector under section 176;

"licence" means a licence issued under section 145 and includes a renewal of the licence;

"payday loan" has the meaning given to it in section 112.01 [definitions];

"prepaid purchase card" has the meaning given to it in section 56.1 [definitions];

"private dwelling" means a

(a) a structure that is occupied as a private residence, or

(b) if only part of a structure is occupied as a private residence, that part of the structure;

"property freezing order" means an order made under section 159 (2) by the director;

"publish" means make public in any manner, including by or through any media;

"services" means services, whether or not the services are together with or separate from goods, and

includes a membership in a club or organization;

"supplier" means a person, whether in British Columbia or not, who in the course of business

participates in a consumer transaction by

(a) supplying goods or services or real property to a consumer, or

(b) soliciting, offering, advertising or promoting with respect to a transaction referred to in

paragraph (a) of the definition of "consumer transaction",whether or not privity of contract exists

between that person and the consumer, and includes the successor to, and assignee of, any rights

or obligations of that person and, except in Parts 3 to 5 [Rights of Assignees and Guarantors

Respecting Consumer Credit; Consumer Contracts; Disclosure of the Cost of Consumer Credit],


includes a person who solicits a consumer for a contribution of money or other property by the

consumer;

"supply" includes, in respect of the supply of goods or services or real property to a consumer, a sale,

lease, assignment, award by chance or other disposition;

"time share contract" means a contract by which the consumer acquires the right to use property,

whether or not the property is located in British Columbia,

(a) for a period of time each year or other interval, and

(b) as part of a plan that provides for the use of the property to circulate, in any year or other

interval, among persons participating in the plan, but does not include a time share plan as

defined in the Real Estate Development Marketing Act;

"total cost of credit" has the meaning given to it in section 57 [definitions];

"total price" means the total obligation or amount that is payable, given, undertaken or assumed by a

consumer under a consumer transaction;

"undertaking" means an undertaking accepted under section 154 by the director.

(2) Subject to subsection (3), the definitions in the Cremation, Interment and Funeral Services

Act, except where a contrary definition is set out in this Act or the regulations, apply to this Act.

(3) The definition of "register" in the Cremation, Interment and Funeral Services Act does not

apply to this Act.

Application of this Act

2 (1) Parts 6 [Credit Reporting] and 7 [Debt Collection] apply to transactions, matters or things,

regardless of whether they involve a consumer.

(2) Except for the following, this Act does not apply to a sale, lease, mortgage of or charge on land or a

chattel real:

(a) Parts 2 [Unfair Practices] and 5 [Disclosure of the Cost of Consumer Credit];

(b) section 3 and Parts 3 [Rights of Assignees and Guarantors Respecting Consumer Credit], 8 to

10 [Compensation Funds and Consumer Advancement Fund; Licences; Inspections and

Enforcement], 13 [Offences and Penalties] and 14 [Regulations], as those Parts relate to Parts 2

and 5.


Waiver or release void except as permitted

3 Any waiver or release by a person of the person's rights, benefits or protections under this Act is void

except to the extent that the waiver or release is expressly permitted by this Act.

Part 2 — Unfair Practices

Division 1 — Deceptive Acts or Practices

Deceptive acts or practices

4 (1) In this Division:

"deceptive act or practice" means, in relation to a consumer transaction,

(a) an oral, written, visual, descriptive or other representation by a supplier, or

(b) any conduct by a supplierthat has the capability, tendency or effect of deceiving or misleading a

consumer or guarantor;

"representation" includes any term or form of a contract, notice or other document used or relied on by

a supplier in connection with a consumer transaction.

(2) A deceptive act or practice by a supplier may occur before, during or after the consumer transaction.

(3) Without limiting subsection (1), one or more of the following constitutes a deceptive act or practice:

(a) a representation by a supplier that goods or services

(i) have sponsorship, approval, performance characteristics, accessories, ingredients,

quantities, components, uses or benefits that they do not have,

(ii) are of a particular standard, quality, grade, style or model if they are not,

(iii) have a particular prior history or usage that they do not have, including a

representation that they are new if they are not,

(iv) are available for a reason that differs from the fact,

(v) are available if they are not available as represented,

(vi) were available in accordance with a previous representation if they were not,

(vii) are available in quantities greater than is the fact, or

(viii) will be supplied within a stated period if the supplier knows or ought to know that

they will not;


(b) a representation by a supplier

(i) that the supplier has a sponsorship, approval, status, affiliation or connection that the

supplier does not have,

(ii) that a service, part, replacement or repair is needed if it is not,

(iii) that the purpose or intent of a solicitation of, or a communication with, a consumer

by a supplier is for a purpose or intent that differs from the fact,

(iv) that a consumer transaction involves or does not involve rights, remedies or

obligations that differs from the fact,

(v) about the authority of a representative, employee or agent to negotiate the final terms

of a consumer transaction if the representation differs from the fact,

(vi) that uses exaggeration, innuendo or ambiguity about a material fact or that fails to

state a material fact, if the effect is misleading,

(vii) that a consumer will obtain a benefit for helping the supplier to find other potential

customers if it is unlikely that the consumer will obtain the benefit,

(viii) that appears in an objective form such as an editorial, documentary or scientific

report if the representation is primarily made to sell goods or services, unless the

representation states that it is an advertisement or promotion, or

(ix) to arrange for the consumer an extension of credit for a fee, unless the fee is

deducted from the advance, as defined in section 57 [definitions];

(c) a representation by a supplier about the total price of goods or services if

(i) a person could reasonably conclude that a price benefit or advantage exists but it

does not,

(ii) the price of a unit or instalment is given in the representation, and the total price of

the goods or services is not given at least the same prominence, or

(iii) the supplier's estimate of the price is materially less than the price subsequently

determined or demanded by the supplier unless the consumer has expressly consented to

the higher price before the goods or services are supplied;

(d) a prescribed act or practice.

Prohibition and burden of proof

5 (1) A supplier must not commit or engage in a deceptive act or practice in respect of a consumer

transaction.


(2) If it is alleged that a supplier committed or engaged in a deceptive act or practice, the burden of proof

that the deceptive act or practice was not committed or engaged in is on the supplier.

Advertising

6 (1) In this section, "advertiser" means a supplier who publishes advertisements.

(2) An advertiser who, on behalf of another supplier, publishes a deceptive or misleading advertisement is

not liable under section 171 [damages recoverable], 172 [court actions respecting consumer

transactions] or 189 [offences] if the advertiser proves that the advertiser did not know and had no reason

to suspect that its publication would contravene section 5.

(3) An advertiser, for each advertisement accepted, must maintain a record of the name and address of the

supplier who provides the advertisement.

Division 2 — Unconscionable Acts or Practices

Application of this Division

7 Nothing in this Division limits, restricts or derogates from a court's power or jurisdiction.

Unconscionable acts or practices

8 (1) An unconscionable act or practice by a supplier may occur before, during or after the consumer

transaction.

(2) In determining whether an act or practice is unconscionable, a court must consider all of the

surrounding circumstances of which the supplier knew or ought to have known.

(3) Without limiting subsection (2), the circumstances that the court must consider include the following:

(a) that the supplier subjected the consumer or guarantor to undue pressure to enter into the

consumer transaction;

(b) that the supplier took advantage of the consumer or guarantor's inability or incapacity to

reasonably protect his or her own interest because of the consumer or guarantor's physical or

mental infirmity, ignorance, illiteracy, age or inability to understand the character, nature or

language of the consumer transaction, or any other matter related to the transaction;

(c) that, at the time the consumer transaction was entered into, the total price grossly exceeded the

total price at which similar subjects of similar consumer transactions were readily obtainable by

similar consumers;


(d) that, at the time the consumer transaction was entered into, there was no reasonable

probability of full payment of the total price by the consumer;

(e) that the terms or conditions on, or subject to, which the consumer entered into the consumer

transaction were so harsh or adverse to the consumer as to be inequitable;

(f) a prescribed circumstance.

Prohibition and burden of proof

9 (1) A supplier must not commit or engage in an unconscionable act or practice in respect of a consumer

transaction.

(2) If it is alleged that a supplier committed or engaged in an unconscionable act or practice, the burden of

proof that the unconscionable act or practice was not committed or engaged in is on the supplier.

Remedy for an unconscionable act or practice

10 (1) Subject to subsection (2), if an unconscionable act or practice occurred in respect of a consumer

transaction, that consumer transaction is not binding on the consumer or guarantor.

(2) If a court determines that an unconscionable act or practice occurred in respect of a consumer

transaction that is a mortgage loan, as defined in section 57 [definitions], the court may do one or more of

the following:

(a) reopen the transaction and take an account between the supplier and the consumer or

guarantor;

(b) despite any statement or settlement of account or any agreement purporting to close previous

dealings and create a new obligation, reopen any account already taken and relieve the consumer

from any obligation to pay the total cost of credit at a rate in excess of the prevailing prime rate;

(c) order the supplier to repay any excess that has been paid or allowed by the consumer or

guarantor;

(d) set aside all or part of, or alter, any agreement made or security given in respect of the

transaction and, if the supplier has parted with the security, order the supplier, to indemnify the

consumer;

(e) suspend the rights and obligations of the parties to the transaction.

Division 3 — Unsolicited Goods or Services


Definition and interpretation

11 (1) In this Division, "unsolicited goods or services" means goods or services that are supplied to a

consumer who did not request them, other than

(a) goods or services supplied to a consumer who knew or ought to have known they were

intended for delivery to another person,

(b) goods or services for which the supplier does not require payment, or

(c) a prescribed supply of goods or services.

(2) For the purposes of the definition of "unsolicited goods or services", a request for goods or services

must not be inferred only from the passage of time or from the consumer's

(a) payment for the goods or services,

(b) use of the goods or services,

(c) request to purchase another similar good or service, or

(d) inaction.

Unsolicited goods or services

12 (1) A consumer has no legal obligation in respect of unsolicited goods or services unless and until the

consumer expressly acknowledges to the supplier in writing his or her intention to accept the goods or

services.

(2) Unless the consumer has given the acknowledgment referred to in subsection (1), the supplier does not

have a cause of action for any loss, use, misuse, possession, damage or misappropriation in respect of the

goods or services or the value obtained by the use of the goods or services.

(3) Subsections (1) and (2) do not apply to goods supplied to a consumer on a continuing basis under a

contract between the consumer and supplier.

(4) If it is alleged that the supplier supplied unsolicited goods or services, the burden of proof that the

goods or services were not unsolicited is on the supplier.

Material change resulting in unsolicited goods or services

13 (1) This section does not apply to

(a) a material change in services referred to in section 25 (4) [continuing services contract —

cancellation], and


(b) a change to the price of goods or services or a renewal of an existing supply of goods or

services if the goods or services are not otherwise changed.

(2) If a consumer is being supplied with goods or services on a continuing basis and there is a material

change in the goods or services, or in the supply of the goods or services, the goods or services are

deemed to be unsolicited goods or services from the time of the material change unless the supplier is

able to establish that the consumer consented to the material change.

(3) Subject to subsection (4), a supplier may rely on a consumer's consent to the material change if that

consent is made by any method that permits the supplier to produce evidence to establish the consumer's

consent.

(4) A supplier does not establish a consumer's consent by providing notice to the consumer to the effect

that the supplier will supply the materially changed goods or services to the consumer unless the

consumer instructs the supplier not to supply the goods or services.

Consumer's remedy if unsolicited goods or services

14 (1) A consumer who pays for unsolicited goods or services may give to the supplier a demand, in

writing, for a refund from the supplier within 2 years after the consumer first received the goods or

services if the consumer did not expressly acknowledge to the supplier in writing his or her intention to

accept the goods or services.

(2) A demand is sufficient if it indicates, in any way, the intention of the consumer to demand a refund of

a payment made for unsolicited goods or services.

(3) If a supplier receives a demand for a refund, the supplier must refund to the consumer, within 15 days

after the supplier received the demand, all money received in respect of the unsolicited goods or services.

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