[Vol. 17
The Supreme Court of Canada and
The Common Law of Contract
by Philip Slayton*
I
Introduction
On December 10, 1949, assent was given to “An Act to amend
the Supreme Court Act.” 1 This Act abolished appeals from Canada
to the Judicial Committee of the Privy Council, making the Supreme
Court of Canada the final court of appeal for Canada.2 The Supreme
Court became judicial master in the Canadian house.
Abolition of appeals was considered a mark of the maturity
of the Canadian state. Many hoped that it would lead to development
of a law more able to respond to Canadian conditions. The Ottawa
Journal commented in 1938 that “in recent years in particular
Privy Council decisions have shown hardly an inkling of things
in Canada in consequence of modern and Empire change.” 8 Canadian
development was characterized by one commentator as “arrested
by the judicial barrier to progressive change erected by the Privy
Council, and raised even higher as time moves on and new conditions
arise.”‘ 4 Professor MacGuigan has described the Privy Council
as sitting out its days in “judicial seclusion an ocean removed
from the colony-state, with no knowledge of the geographic, eco-
*B.A.
(Hons.) (Man.), BA. (Oxon.), B.C.L. (Oxon.), Assistant Professor
of Law, McGill University.
113 Geo. 6, c. 37. 1949, 2nd session, Vol. 1.
2 Section 7 of the Act read in part: “Notwithstanding anything in section
three of this Act, an appeal from or in respect of a judgment pronounced in
(a) a judicial proceeding that was commenced prior to the coming into
force of this Act … lies or may be brought as if that section had not been
enacted.” The last Canadian appeal to the Privy Council was therefore some
years after the 1949 Act.
3 Ottawa Journal, April 11, 1938, p. 4. Quoted by McConnell, The Judicial
Review of Prime Minister Bennet’s ‘New Deal’, 6 Osgoode Hall LJ. 39, at 80
(1968).
4 Tuck, Canada and the Judicial Committee of the Privy Council, 4 U. Toronto
LJ. 33, at 71 (1941-2).
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THE COMMON LAW OF CONTRACT
nomic, social and political conditions beyond what it might gather
from the London newspapers.” 5
The post-war Canadian, under the influence of new Canadian
nationalism, was irked by appeals to the Privy Council, which he
considered to be the “badge of colonialism.” 6 Stuart Garson,
Minister of Justice, when introducing the legislation ending ap-
peals, said:
By far the most powerful argument, therefore, for the passing of this
bill as a step towards complete self-government is that Canada in almost
every other respect… has attained a complete and honourable nationhood.
The question is whether it is consistent with that nationhood that we
should continue an arrangement with regard to the hearing of our law
cases which was begun in colonial times and still preserves its colonial
characteristics … 7
Criticism in this vein had been levelled at appeals over several
decades. John Ewart commented in 1928 that “it is difficult to
understand what right anybody, outside of Canada, has to discuss
with us the finality of the decisions of our own courts.” 8 The
Toronto Daily Star said on April 21, 1938, that “the Judicial Com-
mittee of the Privy Council was established as a colonial court
and Canada is not a colony but a self-governing dominion.” 9 Pro-
fessor Frank Scott remarked in 1947 that “because of the appeal
a prime element of Canadian sovereignty is impaired.”‘ 0
It was expected and hoped, then, that abolition of appeals to
the Privy Council would remove the last mark of colonialism from
Canada, and allow development of a law particularly suited to
Canada by a Court with particular knowledge of peculiar Canadian
conditions. Remarkably, since the abolition of appeals little has
been written about the work of the Supreme Court, particularly
in the private law area; there has been no extensive and rigorous
analysis of the Court’s work which would allow commentators to
form opinions as to whether pre-abolition hopes and expectations
have to any extent been realized. It is the purpose of this article
Analysis, 4 Alta. L. Rev. 419, at 419 (1966).
5 MacGuigan, The Privy Council and the Supreme Court: A Jurisprudential
6 For a history of the abolition movement, see MacKinnon, The Establish-
ment of the Supreme Court of Canada, 27 Can. Historical Rev. 258 (1946),
and Russell, The Supreme Court of Canada as a Bilingual and Bicultural
Institution, ch. 1 (1969).
7Canada, House of Commons Debates, September 20, 1949, p. 74.
8 Ewart, Canada’s Political Status, 9 Can. Historical Rev. 194, at 204 (1928).
9 Toronto Daily Star, April 21, 1938, p. 6. Quoted by McConnell, supra, note 3.
10 Scott, Abolition of Appeals to the Privy Council: A Symposium, 25 Can.
B. Rev. 557, at 566 (1947).
McGILL LAW JOURNAL
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to attempt to make such an analysis of the way in which the
Supreme Court of Canada has, since the abolition of appeals to
the Privy Council,” interpreted and applied the common law of
contract.12 What is presented here is a survey of the more im-
portant aspects of the Court’s work in the field of contract, since
1949, in the hope that the survey will allow those interested in
the Supreme Court to form some views on its development.
The kind of analysis to which this study subjects decisions of
the Supreme Court is what might be termed, for want of a better
phrase, “traditional substantive analysis.” It
is the written judg-
ments rendered by members of the Supreme Court that are em-
phasized and analysed. Curiously, the bulk of what recent study
of the Supreme Court there has been, is in the form of “scalogram
analysis”, 13 a methodology which presents a dramatic contrast to
the traditional methodology adopted in this article. Scalogram
analysis is an expression of the approach pioneered by, among
others, Jerome Frank, who believed that judicial judgments are
worked out backwards from conclusions formulated on the basis
of, amongst other things, idiosyncratic biases.14 This school of
thought holds that the formal reasons for judicial judgment are,
at best, only part of the “real” reasons for judgment; the “real”
reasons include a judge’s personality, his social and political beliefs,
whether or not he has indigestion, his attitude towards redheads
” As already pointed out (supra, n. 2), for some time following assent to
“An Act to amend the Supreme Court Act”, 13 Geo. 6, c. 37, cases before
the Supreme Court, depending on when judicial proceedings were commenced,
may have been subject to appeal to the Privy Council. This article will
nonetheless
the Supreme Court after
December 10, 1949, on an equal footing, on the grounds that the significant
fact is recognition by the Act of Canadian judicial independence.
treat all cases appearing before
120ne of the few comments on how the Court has dealt with contract
is that of Dean Horace Read: “Study of most of the reported opinions
revealed that while some of them show much skill in the techniques of
applying precedents by analogy, almost all are routine deductions from
English authorities or their unmodified derivatives.” Read, The Judicial
Process in Common Law Canada, 37 Can. Bar Rev. 265, at 267 (1959).
13 See, for example, Peck, The Supreme Court of Canada, 1958-1956: A Search
for Policy Through Scalogram Analysis, 45 Can. Bar Rev. 666 (1967); Peck,
A Scalogram Analysis of
in
Comparative Judicial Behaviour 293 (Ed. Schubert and Danelski); Fouts,
Policy-Making in the Supreme Court of Canada 1950-60,
in Comparative
Judicial Behaviour 257; Russell, The Supreme Court of Canada as a Bilingual
and Bicultural Institution, (1969).
the Supreme Court of Canada, 1958-1967,
14 J. Frank, Law and the Modem Mind 114 (1930).
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if the appellant has red hair, and so on. If judges really do reach
judicial decisions for these kinds of reasons, then clearly close
study of formal written reasons for judgment is largely irrelevant.
The most rational thing is probably to characterize the issue raised
by the case and then determine which way the judge has “voted”
on that issue.
Scalogram analysis represents a formalized and precise method
of approaching cases in this way. Considerable claims have been
made for its importance. 5 But apart from deficiencies of internal
logic, the method suffers from serious conceptual flaws. It may
well be true to say of a judge that his decisions are to some
extent based on non-judicial considerations, but it is not true to
say that judicial considerations are substantially disregarded in
giving judgment; such a claim ignores the realities of the system.
Furthermore, whatever it is that stimulates the judicial response,
it is the rules and principles of law that define the acceptable
limits of that response. It may be true to say that written reasons
for judgment are not the whole story, but one cannot conclude
that study of written reasons is futile. Those reasons indicate the
boundaries within which judicial discretion operate. They illustrate
one aspect of the workings of the judicial mind. And they are all
we have, in the last resort; we must make of them what we can. 6
II
Formation
Horace Read has written that in Dawson v. Helicopter Ex-
ploration Co. Ltd.17 Mr. Justice Rand “by way of reasoned dictum,
led the way in advancing the common law of contracts beyond
previous express English and Canadian formulation…” 18 Springer,
an agent of Helicopter Exploration, had written to Dawson offering
to give him a ten percent share in claims staked if Dawson would
show Helicopter Exploration mineral deposits which he had dis-
covered at the head of the Leduc River in British Columbia. Heli-
copter was to finance the staking of new claims. Dawson agreed
to this arrangement. Subsequently Helicopter wrote to Dawson
15 See, for example, Baade, Foreword, 28 Law and Contemp. Prob. 1, (1963).
16For a description of scalogram analysis as applied to the Supreme
Court of Canada, and an elaboration of the criticisms made above, see
Slayton, A Critical Comment on Scalogram Analysis of Supreme Court of
Canada Cases, 21 U. Toronto L.J. 393, (1971).
17 [1955] S.C.R. 868.
18Supra, n. 12, at 281.
McGILL LAW JOURNAL
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saying that it had been advised that technical difficulties
in
the way of extracting deposits from the Leduc River area made
the proposal unattractive. Dawson did not reply. Later Helicopter
located the deposits by itself and made arrangements with a new
company to enter into development of the claims. Dawson brought
an action against Helicopter Exploration for breach of contract.
Helicopter contended that its offer called for an acceptance not
by promise but by the performance of an act, namely, the precise
location of the claims by Dawson for the respondent. Since that
act was never performed, no contract was ever concluded.
The Court, in a four-to-one decision (Kerwin C. J. dissenting),
found in favour of the appellant.
Mr. Justice Rand delivered the judgment of himself and Mr.
Justice Fauteux. Rand J. was not prepared to find that the offer
of the respondent was a unilateral offer. Purely on the facts, this
was not the case; in a unilateral offer the offeror remains passive,
and in Springer’s proposal it was necessarily implied that Springer
would participate, since Dawson was to proceed to the Leduc
River with Springer or persons acting for him and by means of
the respondent’s helicopter. Dawson’s simple promise was therefore
sufficient to form the contract.
Rand J. then argued that where possible offers should be treated
as calling for bilateral rather than unilateral action so that trans-
actions will have business efficacy:
… an offer in the unilateral sense can be revoked up to the last moment
before complete performance. At such a consequence many courts have
balked; and it is in part that fact that has led to a promissory construction
where that can be reasonably given. What is effectuated is the real
intention of both parties to close a business bargain on the strength of
which they may, thereafter, plan their courses. 19
Rand J. quoted with approval Williston on Contracts, 1936 edition,
Volume One, pp. 76-7, which urges the treating of offers as bilateral
rather than unilateral so that both parties can be protected from
a period prior to the beginning of performance on either side.
He went on to endorse the following passage from Cardozo J. in
Wood v. Lady Duff Gordon: 20
The law has outgrown its primitive stage of formalism when the precise
word was the sovereign talisman, and every slip was fatal. A promise
may be lacking and yet the whole writing may be “instinct with an
obligation imperfectly expressed.”
1.9Ibid., p. 875.
20222 N.Y. 88, at 90 (1917).
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THE COMMON LAW OF CONTRACT
On these grounds, on the grounds that Helicopter’s offer was not
unilateral, and on the grounds that the offer on the facts expressed
an “instinct with an obligation”,21 Mr. Justice Rand was prepared
to find for the appellant.
Estey and Cartwright JJ. agreed with Rand and Fauteux JJ.
as to result, but preferred to assume that the respondent’s offer
was bilateral, and decide the case on the basis of whether or not
the offer had been absolutely and unequivocally accepted 22 and
whether the contract had been subsequently repudiated or aban-
doned. Chief Justice Kerwin dissented on the grounds that Dawson
and Helicopter Exploration had never progressed beyond the stage
of negotiations.
The judgment of Mr. Justice Rand is an important contribution
to solution of the problem posed by unilateral contracts. An offer
is not to be considered unilateral unless the offeror remains passive.
It is not to be considered unilateral if a promissory construction
can reasonably be given. It should not be considered unilateral if
the real intention of the parties is to close a business bargain on
the strength of which they may both plan their courses. Most
significant of all, Rand J.’s endorsement of the passage in Cardozo
J.’s judgment in Wood v. Lady Duff Gordon indicates a willingness
to look beyond precise formal requirements in an attempt to gather
the real sense of the agreement. It indicates a willingness to abandon
application of precise rules in favour of a greater judicial discretion
and creativity in the interpretation of contractual arrangements.
In Calvan Consolidated Oil & Gas v. Manning 23 a letter setting
out an agreement was to be reduced to a formal agreement, the
terms of which were to be settled by arbitration if the parties
failed to agree on them. Judson J. (giving judgment for the Court),
after disposing of a claim that the agreement was void for un-
certainty, held that the parties were bound immediately on the
execution of the informal agreement. He relied on a dictum of
Parker J. in the English case of Hatzfeldt-Wildenburg v. Alexander,24
and said that on construction the parties intended to hold them-
selves bound until execution of the formal agreement. The provi-
in McCall v. Wright, 133 App. Div. (N.Y.) 62 (1909).
21 The phrase “instinct with an obligation” was first employed by Scott J.,
22 For an enunciation by the Supreme Court of the well-established propo-
sition that acceptance must be absolute and unequivocal, see the judgment of
Estey J., Harvey v. Perry [1953] 1 S.C.R. 233, and Judson J., in Calvan
Consolidated Oil and Gas v. Manning [1959] S.C.R. 253.
23 [1959] S.C.R. 253.
24 [1912] 1 Ch. 284, at 288-9.
McGILL LAW JOURNAL
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sion for a formal agreement was merely an expression of the desire
of the parties as to the manner in which the transaction already
agreed to would go through. Some considerable weight appeared
to be placed by Judson J. on the absence in the informal agreement
of a traditional qualifying phrase such as “subject to contract.”
But it is difficult to see the significance of such omission, and to
see how on construction it can be said the parties considered them-
selves bound from the time of the informal agreement, when the
arbitration provision in that informal agreement was couched in
the following terms:
It is agreed that the terms of the formal agreement are to be subject
to our mutual agreement, and if we are unable to agree, the terms of
such agreement are to be settled for us by arbitration…
To balance against this provision, as Judson J. noted at page 256,
was the fact that both parties to the informal agreement performed
some of their obligations under that agreement, despite the absence
of the formal document. But in what substantive way does the
arbitration clause differ in effect from, for example, the phrase
“subject to the terms of a formal lease,” which the Supreme Court
has agreed prevents a binding contract arising unless a formal
agreement is executed? 25
In any event, the judgment of Judson J. for the Court in Calvan
Consolidated Oil & Gas v. Manning suggests the kind of preoccu-
pation with words and formulae which Rand J. impliedly criticised
in Helicopter Exploration v. Dawson. At the very least, Mr. Justice
Judson neglected an opportunity to develop the more creative
position suggested by Rand J.
In Saint John Tug Boat Co. Ltd. v. Irving Refinery Ltd.
the
respondent made verbal arrangements with the appellant for the
rental of a tug for one month. Those arrangements were expressly
extended twice, each time for a two-week period. No further
formal arrangements or extensions were agreed upon, but the ap-
pellant continued to make his tug available to the respondent. Later
the respondent denied all liability for charges accruing after expiry
25 Kellock J., in Bonnie v. Aero Tool Works Ltd. [1952] 1 S.C.R. 495, at 502,
citing Spottiswoode v. Doreen [1942] 2 All E.R. 65. In Cotter v. General
Petroleums Limited
the
following passage from Pollock on Contracts, 13th Edition, (1950) p. 35:
“…if parties to an agreement leave essential terms in it undetermined and
therefore to be settled by subsequent contract, their agreement is not ap
enforceable contract.”
20 [1964] S.C.R. 614.
[1951] S.C.R. 154, at 172 Cartwright approved
No. 3]
THE COMMON LAW OF CONTRACT
of the last formal extension. Ritchie J., giving the judgment of
the Court, found in favour of the appellant. He considered that the
appellant, in keeping the tug available for the respondent after
the express arrangements had expired, was making a new offer
for the same services at the same rate. The question then became
whether the respondent’s course of conduct during the months
in question constituted a continuing acceptance of these offers.
The test, said Ritchie J., was objective; in support of this proposition
he cited Anson on Contracts, 21st edition, p. 28, and Williston on
Contracts, 3rd edition, volume 1, paragraph 91A, but appeared to
rely most heavily on the famous dictum of Lord Blackburn in
Smith v. Hughes:
If, whatever a man’s real intention may be he so conducts himself that
a reasonable man would believe that he was consenting to the terms
proposed by the other party and that other party upon that belief
enters into a contract with him, the man thus conducting himself would
be equally bound as if he had intended to agree to the other party’s
terms.27
Ritchie J. concluded that an agreement was to be implied from
the respondent’s acquiescence in the tug’s services being supplied
for its benefit during the period for which the claim was being made.
Regrettably, Ritchie J. did not examine important passages from
the judgment of Locke J. in Barrick v. Clark.28 In that case, the
Supreme Court was called upon to decide whether or not an offer
by post had been accepted within a reasonable time. Upon con-
sidering the terms of the offer and the circumstances surrounding
it, the Court held that a reasonable time had elapsed before pur-
ported acceptance. Locke J. considered evidence to the effect that
the offeror was not really in as much of a hurry as his offer in-
dicated, and commented as follows:
With great respect, I think this evidence does not affect the question
to be determined. An intention not expressed or communicated to the
other party is immaterial in deciding the question as to whether there
was an agreement. The law appears to me to be accurately summarized
in Leake (8th Ed.) p. 2, where it is said that the law judges the intention
of a person by outward expressions only and judges of an agreement
between two persons exclusively from those expressions of their intention
which are communicated between them unless there is a duty to speak,
in which event a party may become bound by his silence … , the question
should, in my opinion, be determined by considering only the com-
munications which passed between the parties.2 9
27 (1871), L.R. 6 Q.B. 597, at 607.
28[ 1951] S.C.R. 177.
29 Ibid., p. 188.
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To the extent that Locke J. in this passage is accepting the propo-
sition that formation of a contract must be judged objectively,
his dicta can be said to support Ritchie J.’s interpretation of the
facts in Saint John Tug. But to the extent that Locke J. considers
express communication of intent between parties crucial, this
passage from Barrick v. Clark is a serious obstacle to Ritchie J.’s
decision, and constitutes a severe restriction on the whole notion
of acceptance by conduct. Faced with this difficulty raised by his
own Court, Ritchie J. weakened his judgment in Saint John Tug
by simple reliance on Lord Blackburn’s dictum in Smith v. Hughes.
Ritchie J. in Saint John Tug was faced with a difficult problem
concerning formation of a contract. It would have been appropri-
ate, although it was not necessary, for Ritchie J. to employ Rand
J.’s “instinct with an obligation” concept and develop it in a way
that would make it suitable as a method of solving acceptance by
conduct situations. The effect of the “instinct with an obligation”
concept, properly developed, would be to allow evaluation of the
whole sense and nature of the negotiations and possible agreement,
without undue restriction by highly technical rules and requirements.
When the function of the Court is properly to interpret and apply
the private law of the parties, such a wide mandate is appropriate.
Without questioning the wisdom and fairness of the specific decision
of Ritchie J. in Saint John Tug, it can be said that Ritchie J. ignored
an opportunity to develop a new and far-seeing principle already
canvassed by the Supreme Court.
In those few cases which the Supreme Court since 1949 has
decided on offer and acceptance grounds, the Court has as a whole
apparently chosen to act on conventional principles long accepted
by English and to some extent American law. It can be said that
the Court has not decided these cases badly; generally application
of the conventional law has led to a reasonable resultY0 But the
Court has ignored the opportunity to indulge in creative juris-
prudence; it has ignored an opportunity to create a distinct new
principle, in favour of simple application of concepts developed
elsewhere. And it has done this without canvassing the relative
policy merits of the competing principles.
30See for another example of such a result Gordon v. Conners [1953]
2 S.C.R. 127. A less convincing case is Lethbridge Collieries Ltd. v. The King
[1951] S.C.R. 138, in which the Court differentiated between an offer and
a “certain policy” which the Emergency Coal Production Board indicated
by letter to collieries that it proposed to follow.
No. 31
THE COMMON LAW OF CONTRACT
III
Construction
In Canadian Indemnity v. Andrews & George 31 Kerwin J., giving
judgment for himself and Estey J., quoted Holmes, The Common
Law, p. 302: “As the relation of contractor and contractee is volun-
tary, the consequences attaching to the relation must be voluntary.”
To this sentence, Kerwin J. added the following passage from Chitty
on Contracts, 20th edition, p. 3:
It therefore appears that.., the kind of obligation involved in a contract
is that which the parties themselves intend shall be created. It arises
from their volition and is not imposed on them ab extra by the law. A
and B are not obliged to enter into any contract unless they wish to
do so; if they do so, they create their own obligation, the one to the
other; they intend that their bargain shall, if necessary, be enforced by
the law.32
The law of contract has traditionally proceeded on the basis that
the Court has as its function to understand the arrangements reached
between private parties and to enforce those arrangements, provided
only that the contract is not in some way illegal or contrary to
public policy. But as the range and nature of possible contracts
has expanded as society becomes more complex, the Courts have
made inroads into this basic principle, although in most cases,
paying lip-service to it. To begin with, the increasingly accepted
notion that intention must be judged objectively, rather than sub-
jectively, allows courts if they wish to impose on all contracts
the community or some other standard of what is ‘fair” and “rea-
sonable.” Using this device, and sometimes simply explicitly ignoring
what appears to have been the true intention of the parties, the
courts, while maintaining that “the heads of public policy are
closed,” have often acted to impose general standards on private
agreements. This fundamental and continuing development in the
law of contract has been clearly recognized by most commentators.
Atiyah, for example, has analysed how the Courts, when differ-
entiating between terms of the contract and mere representations,
do not really do what they claim to be doing:
… it is reasonably clear that the ‘intention of the parties’ does not
really mean what it says. In the first place, it is highly unlikely that the
parties had any intention at all on the matter, for such an intention
would virtually require an appreciation of the legal distinction between
a term of the contract and a mere representation. In the second place
3′ [1953] 1 S.C.R. 19.
32 Ibid., p. 23.
McGILL LAW JOURNAL
EVol. 17
it is almost certain that the parties will claim that they had different
intentions, for if they did not, the case probably would not be in Court
at all. Thus we rarely find a Court making any real attempt to examine
the actual intention of the particular parties in order to solve this
particular type of question. …. We are then likely to find the Court
explaining the purely objective reasons for which it
thinks that the
party making the statement accepted responsibility for it, e.g. that he
was a dealer in the goods in question, or that he, as owner of the land
being sold, had better opportunities for discovering the truth of his
statement.
… In point of fact, it is the nature of the result which appears in
many cases to determine the answer to the question.33
The Court, then, may well interpret the contract to arrive at a
result which appeals to it; and often what will appeal to the Court
will appeal to it for policy reasons. “Objective” interpretation of
a contract may simply be a means of applying public standards to
private law.
This fundamental development, symptomatic of a tempered
judicial activism, 34 has yet to be consistently reflected in the de-
cisions of the Supreme Court of Canada. The Supreme Court,
compared to other final appellate courts, has demonstrated a gener-
al reluctance to interfere with what appears to be the actual
agreement reached between two parties. Some indication of its
general approach is given by the case of Canadian Atlas Diesel
Engines v. McLeod Engines.3 5 Both the appellant and the respondent
held agencies in British Columbia for the sale of Chrysler marine
engines. Chrysler appeared to want only one agency in
the Van-
couver/Victoria area, and the respondent, a much newer agency
than the appellant, decided it would be wise to anticipate a possible
move by Chrysler and surrender its agency to the appellant on the
best terms available. The agreement for that surrender included
a provision whereby the appellant agreed to supply the respondent
with enough engines to allow the respondent to fill “orders” which
it had on hand at the time of surrender. The respondent submitted
a list to the appellant of what it considered to be such orders;
33 Atiyah, Introduction to the Law of Contract 103, (1961).
34 American Courts, taking a highly liberal view of the role of public policy
in the law of contract, tend to be explicit in their application of actual or
desired community standards; consider, ‘for example,
the judgment of
Frances J., in Henningsen v. Bloomfield Motors, 32 NJ. 358, 161 A. 2d 69
(1960). An English Court might decide the same way in a Henningsen situation,
but would likely justify its decision, following Suisse Atlantique Socidtd
d’Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967] 1
A.C. 361, on the basis of unrebutted presumptions of intention.
35 [1952] 2 S.C.R. 122.
No. 3]
THE COMMON LAW OF CONTRACT
the list was compiled from letters from fishing companies estimating
the engines they would need for the coming season. After supplying
some engines, the appellants refused to supply any more, and argued
that the letters estimating engine requirements were not “orders”
within the meaning of the word.
The Court gave judgment for the appellant. Mr. Justice Estey
considered that the letters in question were of an ambiguous nature;
the Court was therefore justified in examining the intent and mean-
ing of the word “orders” as used by the parties in this contract.
The rule to be applied, said Estey J., is that stated by Blackburn J.
in Fowkes v. The Manchester and London Life Assurance and Loan
Association: 11
… The language used by one party is to be construed in the sense in
which it would be reasonably understood by the other.
If, said Mr. Justice Estey, the respondent intended the estimated
requirements made in the letters to be accepted as orders within
the meaning of the contract, the respondent should have exhibited
one of the letters or made such explanations of their contents as
would have enabled the appellant to understand the word “order”
in the sense which he desired it to be understood.3 7 Mr. Justice
Locke agreed as to the result with Estey J. Locke J. did not con-
sider there to be any ambiguity in the language used in the
contract, and considered accordingly that the word “orders” should
be given its commonly accepted meaning, which in Locke J.’s. view,
was the meaning to be found in the New Oxford Dictionary. The
letters in question were, said Locke J., not “orders” but were simply
estimates of requirements. Kerwin J. simply agreed with Estey
and Locke JJ., without indicating which of the two approaches he
preferred.
The dissenting judgment of Rand and Cartwright JJ. was deliver-
ed by Mr. Justice Rand. Rand J. was of the opinion that the word
“orders” as used embraced the commercial commitments contained
in the controversial letters. He gave a far-ranging definition of
the word “order”:
Strictly speaking, an order, in law, is a proposal in the nature of an
offer which invites, without more, some form of acceptance intended
to lead to an obligation; that acceptance, according to the nature of
the order, may be by promise or by some act as, say, the delivery of
goods to a carrier. The letters of essentiality here do not go to that
length; they do not of themselves alone contemplate an acceptance;
30 (1863), 3 B. & S. 917, at 929.
37Estey J. did not refer to the supporting dictum of Locke J., in Barrick
v. Clark [1951] S.C.R. 177, at 188.
McGILL LAW JOURNAL
[Vol. 17
but they are bona fide estimates of an approaching season’s requirements
by a customer to a seller which look to subsequent directions for shipment
of the goods mentioned. They imply an assurance that such directions
will be given, and exhibit that assurance as a representation
to the
department of government concerned. 38 They did not, from that moment,
in a legal sense, bind the companies, but neither would they have had
they been orders in the strict sense; before acceptance, an order can
be revoked and an outstanding recovable order would admittedly satisfy
the language used.39
Rand J. went on, relying on Hillas & Co. Limited v. Arcos Limited,40
to hold that the rule that the ordinary meaning of language is
to be taken as intended may be modified by showing the perspective
in which the matters were actually viewed, and what matters of
fact were actually in the minds of the parties.41 The contract, said
Rand J., must be construed as a whole, and an undue emphasis
upon a word or phrase may easily distort that balanced understand-
ing which can be seen to have been the crystallized consensus.
Rand J.’s judgment recalls again the passage from Wood v.
Lady Duff Gordon42 which he quoted in Dawson v. Helicopter
Exploration Co. Ltd.: 4′ “The law has outgrown its primitive stage
of formalism when the precise word was the sovereign talisman,
and every slip was fatal.” Kerwin, Estey and Locke JJ. were con-
38The letters were originally written to satisfy the Federal Government
that there was a commercial need for the engines in question so that the
required import permission could be obtained.
39 [1952] 2 S.C.R., at 129-130.
40 (1932), 147 L.T. 503. See the dictum of Lord Wright, at 514, and that of
Lord Tomlin, at 511, both cited by Rand J.
41 In Canadian Indemnity Co. v. Andrews & George Co. Ltd. [1953] 1 S.C.R.
19, at 24, Rand J., said “… “meaning” itself has rather shadowy boundaries,
and even ordinary language must, for a true understanding of what the
parties meant by it, be construed in the context and the circumstances out
of which it has arisen. When the words are in the form of legal expressions
which have no fixed or precise definition, those circumstances become so
much more necessary to enable us to appreciate the mental perspectives of
the parties when they bargained.” The Court held in Canadian Indemnity
that liability under s. 21 of the Sale of Goods Act R.S.B.C. 1948, c. 294, was
contractual liability rather than liability at law, since the warranty provided
by s. 21 was deemed to be an element of the intention of the parties, and
could by agreement be excluded. It is interesting to note that in this case
the Court, while insisting that it was up to contracting parties to create their
own law, found that s. 21 was impliedly a term of the contract although the
litigation suggests the parties were not agreed that this section was a term.
The Court in this case appears to have taken an unusual objective view
of the contract.
42222 N.Y. 88, at 90 (1917).
43 [1955] S.C.R. 868, at 875.
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THE COMMON LAW OF CONTRACT
cerned only to define the word “orders.” Locke J. relied on the
dictionary definition; Estey J. was, it seems, prepared to admit of
another definition if the word could so be reasonably understood.
Even Rand J. was essentially concerned with the meaning of “or-
ders,” but he was prepared to take a far-ranging view of what
was involved in defining any word. It is only Rand J. who gives
any indication of being concerned with objectivity in the sense
of a desired result or application of a general standard. It could,
of course, be said of the majority judgment that it was objective
in the sense that it attempted to define a word generally rather
than with a view to the specific understanding of the contractual
parties. But this kind of objectivity is indeed a poverty-stricken
objectivity. Its result is to apply neither the intention of the parties
nor a community standard of what is fair and reasonable.
Rand J., in asking for balanced understanding rather than undue
emphasis upon a word or phrase, has not been alone in the Supreme
Court of Canada. In Cotter v. General Petroleums Ltd.44 Cartwright
J. endorsed the following rule laid down in Mill v. Hill 45 : “The
general rule of construction is, that the Courts, in construing the
deeds of parties, look much more to the intent to be collected from
the whole deed, than from the language of any particular portion
In Barrick v. Clark 47 Estey J., in discussing whether or
of it.” 4
not an offer by letter had been accepted within a reasonable time,
stated:
What will constitute a reasonable time depends upon the nature and
character of the subject matter and the normal or usual course of
business in negotiations leading
to a sale thereof, as well as the
circumstances of the offer including the conduct of the parties in the
course of negotiations.
A remarkable result was achieved in the case of Mason v. Freed-
man.48 In that case, the appellant accepted an offer from the re-
spondent for the purchase of the fee simple of his farm. The
contract contained a clause providing for the right of the vendor
to declare the contract null and void if requisitions which he is
unable or unwilling to remove are made within a stated time. At
the time of closing, the appellant asserted that he was unable to
secure a bar of dower from his wife, tendered a deed without such
44 [1951] S.C.R. 154, at 171.
-5 (1852), 3 H.L. Cas. 828, at 847.
46In Cotter v. General Petroleums the Court was faced with deciding
whether or not, under the rule in Forbes v. Git [1922] 1 A.C. 256, at 259, a
repugnancy existed between two clauses in an option agreement.
47 [1951] S.C.R. 177, at 184.
Is [1958] S.C.R. 483.
McGILL LAW JOURNAL
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a bar and claimed payment in accordance with the terms of the
contract. The respondent refused to close on these terms, rejected
a tender of the return of his deposit, and brought an action for
specific performance. Judson J., giving the majority judgment, said
that a proviso of the kind facing the Court “does not enable a
person to repudiate a contract for a cause which he himself has
brought about.” 49 “A vendor who seeks to take advantage of the
clause,” said Judson J., “must exercise his right reasonably and
in good faith and not in a capricious or arbitrary manner.” 50 In
this case, decided Judson J., the vendor had made no genuine
attempt to obtain a bar of dower: “there was complete and
deliberate failure… to do what an ordinarily prudent man having
regard to his contractual obligations would have done.” r” Accord-
ingly, the appellant was unable to rely on the clause in the contract. 52
In Mason v. Freedman the Supreme Court disregarded the ob-
vious and mechanical application of a specific clause in a contract,
looked beyond the clause to the actions and motives of the parties,
and denied success to the appellant on the grounds that he did not
act as “an ordinary prudent man having regard to his contractual
obligations would have done.” Here is an explicit application of
a general standard, instead of an attempt to apply private law de-
vised by the parties themselves.
The recent trend of the Supreme Court has regrettably been
away from this type of objective approach to contractual inter-
pretation and enforcement. In Clark’s-Gamble of Canada Limited
v. Grant Park Plaza Limited et al,53 the appellant sought a permanent
49Ibid., p. 486. In Bonnie v. Aero Tool Works Ltd. [1952] 1 S.C.R. 495, at
506, Kellock J., said of the contract in question: “I think it was not in the
contemplation of the parties that, where a binding contract of purchase
and sale had been effected by the appellant, he would not be entitled to be
remunerated if the respondent, by its own deliberate act, prevented such
contract being carried out.” From these dicta some new general principle
or an extension of the principle of breach may emerge to the effect that
if a contractual party prevents fulfillment of the contract, he becomes
unable to sue on that contract, regardless of its terms, and is severely
restricted in the remedies available to him. Possibilities of development of
the law of contract in this direction are worthy of examination.
50 Ibid., p. 487.
51 Ibid., p. 488.
52The order of the Court for specific performance gave the respondent
the option of requiring the appellant to convey all the interest he had
without the bar of dower but with an appropriate provision for the payment
into court of a sum of money out of the purchase-price as security against
the claim for dower.
53 [1967] S.C.R. 614.
No. 3]
THE COMMON LAW OF CONTRACT
injunction restraining the respondent from giving a lease in a shop-
ping centre to a “Woolco Store”, a type of store which would be in
direct competition with the appellant’s own operation. The appel-
lant’s primary contention was that in its agreement with the re-
spondent, certains plans were approved by the parties, and those
plans made no provision for a Woolco Store. The appellant also
argued that the proposal to the respondent contemplated a building
scheme and implied a negative covenant of the respondent not to
depart from that scheme. Spence J., giving the judgment of the
Court, gave judgment for the respondent. In interpreting the agree-
ment, Spence J. relied on the following passage from the judgment
of Sedgewick J. in Toronto Railway Company v. City of Toronto: 54
It may be that those who are acting in the matter, or who either
framed or assented to the wording of the instrument, were under the
impression that its scope was wider and that it afforded protection
greater than the court holds to be the case. But such considerations
cannot properly influence the judgment of those who have judicially
to interpret an instrument. The question is not what may have been
supposed to have been intended, but what has been said.
The judgment of Spence J. in Clark’s-Gamble Case, although it
may well have achieved a reasonable result on the facts of that
particular case, is regrettable in that it indicates a current general
policy of the Court which does not encourage either a realistic
attempt to determine the actual subjective intention of the con-
tracting parties, or an attempt by objective interpretation to apply
general standards. Spence J., and presumably the Court generally,
is not prepared to go much, if at all, beyond the actual written
word. The attitude of Kerwin, Estey and Locke JJ. in Canadian
Atlas Diesel Engines v. McLeod Engines seems established as the
general attitude of the Court. Precise words are still, it seems, in
the Supreme Court of Canada, the sovereign talisman.
IV
Promissory Estoppel
The first case to reach the Supreme Court of Canada since 1949
in which, on the facts, the doctrine of promissory estoppel 55 could
54 (1906), 37 S.C.R. 430, at p. 435.
55 Promissory estoppel must, of course, be carefully distinguished from
ordinary estoppel. For a consideration by the Supreme Court of ordinary
estoppel, see Spence J., Clark’s-Gamble of Canada Limited v. Grant Park
Plaza Ltd. et al., [1967J S.C.R. 614, at 626-7, and Canadian Acceptance Corpo-
ration Ltd. v. Fisher [1958] S.C.R. 546, at 555-557 (per Cartwright J.).
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have applied, appears to have been Foot v. Rawlings.r6 An action
was brought for the balance owing on six promissory notes, made
by the respondent payable to the appellant. The parties had executed
an agreement as to five of the notes, whereby it was agreed that
the respondent would pay $300 a month at 5%, instead of $400
at 8%. The payments were to be made on or before the 16th of
each month. A series of post-dated cheques was inadvertently dated
on the 18th; these cheques were accepted by the appellant. Several
were cashed, but then an action was brought. The Court found
for the appellant. Cartwright J., giving the unanimous judgment,
found first that there had been no default under the agreement;
the respondent had cashed three cheques dated the 18th, and by
his conduct therefore had not elected to treat the lateness as en-
titling him to rescind. Cartwright then considered whether there
was any consideration to support the agreement: citing Sibree v.
Tripp,57 he found as follows:
I have reached the conclusion that the giving of the several series of
post-dated cheques constituted good consideration for the agreement
by the respondent to forbear from taking action on the promissory notes
so long as the appellant continued to deliver the cheques and the same
were paid by the bank on presentation.58
The notion that tender of a negotiable instrument constituted
consideration for the discharge of the original debt was developed
by the English courts as a way of avoiding the rule in Pinnel’s
Case 59 which holds that “payment of a lesser sum on the day in
satisfaction of a greater cannot be any satisfaction for the whole.”
Under that rule, a new agreement with new consideration is required
before the original debt can be discharged by payment of a smaller
sum. Sibree v. Tripp, followed by Goddard v. O’Brien,0 held that
the giving of a negotiable instrument constitutes such new con-
sideration. These cases have been subject to considerable criticism.
Cheshire and Fifoot have commented that “in contemporary society
the distinction between payment in cash and payment by cheque –
provided, indeed, that the cheque is honoured –
scarcely accords
with business practice.” 61 Only two years after the Supreme Court
of Canada decided Foot v. Rawlings, the English Court of Appeal
56 [1963] S.C.R. 197.
57 (1846), 15 M. & W. 23. Sibree v. Tripp was generally considered authority
for the proposition that the acceptance of a negotiable instrument may be in
law a satisfaction of a debt of a greater amount.
5 [1963] S.C.R. 197, at 202.
59 (1602), 5 Co. Rep. 117a.
60 (1882), 9 Q.B.D. 37.
61 Cheshire and Fifoot, The Law of Contract 81 (7th ed. 1969).
No. 3]
THE COMMON LAW OF CONTRACT
in D. & C. Builders Ltd. v. Rees 62 rejected the distinction between
cash and a cheque. Lord Denning said that “no sensible distinction
can be taken between payment of a lesser sum by cash and payment
of it by cheque.” 63
The rule in Pinnel’s Case has further been circumvented in
England by development of the doctrine known as promissory
estoppel. This doctrine was established by the 1947 case of Central
London Property Trust, Ltd. v. High Trees House Ltd.64 and was
further defined in Combe v. Combe.65 Denning L. I. in Combe v.
Combe stated the principle in these terms:
The principle, as I understand it, is that, where one party has, by his
words or conduct, made to the other a promise or assurance which
was intended to affect the legal relations between them and to be acted
on accordingly, then, once the other party has taken him at his word
and acted on it, the one who gave the promise or assurance cannot
afterwards be allowed to revert to the previous legal relations as if
no such promise or assurance had been made by him: but he must accept
their legal relations subject
to the qualification which he himself
has so introduced, even though it is not supported in point of law by
any consideration but only by his word.66
The question becomes: Why did the Supreme Court of Canada
in Foot v. Rawlings apply a distinction rejected two years later
by the English Court of Appeal as lacking sense, while at the same
time not discussing or employing an already established doctrine
which would have allowed the Court to reach the result it apparently
favoured?
The 1964 case of Conwest Exploration Co. Ltd. v. Letain 67 was
the first post-abolition of appeals case in which the Supreme Court
explicitly considered the doctrine of promissory estoppel. Under
an option agreement, the obligations of the optionee, the appellant
company Conwest, were to cause to be incorporated before October
1, 1958, a company to hold certain mining claims owned by the
optionor, Letain, and to allot and issue to Letain not less than
fifty thousand shares of this company. Letain executed a transfer
of the optional claims to Conwest to be held subject to the terms
of this agreement. On September 18, 1958, Conwest filed an ap-
plication for incorporation of the company, and was notified that
letters patent were being prepared and would bear the date Sep-
62 [1965] 3 All E.R. 837.
63 Ibid., p. 840.
64[1947J 1 K.B. 130.
65 [1951] 2 K.B. 215.
66Ibid., p. 220.
67 [1964] S.C.R. 20.
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tember 25. Conwest then decided to invite Letain to have his name
appear in the proposed company; on September 26, Letain agreed
to this proposal. The Director of Companies wrote to Letain to in-
quire about the nature of his interest in the company, and on
October 7, Letain stated that he would have a substantial interest.
Two days later, Letain sent a telegram to the Director withdrawing
consent to the use of his name. The letters patent were nonetheless
sealed and issued on October 20, bearing the date September 25.
Letain sought return of the claims held under option.on the ground
that Conwest had not performed the conditions precedent to the
exercise of the option; Letain maintained that he was entitled to
have a company whose letters patent were actually sealed and
issued on or before October 1.
The Court allowed the appeal by Conwest and restored the
order of the trial judge for specific performance of the option
agreement. The Court considered whether Letain, by his intervention
in the incorporation of the company before October 1, 1958, provided
Conwest with an equitable defence against a claim for re-transfer
of the claims. Judson J., giving judgment for himself and Chief
Justice Taschereau, held that Letain, by signing the consent to the
use of his name and the declaration of substantial interest on
October 7, and retaining $18,000 paid for the shares in the proposed
company, represented to Conwest that he was satisfied with what
was being done as performance of the contract. Furthermore, said
Judson J., Letain knew that Conwest would act and was acting
upon his representation, and but for this representation, Conwest
could have given Letain the kind of performance to which he says
he is entitled. Judson J. continued:
I think that this brings the case within the principle which appears
to have originated in the judgment of Lord Cairns in Hughes v. Metro-
politan Railway Co. (1877) 2 App. Cas. 439. There was an unambiguous
representation of intention made by Letain which was intended to be
acted upon and was acted upon by Conwest, with the result that
Conwest’s position in relation to Letain was prejudiced
if Letain’s
interpretation of what constituted performance under this contract is
correct.68
This type of equitable defence, said Judson J., was recognized
by Duff C. J. in Pierce v. Empey 69 and “it does not seem to me
that the recent interest in England in this subject-matter, beginning
with Central London Property Trust Limited v. High Trees House
68 Ibid., pp. 27-28.
69 [1939] S.C.R. 247.
No. 3]
THE COMMON LAW OF CONTRACT
Ltd. [1947] K.B. 130, has done anything more than to restate the
principle.” 70
Martland J., dissenting, was of the opinion that the defence
of equitable estoppel was not open to the appellant. Conwest con-
tends, said Martland J., that it was induced by the respondent’s con-
duct to believe that he had agreed to extend the time for acceptance.
In taking this point, Conwest was not seeking to raise equitable
estoppel as a defence to the strict enforcement by the respondent
of his contractual rights; the respondent did not need to take any
steps to terminate the option agreement, for it terminated auto-
matically upon expiration of the option period. Said Mr. Justice
Martland:
What Conwest really seeks to do is to use equitable estoppel as a means
of establishing that there was an extension of the option period. But
such an extension would involve the making of a new contract and for
such a contract there was no consideration.
The doctrine has never been extended this far and its application
in similar circumstances was denied by the Court of Appeal in England
in Combe v. Combe [1951] 2 K.B. 215. While it is true that in that case
the party seeking to apply the principle was the plaintiff in the action,
in my opinion its application is not dependent upon which party sues the
other. The basic question is as to whether, in the circumstances of the
particular case, it is being used as a defence to the strict enforcement
of contractual rights, or as a means of proving the existence of a contract
made without consideration. It has no application to the latter type of
case and consequently, in my view, should not be applied here7 1
Ritchie J. also dissented. On the equitable estoppel point, he
agreed in substance with Martland J. Said Ritchie J.:
It is suggested… that the respondent’s “declaration of substantial interest”
which was not given until October 7 is to be treated as an acceptance
by Letain of the fact that the company had not then been incorporated
and an acquiescence in the delay, but even if this were so it could not
serve to reinstate the lapsed option as the law is well settled that once
it has expired an option cannot be revived without a new agreement
(see Dibbins v. Dibbins [1896] 2 Ch. 348,
for valuable consideration
per Chitty J. at 351 and 352).72
Cartwright J. agreed with the judgment of Judson J. and in a
short judgment of his own referred specifically to one aspect of
the use of equitable estoppel raised by Mr. Justice Martland:
In my view … Letain is the plaintiff in substance as well as in form.
He is not simply resisting an attempt to enforce the option; he is
7oSupra, n. 67, at p. 28. For an argument that High Trees constitutes a
significant misunderstanding of Hughes v. Metropolitan Ry., see Gordon,
Creditors’ Promises to Forgo Rights, 1963 Camb. LJ. 222.
71 Ibid., p. 31.
72 Ibid., p. 36.
McGILL LAW JOURNAL
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seeking to compel the conveyance to himself.:. of the eight claims
which he caused to be transferred to Conwest … 73
In the view of Cartwright J. the defence of equitable estoppel was
open to Conwest.
It is clearly irrelevant that there was no consideration for an
agreement to extend the option period. The doctrine of promissory
estoppel was devised precisely to allow the use of an agreement
without consideration as a defence to an action to enforce the
superseded agreement. The doctrine can only be used as a defence,
because only then is it not necessary to prove a contract and thus
the existence of consideration. Although Letain was the plaintiff
in Conwest, and from the point of view of form Conwest was
using promissory estoppel as a defence, it was the view of Martland
J. and apparently Ritchie J. (explicitly rejected by Cartwright J.)
that in substance Conwest was using the doctrine to prove the
existence of a new contract and not by way of defence to an action
by Letain to enforce strict contractual rights. It is submitted that
a better view –
is that the key conceptual limitation on the doctrine is that as
to form it can only be used as a defence –
“as a shield and not
as a sword”; it is not and should not be mandatory that it be
used as a defence to an action to enforce strict contractual rights.
Accordingly, that Letain was not enforcing strict contractual rights
as such should not have affected the ability of Conwest to use
promissory estoppel as a defence. That the majority of the Supreme
Court in Conwest allowed use of the defence appears, then, to
constitute a significant development of the doctrine of promissory
estoppel in keeping with the spirit in which it was devised.
and impliedly this was the view of the majority –
In any event, it should be clearly noted that the view of Martland
and Ritchie JJ. that Conwest, by using promissory estoppel, was
attempting illegitimately to prove the existence of a consideration-
less contract is a highly doubtful view. Whenever the defence
is employed, by its very nature it constitutes a reference to a new
agreement without consideration. It was specifically devised to
allow such a reference to constitute a good defence. If in the view
of a Court, such a reference cannot be allowed, then that Court
must reject the whole doctrine of promissory estoppel.
The doctrine of promissory estoppel was again considered by
the Supreme Court in John Burrows Ltd. v. Subsurface Surveys
Ltd. and G. Murdoch Whitcomb 74 Under an agreement involving
73 Ibid., p. 29.
74 [1968J S.C.R. 607.
No. 3]
THE COMMON LAW OF CONTRACT
the sale of the appellant company to the respondent Whitcomb,
the respondent company Subsurface Surveys (set up by Whitcomb)
promised to pay the appellant $42,000 in nine years and ten months,
together with interest on the first day of each month until payment.
In default of payment of any interest payment for ten days or more,
the whole amount payable under the note was to become im-
mediately due. Eleven payments were accepted more than ten days
after they were due. The twelfth payment being thirty-six days
overdue, the appellant demanded the whole sum owing.
The Court found unanimously for the appellant. Ritchie J.,
giving the judgment, after finding that the instrument in question
was a promissory note, addressed himself to the question of whether
or not the defence of equitable estoppel applied in the circumstances
of the case. Said Ritchie J.:
It seems clear to me that this type of equitable defence cannot be invoked
unless there is some evidence that one of the parties entered into a
course of negotiation which had the effect of leading the other to suppose
that the strict rights under the contract would not be enforced, and
I think that this implies that there must be evidence from which it
can be inferred that the first party intended that the legal relations
created by the contract would be altered as a result of the negotiations.
It is not enough to show that one party has taken advantage of
indulgences granted to him by the other for if this were so in relation
to commercial transactions, such as promissory notes, it would mean
that the holders of such notes would be required to insist on the very
letter being enforced in all cases for fear that any indulgences granted
and acted upon could be translated into a waiver of their rights to
enforce the contract according to its terms.75
Ritchie J. concluded that “the behaviour of Mr. Burrows is
much more consistent with his having granted friendly indulgences
to an old associate while retaining his right to insist on the letter
of the obligation…” 76
Interesting questions are raised by the judgment of Ritchie J.
in Burrows v. Subsurface Surveys. It is generally supposed that
for promissory estoppel to be applicable, the party using the de-
fence must have believed that strict rights under the contract would
not be enforced and must have been led to so suppose by a course
of negotiations. No one would likely dispute that this supposition
must be a reasonable supposition; a mere eccentric belief would
not satisfy the precondition for the doctrine’s use. Ritchie J., in the
passage above, appears further to define what is required before
the defendant’s supposition is sufficient to allow use of the de-
7TIbid., p. 615.
7 Ibid., p. 617.
McGILL LAW JOURNAL
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fence. There must be evidence that the plaintiff intended that the
legal relations created by the contract would be altered as a result
of the negotiations. In other words, the Court will only consider
a supposition that strict rights will not be enforced as reasonable
if it results from negotiations in which the other party intends
the original legal relations to be altered. This limitation on the
doctrine’s use is unobjectionable if the promisor’s intentions are
judged objectively, according to the standard of the reasonable
man. But if Ritchie J. means that the use of the defence depends
on an actual subjective intention being shown to exist, we are faced
witl an unreasonable further definition of promissory estoppel,
for this means that no matter how reasonable the defendant’s sup-
position, it cannot be relied upon if the plaintiff unreasonably did
not have the required intention. It is assumed that Ritchie J. in-
tended the first interpretation, although this article’s discussion
of the Court’s general attitude towards “intention” 77 raises some
doubts concerning this assumption.
An additional element of further definition and limitation of
the doctrine of promissory estoppel is the distinction drawn by
Ritchie J. between the intention to alter legal relations and the
mere granting of an indulgence. It is clearly a sound distinction,
for as Ritchie J. points out, failing such a distinction contracting
parties would have always to insist on their exact rights being
enforced. However, some more precise indication of the nature
of the distinction would have been helpful.
In summary, putting aside the curious case of Foot v. Ravlings,
when it comes to promissory estoppel the Supreme Court of Canada
in the few cases presented for its attention has applied the general
law developed in England, although it has applied that law in a
somewhat confused fashion.
V
Exemption Clauses
The problem of standard form contracts is increasingly recog-
nized as a key problem in the modern law of contract. A law
developed in an age which believed in laissez-faire and in which
most contracts were concluded between parties of equal bargaining
strength, must adjust to a time when the ordinary man deals with
huge monopolies, and organs of the government seek increasingly
7 Supra, pp. 483-491.
No. 3]
THE COMMON LAW OF CONTRACT
to regulate all relationships. In England this adjustment has re-
cently been reflected in a long chain of difficult cases. Some
thought that the judgment of the House of Lords in Suisse Atlan-
tique Socidtg D’Armement Maritime S.A. v. N.V. Rotterdamsche
Kolen Centrale 7 settled this troublesome area. But the judgment of
the Court of Appeal, and particularly Lord Denning, in Harbutt’s
Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd.7 9 has again
thrown the law as it relates to exemption clauses into confusion.
In the United States, the problem of standard form contracts has
been approached by courageous application of precepts of public
policy. Beginning with the landmark case of Henningsen v. Bloom-
field Motors,S American courts have shown an awareness of the
problem and a desire to struggle with it in a fundamental way.
Curiously, only a handful of cases involving standard form
contracts or exemption clauses has been considered by the Supreme
Court of Canada since abolition of appeals to the Privy Council,
and those few were considered before much of the interest and
many of the developments in other countries. In The King v.
Canada Steamship Lines et al.8l a Montreal shed, leased by the
appellant to the respondent Canada Steamship Lines, in which
were stored goods belonging to the respondent and third parties,
caught fire while the appellant’s employees, acting within the scope
of their duties, were negligently performing repairs in compliance
with the appellant’s obligation under the lease to maintain the
premises. Clause 7 of the lease provided that “the lessee shall not
have any claim or demand against the lessor for detriment, damage
or injury of any nature.., to the said shed.., or materials …
goods … placed, made or being… in the said shed.”
The Court, with each of the seven judges sitting on the case
rendering a separate judgment, found for the appellant, with Locke
J. dissenting in part. Chief Justice Rinfret first found, and all the
other judges agreed with him, that the employees of the Crown
did not commit “faute lourde.” In any event, said the Chief Justice,
on the authorities and true interpretation of Clause 7, he could
not come to the conclusion that gross negligence or “faute lourde”
should render the Clause inoperative. For this conclusion, Rinfret
C. J. relied on the Supreme Court cases of The Glengoil Steamship
78 [1967] 1 A.C. 361.
79 [1970] 1 All E.R. 225.
80 32 N.J. 358, 161 A. 2d 69 (1960).
81 [1950] S.C.R. 532. The judgment of the Supreme Court was reversed by
the Privy Council – Canada Steamship Lines Ltd. v. The King [1952] A.C. 192.
McGILL LAW JOURNAL
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Company v. Pilkington 82 and Vipond v. Furness, Withy and Com-
pany I and on the Quebec case of Canadian National Railway Com-
pany v. La Citg de Montrdal.84 These cases, said Rinfret C. J., settled
that a clause of this character is neither illegal or void. Clause 7,
concluded the Chief Justice, is general and all-embracing and not
susceptible of two meanings; it is applicable to the negligence of
the appellant, and would be applicable even if that negligence
constituted “faute lourde.”
Mr. Justice Rand discussed what he described as the rule striking
negligence from exceptions of liability. Examining “the rational
consideration upon which the rule is based,” Rand J. said that
“since the matter is primarily in contract, the exception should
appear as the presumed intention of the parties.” 81 A test to
ascertain presumed intention is whether the words of exemption
can be given a reasonable application short of negligence, as was
suggested by Atkin L. J. in Rutter v. Palmer.” Rand J. applied that
test in the following way:
In the lease before us, the Crown has undertaken only one obligation,
to maintain the building, and the only sources of liability are, failure
to maintain and negligent performance. It is said that the former is
within section 7 and the latter not. But what, in reasonableness, is the
difference between a culpable refusal to carry out an obligation, which
involves either an intentional or negligent disregard of it, and the
performance in good faith accompanied by less than reasonable care?…
it is irrelevant that there might be liability which did not involve
culpability, although I should add that I do not see how there could
be here.8 7
Mr. Justice Kellock, referring to Alderslade v. Hendon Laundry 8
said:
It is well settled that a clause of this nature is not to be construed
as extending to protect the person in whose favour it is made from
the consequences of the negligence of his own servants unless there is
express language to that effect or unless the clause can have no operation
except as applied to such a case…
It is therefore argued for the respondent in the case at bar that
the provisions of para. 7 do not extend to exonerate the Crown from
its liability under the provisions of section 19(c) of the Exchequer
82 (1897), 28 S.C.R. 146.
83 (1916), 54 S.C.R. 521.
8 (1927), Q.R. 43 K.B. 409.
s8 [1950] S.C.R., at 546.
86 [1922] 2 K.B. 87, at 94, referred to by Rand J., ibid., p. 547.
sT Ibid., p. 547.
88 [1945] 1 All E.R. 244. See the dicta of Lord Greene M.R., at 245.
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THE COMMON LAW OF CONTRACT
Court Act89 for the reason that negligence is not expressly mentioned
and need not of necessity be implied as, under the provisions of the
lease itself, circumstances could have arisen entailing liability upon the
Crown apart altogether from negligence. 90
The question, upon the analysis of Kellock J., becomes whether
Clause 7 operates only to exempt for contractual liability for damage
through failure to fulfill the obligation to maintain the shed. At
this point, Kellock J. considered Clause 17 of the lease, which pro-
tected the Crown in respect of claims of third parties. Such claims
could be based only on negligence, there existing by definition no
contractual nexus between the third parties and the Crown. Clearly
Clause 17, at any rate, extends to claims for damages by reason
of negligent acts of Crown servants. The presence of Clause 17
affects the proper interpretation to be given to Clause 7, and on
balance Kellock J. considered that Clause 7 answered the claim
of Canada Steamship Lines.
Mr. Justice Estey, on the matter of the effect of Clause 7, at-
tempted squarely to base his judgment on the intention of the
parties:
it must be assumed that clause 7 was drafted with reference
…
to
detriment, damage or injury to the premises, property or freight. In the
preparation thereof the parties would have in mind at least the more
likely sources or causes of liability on the part of the lessor. It would
therefore be liability for damages arising out of the exercise of the
privilege of access or duty to maintain that would be uppermost in their
minds. In respect to the former any liability arising therefrom would
almost invariably be founded on negligent conduct… It must be assumed,
therefore, that the parties in drafting that clause would fully appreciate
that the most probable source of liability upon the lessor would be
negligent conduct.91
Mr. Justice Locke dissented in part. After an important review
of cases dealing with exemption clauses, Locke J. concluded:
Under the provisions of section 19(c) of the Exchequer Court Act the
Crown might be held liable for damage to property resulting from the
negligence of its servants in the discharge of their duties, a liability
quite distinct and not in any way dependent on the contractual obligation
to maintain the shed during the currency of the lease. As stated by
Pollock 9 2 the fact that the work was done pursuant to the lessor’s
obligations under the contract is merely irrelevant… Under the contract
to maintain the shed… the Crown might be held liable in damages
if, by way of illustration, the foundation of the shed gave way, due to
89R.S.C. 1952, c. 98.
90 Supra, n. 81, at p. 551.
91 Ibid., p. 556.
92 Pollock on Torts 427 (14th ed.), referred to by Locke J., at 558.
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lack of repair … Such liability would be in contract and not in tort …
The liability of the Crown, as in the case of the common carrier was
not confined to that for the negligence of its servants; there was here,
as with the carrier, a double liability and, in my opinion, the liability
in negligence not having been expressly or by necessary implication
excluded remains.9 3
Mr. Justice Cartwright, after considering the line of cases culmin-
ating with Alderslade v. Hendon Laundry 94 said:
I see no good ground for holding, and I find nothing in the numerous
authorities cited to us that appears to me to decide, that general words
of exemption wide enough in their ordinary sense to cover every sort
of liability should be held not to cover liability arising from negligence
merely because some other equally blameworthy source of liability can
be imagined.95
Mr. Justice Fauteux found the literal meaning of Clause 7 un-
helpful. For help, he looked to Clause 17:
This clause refers to claims and demands of third parties against the
lessor for damages. There being no contractual relations between the
former and the latter, such claims and demands for damages must, of
necessity, be for damages ex delicto. Thus clause 17 affords manifest
evidence that the minds of the parties were directed to other obligations
than those flowing simply from the contract, that the legal duty not
to do damage to others was considered and dealt with and this precisely
in terms all embracing and thus consistently with the generality of the
terms of clause 7… 06
The judgment in The King v. Canada Steamship Lines was
reversed by the Privy Council.97 Speaking for the Court, Lord
Morton of Henryton found that the Crown had failed in Clause 7
expressly to limit its liability for negligence and that therefore,
following Alderslade v. Hendon Laundry, the clause was to be
construed as relating only to certain obligations imposed on lessors
by the Quebec Civil Code. The Privy Council further found that
the effect of Clause 17 was unclear and it did not therefore exclude
liability for negligence, since such an exclusion must be imposed
by clear words. In any event, Lord Morton found that the Alderslade
principle applied to Clause 17 since that clause could apply to
heads of damage other than negligence.
The judgment of the Supreme Court of Canada has a number
of curious features. In the first place, it is regrettable that each of the
six judges in the majority felt it necessary to render an individual
93 Ibid., pp. 5634.
94 [1945] 1 K.B. 189.
95 Ibid., p. 569.
96 Ibid., p. 576.
97 Canada Steamship Lines Ltd. v. The King [1952] A.C. 192.
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judgment. Such duplication is not only time-consuming, but also
makes it that much more difficult to determine the exact ratio
decidendi of the case. Secondly, the judgments in this case present
a remarkable mixture of the principles of common and civil law.
In theory the law applicable to this contract made and performed
in Quebec is Quebec Civil Law; in fact, examination of the judg-
ments shows extensive discussion of common law principles and
of such English cases as Rutter v. Palmer and Alderslade v. Hendon
Laundry. Consideration of these cases appears to have proceeded
on the basis that the common law and the civil law as far as
the matters under consideration went were the same. It
is a
trifle ironic that in a civil law matter the Supreme Court of Canada
applied common law principles, only to have its decision reversed
by the Privy Council sitting in England.
In general terms, the Supreme Court’s judgment in The King
v. Canada Steamship Lines is conservative and traditional, giving
no indication of the doubt and controversy which surrounded and
was increasingly to surround clauses exempting from liability.
The various tools being developed at that time to avoid application
of such clauses were studiously ignored. It was definitively stated
that “faute lourde” did not render an exemption clause inoperative;
meanwhile, English courts were on the brink of developing the
notion that a party guilty of a “fundamental breach” could not
rely on an exemption clause. The principle, articulated in Alderslade
v. Hendon Laundry, that when negligence and another level of
of liability co-exist the exemption clause will not be applied to
liability for negligence, was unapplied by all but Mr. Justice Locke.
Cartwright J. inexplicably appeared to offer the Alderslade case
as authority for the exact opposite of what is generally considered
to stand for.P8 Throughout, the Supreme Court referred in artificial
terms to the “intention” of the parties, with no thought or reference
explicit or implicit to judicial policy or community standards. It is
not to be regretted that the Court’s decision was reversed by the
Privy Council.
In Salmon River Logging Co. Ltd. v. Burt Bros. 9 the Supreme
Court, sitting five and with two dissents, substantially backtracked
from the position it adopted in the Canada Steamship Case. The
respondent in Salmon River contracted to haul logs produced by
the appellant logging company. Clause 3 in the haulage contract
exempted the appellant from liability for damage to the respondent’s
OS Ibid., p. 569.
99 [1953] 2 S.C.R. 117.
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trucks in these terms: “The trucks and the personnel operating
such trucks shall.., be at the risk of and the responsibility of the
truckers…” A truck was damaged when a tree fell on it due to
the appellant’s negligence.
Mr. Justice Rand interpreted Clause 3 as emphasizing that the
trucking firm was acting as an independent contractor and laying
down that no risk was to be placed on the logging company
attributable to any relationship arising from the contract. As a
consequence, said Rand J., on the principle followed by the Privy
Council in Canada Steamship Company v. The Crown, “as the
clause can be satisfied reasonably by reference to an area not
touching the negligence of the party claiming the benefit of it, its
language is not to be read as extending to that negligence…” 100
Mr. Justice Cartwright delivered the judgment of himself and
Estey J. He found that the reciprocal obligations with which the
contract dealt had to do with the loading of the logs on the re-
spondent’s trucks, the hauling of them to the appellant’s log dump,
and the dumping of them there; the contract was silent as to
how the logs were to be brought to the places at which they were
loaded, which was the stage at which the appellant’s negligence
occurred. Accordingly, said Cartwright J., the appellant’s negligence
was not within the four corners of the contract and the exempting
clause does not apply.
Kellock and Locke JJ. dissented. Mr. Justice Kellock giving the
judgment for both judges, and subjecting the language of the
contract to rigorous analysis, held that effect could be given to
all the language of Clause 3 only by construing it as applying to
negligence as well.
The Salmon River Case appears to represent a reconsideration
by the Supreme Court of the stance it adopted in Canada Steamship.
The majority utilized the Alderslade v. Hendon Laundry principle
previously shied away from, with Rand J. explicitly relying on
the Privy Council’s reversal of the Court’s own previous decision.
Cartwright J. employed the “four corners” concept rather than
the Alderslade principle, but the general tone of his judgment was
far less rigid than that of his earlier decision. In general, the
Supreme Court in Salmon River Logging v. Burt Bros. paid less
attention to rigorous textual analysis of the contract and, impliedly,
more to general considerations of fairness than it did in The King
v. Canada Steamship Lines. The reasonable bystander and layman,
100 Ibid., p. 119.
No. 3]
THE COMMON LAW OF CONTRACT
and perhaps even the lawyer, would be more likely to approve
of the former decision than the latter.
This trend, initiated in the Salmon River case, was apparently
continued in Indemnity Insurance Company of North America v.
Excel Cleaning Service.’0′ The appellant had agreed to indemnify
the respondent in respect of all sums the respondent should be
obligated to pay because of injury to property caused by accident
in the course of the respondent’s work. An exclusion in the insurance
policy provided that the policy did not apply “to damage to or
destruction of property owned, rented, occupied or used by or in
the care, custody or control of the insured.” The respondent operated
an “on location” cleaning service and, due to a defective cleaning
machine, damaged a wall-to-wall rug it was cleaning in the owner’s
home. The rug’s owner obtained judgment, and the respondent
sought to recover under its policy. The appellant contended that
it was relieved of liability under the exclusion clause.
The Court, in a three-to-two decision, found for the respondent.
The various judgments concentrated on what constitutes “care,
custody or control.” Said Rand J.: “Clearly custody was not trans-
ferred; the only care called for was in the execution of the service,
not toward the property as such; and no control, in a proprietary
sense, was intended.” 102 Mr. Justice Estey, after referring extensively
to American cases, observed that if on the facts of this case the
respondent had “care, custody or control” of the carpet, then in
so far as the great majority of its cleaning jobs were concerned,
the respondent would have no insurance coverage, notwithstanding
the comprehensive language used in the policy. Said Estey J.:
“Such a construction would largely, if not completely, nullify the
purpose for which the insurance was sold –
a circumstance to be
avoided, so far as the language used will permit.” 1o1 Mr. Justice
Estey found that it was difficult to construe the precise meaning
of the words used in the policy, and that they should therefore be
construed in a manner favourable to the insured.
No matter how eminently reasonable the decision of the majority
in Excel Cleaning seems, Kerwin and Cartwright JJ. dissented
from it. Kerwin J. found that the rug “was in the respondent’s
safekeeping in the sense that the respondent was not to damage
it and, to that extent at least, it had “authority” over the rug.
With the consent of the owner the respondent had taken such
101 [1954] S.C.R. 169.
102 Ibid., p. 175.
103 Ibid., pp. 177-78.
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possession of it as was possible.” 104 Cartwright J. said that “it
seems to me that interpreting the words in their plain, ordinary
and popular sense the respondent, at the time the damage was
done, had both the care and control of the rug…” 105
The majority decision in Excel Cleaning is marked by a regard
for what is is reasonable, rather than by devoted consideration
of the exact words used in the agreement. The purpose of the
insurance policy should not be frustrated: doubtful words should
be construed in favour of the insured: the words “custody” and
“control” should be interpreted in a non-technical sense. Regrettably,
this reasonable approach and result was abandoned in what appears
to be the most recent case directly on exemption clauses decided
by the Supreme Court – Union Steamships Ltd. v. Barnes.10 The
respondent boarded the appellant’s ship in the early morning. There
was no ticket office on shore, and he bought a ticket for his
family on board. The ticket bore a notice on its face, in red print,
to the effect that it was issued subject to the conditions printed
on the back; on the back was a condition relieving the appellant
from liability for any injury howsoever caused. The respondent
knew that there was writing on the ticket, but had not looked at it.
He was seriously injured as a result of the steward’s negligence.
The Court found that the exemption clause operated to exclude
the appellant’s liability. Mr. Justice Locke gave the majority judg-
ment for himself, Fauteux and Nolan JJ. Said Locke J.:
In my opinion, the issue in the present matter is determined by the
finding of fact that the endorsement on the face of the ticket printed
in red ink and referring to the conditions endorsed on its reverse side
constituted a reasonable attempt to bring to the passenger’s attention
the terms of the contract and I consider that his acceptance of the
ticket without protest and embarking upon the voyage precludes him
from reprobating its terms, relying upon the fact that he did not read it.107
Mr. Justice Locke went so far as to doubt the following dictum of
Mellish L.J. in Parker v. The South Eastern Railway Company: 108
“if the person receiving the ticket did not see or know that there
“)109
was any writing on the ticket, he is not bound by the conditions…
Locke J., for the majority of the Court, was clearly not concerned
104 Ibid., p. 173.
105 Ibid., p. 181.
100 [1956] S.C.R. 842.
1o7 Ibid., p. 856.
108 (1877), 2 C.P.D. 416.
109 Ibid., p. 423.
No. 3]
THE COMMON LAW OF CONTRACT
with real assent, but sought only to satisfy himself that the required
forms had been complied with.
Rand and Cartwright JJ. dissented. Mr. Justice Rand said that
it was absurd to say that reasonable notice of the exemption clause
had been given:
Everything was hurried; his getting aboard, the vessel getting under
weigh (sic), the purchase of the tickets with the steward at his elbow,
the settling of the family in the stateroom and the hastening for the
baggage. One has only to imagine the incongruity of stopping to examine
a ticket in such surroundings to ascertain its terms.” 0
In the view of Rand J. failure to give prominence to the exemption
clause “could amount to a virtual deception of passengers.””‘ In
any event, the appellant did not give sufficient notice of the con-
dition to the respondent. In a separate judgment, Cartwright J.
agreed with Rand’s dissent.
Union Steamships Ltd. v. Barnes is the least happy of those
cases on the common law of contract decided by the Supreme
Court of Canada since abolition of appeals to the Privy Council.
The Court made no reference to the policy question of whether a
common carrier should be able to contract out of negligence, the
kind of question many think a final appellate court should be
prepared to consider. More important, the Court demonstrated
an overriding concern for the satisfaction by contracting parties
of certain formal and somewhat technical requirements, to the
exclusion of examination of real consent, and to the exclusion of
any application of general standards. Apparently Locke J., for the
majority, was concerned only that there be writing on the ticket,
whether or not Barnes saw or knew that there was such writing.
The circumstances in this case demonstrate total absence of genuine
agreement, but the Court ignored subjective reality, not in order
to apply objective community standards, but to demand adherence
to legalistic forms.
A point referred to only by Rand J. should be emphasized. The
ticket with the conditions was obtained after the ship had been
boarded by Barnes and had got under way; at that point, the
contract was already being performed. Can conditions be incor-
porated in a contract after performance has commenced? Chapelton
v. Barry U.D.C.”2 suggests not. Rand J. met this point by assuming
“that the passenger, knowing he must buy a ticket, agreed in
110 [1956] S.C.R., at 845.
“1 Idem.
112 [1940] 1 K.B. 532.
McGILL LAW JOURNAL
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advance that it should govern the carriage from the beginning.” 113
But clearly any such agreement is theoretical. The fact that on
this analysis Barnes could only have discovered the terms of the
contract when he was in a position that absolutely required per-
formance (unless he and his family were prepared to swim for
shore) illustrates the absence of real agreement.1 14
Union Steamships Limited v. Barnes is an unhappy case. Perhaps
the Supreme Court as well felt it to be an unhappy case. The
decision was three to two, and then only after a rehearing.
It seems, remarkably, that the Supreme Court has not directly
faced the problem of exemption clauses since 1956. The 1958 case
of Mason v. Freedman,”15 discussed already in this article, is con-
ceptually applicable to the problem, but has not been applied,
perhaps simply through lack of opportunity. It will be recalled
that in Mason v. Freedman, Judson J. said that an attempt to take
advantage of a contractual provision must be exercised reasonably
and in good faith. This general precept enunciating general standards
outlined by Judson J. could well have been and could still be de-
veloped to restrict the applicability of exemption clauses, perhaps
as a modified version of the American doctrine of unconscionability.
Mr. Justice Judson went on to say that clauses allowing repudiation
of a contract do not allow a person to repudiate a contract for a
cause which he himself has brought about. This dictum could be
interpreted as a specialized application or extension of some form
of doctrine of fundamental breach.
It is to be presumed that at least one reason why for so many
years the Supreme Court of Canada has not considered the problems
posed by exemption clauses and standard form contracts is that
litigants have considered the law sufficiently well established in
England as to make it foolhardy to appeal to the highest Court
in Canada. And yet in England, particularly since the recent case
of Harbutt’s Plasticine, the matter is surrounded by considerable
confusion and doubt. The Supreme Court will likely soon have to
address itself to these questions. Hopefully the Court will feel
itself able to break away from the judgments described here.
“1 1bid., p. 846.
“14 Could Union Steamships have demanded that Barnes leave the ship
(although under way) if Barnes, upon discovering the conditions, rejected
them?
“15Supra, n. 48.
No. 3]
THE COMMON LAW OF CONTRACT
VI
Non Est Factum
In Prudential Trust Co. Ltd. v. Cugnet “0D one Hunter, acting
as an agent of Amigo Petroleums, persuaded Edmond Cugnet to
sign what was represented as a mere grant of an option of mineral
rights, but was in fact an assignment and transfer of a share in
those rights. Amigo assigned these rights to Prudential, which acted
as a trustee, first for Amigo, and then for Canuck Freehold
Royalties, which later acquired the beneficial interest in Amigo’s
petroleum rights. Prudential and Canuck brought an action to
establish what they considered to be their rights, and the defendant
pleaded non est factum.
Mr. Justice Nolan delivered the majority judgment for himself,
Taschereau and Fauteux JJ. Nolan J. began by giving an important
review of non est factum authorities. The two key cases are Howat-
son v. Webb,” 7 stressed by the appellants, and Carlisle and Cum-
berland Banking Company v. Bragg,”8 relied upon by the defendants.
In Howatson, Warrington J. said:
The misrepresentation was as to the contents of the deed, and not as
to the character and class of the deed. He knew he was dealing with
the class of deed with which in fact he was dealing, but did not ascertain
its contents … Under these circumstances I cannot say that the deed
is absolutely void.”9
On this basis, the appellants argued that while the respondent was
careless as to what he signed, he knew the nature of the document
and was bound by his signature. In Carlisle v. Cumberland Banking,
Buckley L. I. said:
The true way of ascertaining whether a deed is a man’s deed is, I conceive,
to see whether he attached his signature with the intention that that
which preceded his signature should be taken to be his act and deed.
It is not necessarily essential that he should know what the document
contains … If, on the other hand, he is materially misled as to the
contents, of the document, then his mind does not go with his pen.
In that case it is not his deed. 20
116 [1956] S.C.R. 914. See a comment by Otto Lang in 35 Can. Bar Rev.
566 (1957). The principle in Cugnet’s Case was referred to in Prudential
Trust v. Olson [1960] S.C.R. 227, and in Pepper v. Prudential Trust, [1965]
S.C.R. 417.
117 [1907] 1 Ch. 537, affirmed [1908] 1 Ch. 1.
I’s [1911] 1 K.B. 489.
110 [1907] 1 Ch., at 549.
120 [1911] 1 K.B., at 495.
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Relying on this case, the respondent argued that his mind did not
go with his pen.
Mr. Justice Nolan, after considering these and other cases,
concluded:
In my view while the respondent Edmond Cugnet knew that he was
dealing with his petroleum and natural gas rights, the representation
made to him was as to the nature and character of the document and
not merely as to its contents …
Applying the principle contained in Carlisle and Cumberland Banking
Company v. Bragg, supra, as I do, I have come to the conclusion that
the mind of the respondent Edmond Cugnet did not go with his hand
and that the plea of non est factum has been established.121
Mr. Justice Locke, in a separate judgment, considered the issue
of estoppel by negligence. The appellants argued that the respond-
ent’s negligence enabled Hunter and his principals to sell what ap-
peared to be an interest in mineral rights to a purchaser for value
acting in good faith; that negligence should prevent the respondents
from pleading non est factum. Locke J. rejected this argument,
adopting the distinction suggested by Bragg’s Case, that negligence
in signing a document only gives rise to estoppel when that docu-
ment is a negotiable instrument. Said Locke J.:
To say that a person may be estopped by careless conduct such as
that in the present case, when the instrument is not negotiable, is to
assert the existence of some duty on the part of the person owing
to the public at large, or to other persons unknown to him who might
suffer damage by acting upon the instrument on the footing that it is
valid in the hands of the holder. I do not consider that the authorities
support the view that there is any such general duty, the breach of
which imposes a liability in negligence. 22
Mr. Justice Cartwright dissented. He characterised the problem
facing the Court in this way: “The question raised for decision
in this appeal is which of two innocent parties is to suffer for the
fraud of a third.” 123 Cugnet, said Cartwright J., was guilty of such
negligence, that he must bear the loss, and to the extent that
Bragg’s Case does not allow this conclusion, it should not be
followed.
The judgment of the majority in Cugnet’s Case shows, once
more, how the Supreme Court has been captivated by fine technical
distinctions at the expense of considerations of policy which in
a good system give rise to and support such distinctions. Mr.
Justice Nolan, rather than taking the fundamental approach of
121 [1956] S.C.R., at 925.
122 Ibid., p. 929.
2 3 Idem.
No. 3]
THE COMMON LAW OF CONTRACT
Cartwright J. who in his dissent characterised the issue as being
which of two innocent parties should suffer for the fraud of a
third, dealt with the case on the doubtful basis of distinguishing
between mistake as to the nature and character of the document,
and mistake as to its contents, a distinction often criticized.12 4 The
key problem in non est factum has increasingly been recognized
as the relationship between the plea and the negligence of the
defendant. It is curious that this matter was not touched on by
Nolan J. Mr. Justice Locke dealt with the question, but regrettably
endorsed the distinction between a document which is a negotiable
instrument and one which is not. The only rational policy basis
for such a distinction is that innocent parties cannot suffer in
the case of non-negotiable instruments; otherwise the general duty
giving rise to the liability estopping use of non est factum would
be wide enough to apply to all instruments. That innocent parties
is amply
can suffer in the case of non-negotiable instruments
shown by Cugnet’s Case itself.
Cugnet’s Case established in Canada the unfortunate distinction
between class and contents, and implicitly denied application in
the non est factum context of the principle of estoppel by negli-
gence. A curious consequence of not allowing estoppel by negligence
is that the class/contents distinction becomes more desirable. If
someone signs a document aware of its nature, but negligently
fails to inform himself of its contents, he cannot plead, according
to present law in Canada, non est factum. If the plea was available
when the mistake was as to contents, availability of estoppel by
negligence would be desirable in order to restrict the plea and
protect third parties. While the principle is not available, the class/
content distinction performs a useful function in limiting the
scope of non est factum. It should be recognized that if in Canada
that distinction is to be abolished, then estoppel by negligence
must be recognized, or non est factum will run rampant.
In Prudential Trust v. Forseth,’125 the distinction between the
contents of a document and its nature was reaffirmed.126 The facts
were essentially the same as those in Cugnet’s Case. Prudential was
bare trustee of rights acquired under the relevant documents on
behalf originally of Amigo Petroleums Limited; at the time of the
action the rights were held by Canadian Williston Minerals Limited.
The respondent had assigned an undivided one-half interest in oil
124See for example, Lang, supra, n. 116.
125 [1960] S.C.R. 210.
126The distinction was again applied in Dorsch v. Freeholders Oil [1965]
S.C.R. 670.
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rights. He sued to have the assignment set aside, alleging that the
defendants’ agent represented that the documents were only an
option to lease.
Mr. Justice Martland, giving the unanimous judgment of the
Court, emphasised that in this case, unlike in Cugnet’s Case, the
document in question was read aloud by one of the respondents,
in the presence of the respondent and the appellant’s agent. Said
Martland J.:
Counsel were unable to refer us to any case in which a plea of non est
factum had been upheld where a literate person executed a document
after having read it through, or after having heard its contents completely
read. The fact that some of the terms may be difficult to comprehend,
a matter which weighed heavily in the Court of Appeal, does not serve
to establish such a plea. This goes only to the issue of a misconception
as to the contents of the document and not as to its nature and character.
A literate person who signs a document after reading it through, or
hearing it fully read, must, I think, be presumed to know the nature of
the document which he is signing.127
Accordingly, Martland J. rejected the plea of non est factum.
There is a certain lack of realism in the approach of Mr. Justice
Martland. How does a document take on a certain nature and
character, if not by its contents? If the contents of a document
cannot be understood, how is it that nonetheless the nature of
the overall document is comprehended? Is it realistic and reason-
able to set up a presumption that if a literate person signs a
document after reading it, he knows what he has done? The real
rule emerging from Martland J.’s dicta is that if a person signs
a document, he is bound by it, whether or not he understands it.
It would have been helpful if the real ratio decidendi of Forseth’s
Case had been explicit and had been justified.
Cugnet’s Case and Forseth’s Case taken together lead to a
curious result. Denial in Cugnet’s Case of the principle of estoppel
by negligence means that the doctrine of non est factum can be
used by someone who negligently signs a document without reading
it; Forseth’s Case denies use of the defence to someone who care-
fully reads the document before signing, but does not understand
fully what he signs. The advantage is thereby given to the person
who does not even bother to read the instrument and a considerable
price is paid for the peccadillo of signing what is not fully com-
prehended.
To summarize, the present Canadian law regarding non est
factum, as laid down by the Supreme Court of Canada to 1965,
127 Ibid., pp. 219-220.
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THE COMMON LAW OF CONTRACT
(1) The distinction made in Bragg’s Case between
is as follows:
(2) estoppel by
the class and contents of a document is accepted;
negligence, if it applies at all, is applicable only to negotiable ins-
truments (Bragg’s Case); (3) the policy problem of which of two
innocent parties is to suffer for the fraud of a third is overshadowed
by the technical distinctions referred to in (1) and (2) above.
Essentially, what the Supreme Court of Canada has done is endorse
and apply the English case of Carlisle and Cumberland Banking
v. Bragg.
Ironically, the House of Lords in Saunders v. Anglia Building
Society,28 has recently overruled Bragg’s Case.12 9 Lord Reid said
in that case “… I do not think that the modern division between
the character and the contents of a document is at all satisfactory.” 130
Lord Reid continued:
There must I think be a radical difference between what he signed
and what he thought he was signing –
or one could use the words
‘fundamental’ or ‘serious’ or ‘very substantial’. But what amounts to a
radical difference will depend on all the circumstances. 1′ 1
On the question of estoppel by negligence, the House of Lords
thought that “estoppel” was not the correct term but that the
principle existed. Said Lord Hodson:
A person may be precluded by his own negligence, carelessness or
inadvertence from averring his mistake. The word ‘estoppel’ has often
been used in this context but.., this is not a true estoppel but an
illustration of the principle that no man may take advantage of his
own wrong.’32
Whatever it is called, negligence may in England, it seems, prevent
use of the non est factum plea.
-The Supreme Court of Canada chose to follow English decisions
just at the time when the English courts decided to depart from
them. The English courts now take a wider, less technical approach;
the Supreme Court, in this area as in others, has turned its back
on that approach.
128 [1970] 3 All E.R. 961, affirming Gallie v. Lee [1969] 1 All E.R. 1062.
129 It
is to be remembered that shortly after the Supreme Court, in Foot
v. Rawlings, decided that the giving of a negotiable instrument constituted
new consideration, the English Court of Appeal, in D. & C. Builders Ltd. v.
Rees, rejected the distinction between cash and a cheque.
130Supra, n. 128, at 964.
131 Idem.
132 Ibid., p. 966.
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VII
Damages
The Supreme Court has not given the problem of remoteness
of damage detailed consideration in recent years. In Brown and
Root Ltd. v. Chimo Shipping Ltd.133
it was stipulated in a verbal
contract of carriage that no single piece of cargo tendered for
carriage by the respondent’s ship would exceed thirty tons. The
appellant tendered cargo in excess of that weight, and the re-
spondent’s captain, bragging about the capacity of his derrick,
accepted it. The ship’s derrick was damaged, and the respondent
brought an action for breach of contract. Mr. Justice Ritchie,
giving the judgment of the Court, said that assuming the appellant
was guilty of breach of contract, that breach would not make the
appellant liable for the damage to the ship’s derrick since that
damage was occasioned by the fault of the master. Said Ritchie 3.:
“It has never been seriously questioned since the case of Hadley
v. Baxendale that damages for breach of contract are limited to
the ordinary consequences which would follow in the usual course
of things from such breach or for the consequences of the breach
which might reasonably be supposed to have been in contemplation
of both parties at the time they made the contract.” 134 It could,
of course, be suggested that derrick breakdown is a normal con-
sequence of lifting fifty tons on a thirty-ton derrick, 13 and that
the parties in any event had such results in mind; why, after all,
was the restriction put in the contract in the first place? Ritchie J.
apparently thought otherwise although he offers no elucidation or
explanation of his view. In any event, the result in this case is
eminently reasonable, and involves creative application of the
Hadley v. Baxendale principle. Clearly when an agent of one con-
tracting party urges an agent of the other to go into breach,13
133 [1967] S.C.R. 642.
134 [1967] S.C.R., at 648. The law applicable in Chimo Shipping was the
Civil Code, the incident having taken place in Quebec. After stating the
effect of Hadley v. Baxendale, Ritchie J., at 648, simply said “Article 1074 of
the Civil Code is to the same effect.” It will be remembered that in The
King v. Canada Steamship Lines it was similarly assumed that the common
law and civil law were at one on the relevant point.
135 Ritchie J., considered the breach to be tendering excessively heavy cargo.
The natural result of such breach, says Ritchie, would have been the master’s
refusal to hoist the cargo.
136 Neither apparently knew of the weight restriction in the contract. A
complicating factor was that the master of the ship theoretically had no
authority to alter the terms of the contract of carriage.
No. 3]
THE COMMON LAW OF CONTRACT
some principle should stop the victim of the breach from suing
on it. Whether that principle should be the remoteness of damage
principle is perhaps questionable –
but the result is this case
was the right result.
A specialized application of one branch of the Hadley v. Baxendale
rule was made in Wingold Construction Co. Ltd. v. Kramp.137 In
that case, the appellant suffered loss after accepting inferior qualify
sand fill from the respondent; the appellant asked for consequential
damages over and above the difference in value between the goods
contracted for and those delivered. Judson J. for the unanimous
Court held that the appellant’s consequential loss was not one
directly and naturally resulting from the breach of warranty, but
one resulting from the use made by the appellant of the goods,
with full knowledge of their quality.
The Supreme Court, then, has routinely accepted the Hadley
v. Baxendale rule as the rule governing remoteness of damage.
In England, the precise application of Hadley v. Baxendale has
been in doubt since Victoria Laundry (Windsor) Ltd. v. Newbold
Industries 13 moved towards a general principle of reasonable
foreseeability. The House of Lords, in Koufos v. Czarnikow,13 9 laid
down that “the correct criterion of liability is not whether the
loss is reasonably foreseeable by the the parties, but whether it
should have been within their reasonable contemplation at the
time of the contract, having regard to their knowledge at that
time.” 140 In England, then, the traditional interpretation of Hadley
v. Baxendale is subject to on-going evaluation, and presumably at
some point the Supreme Court of Canada will participate in this
process.
The Court has had the opportunity of taking a closer look at
the question of measure of damages. In Cotter v. General Petroleums
1 optionees covenanted to exercise a petroleum and natural
Ltd.,14
gas option, and it was provided that if they failed to do so, as they
did, the optionor would be entitled to remedies for breach of
contract. Kerwin J. gave the judgment for himself and Chief Justice
Rinfret. On the question of measure of damages, Kerwin said that
137 [1960] S.C.R. 556. The Supreme Court dismissed an appeal from the
Ontario Court of Appeal which had reversed a judgment of Spence J., who
later became a judge of the Supreme Court.
138 [1949] 2 K.B. 528.
139 [1969] 1 A.C. 350.
140 Cheshire and Fifoot, The Law of Contract 549 (7th ed. 1969).
141 [1951] S.C.R. 154.
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“the proper measure is not the cost of performance to the re-
spondents but the value of performance to the appellant,” and a
bit later, that the measure “is the sum necessary to place the
appellant in the same position as he would have been in if the
covenant had been performed.. .” 142 Presumably Kerwin 3. is here
equating the “value of performance” with the difference in value
between the appellant’s position without the covenant performed
and the appellant’s position with the covenant performed. It is
doubtful whether in fact these two things should be equated. For
“consequential reasons” the appellant’s position following perform-
ance may improve in money terms far beyond the actual cost of
performance. By making the measure of damages “the sum neces-
sary to place the appellant in the same position as he would have
been if the covenant had been performed,” measure and remoteness
are confused, and liability for a certain kind of consequential loss
may be imposed. It is doubtful if Kerwin I. had this in mind when
he talked about the “value of performance.” Cartwright J. stated 143
that the underlying principle was that expressed by Lord Atkinson
in Wertheim v. Chicoutimi Pulp Co.144 : “… In giving damages for
breach of contract, the party complaining should, so far as it can
be done by money, be placed in the same position as he would
have been in if the contract had been performed.” Doubts that
here Cartwright J. might be subject to the same confusion as
Kerwin J. are allayed by what follows in Cartwright’s judgment.
Since almost no part of the consideration which under the contract
would have passed to the respondent had passed, Cartwright J.
did not think that the cost of drilling was the proper measure of
damages. The proper measure, said Cartwright, “is the difference
between the value to him [the appellant] of the consideration for
which the respondents agreed to drill the well and the value to
him of the consideration which, acting reasonably, he should find
it necessary to give to have the well drilled by others.” 14′ Cart-
wright J. makes clear by this statement that measure is the more
restricted “value of performance” and excludes remoteness elements
such as consequential loss.
In Sunshine Exploration v. Dolly Varden Mines 140, Sunshine Ex-
ploration was given an exclusive right to develop mining properties
142 [1951] S.C.R., at 160. On the question of remoteness, Kerwin I., applied
the rule in Hadley v. Baxendale.
-143 Ibid., p. 174.
144 [1911] A.C. 301, at 307.
145 [1951] S.C.R., at 175.
146 [1970] S.C.R. 2.
No. 3]
THE COMMON LAW OF CONTRACT
owned by Dolly Varden; in exchange, Sunshine covenanted to
perform developmental work. Sunshine was in breach of its co-
venant. The sole issue before the Supreme Court was the measure
of damages. Sunshine Exploration contended that the decision in
Cotter v. General Petroleums Ltd. should be applied, and that
nominal damages only should be awarded. But Mr. Justice Martland,
giving the judgment of the Court, distinguished Cotter’s Case on
‘the grounds that there consideration for the drilling had not passed,
whereas in the present case it had.14 7 Martland J. rejected the
argument that Dolly Varden was only entitled to receive by way
of damages the difference between the value of the premises if
the work had been performed, and their value with the work
unperformed. Said Martland J.:
… when Sunshine, by entering the agreement, acknowledged that, in the
light of its future potential benefits under the agreement, its own suggested
program of work was worth the cost of performing it, and when Dolly
Varden was prepared to give, and did give, valuable consideration for
its performance, I consider that it was entirely proper for the learned
trial judge to assess the damage resulting from the breach as being
equivalent to the cost of doing the. work. In so doing he was seeking
to fulfil the underlying principle stated by Lord Atkinson in Wertheim v.
Chicoutimi Pulp Co., and cited by Cartwright 3. in the Cotter case in
the passage already quoted:
“And it is the general intention of the law that, in giving damages
for breach of contract, the party complaining should, so far as it can
be done by money, be placed in the same position as he would have been
if the contract had been performed.’148
The key distinction between Cotter’s Case and the Sunshine
Exploration Case is clearly that in the former no consideration
passed to the respondent, whereas in the latter consideration
had passed to the appellant. Nominal damages to someone who
has provided no consideration may be justified, but doubts can
be raised about the justification of awarding merely nominal
damages to someone who has provided consideration. If perform-
ance has been paid for but not provided, the measure must be
what has been paid plus the differential between what has been
paid and what must be paid elsewhere to obtain similar perform-
ance. (Application of remoteness principles may, of course, enlarge
the scope of recovery). If performance has neither been paid for
nor performed, the measure is the differential only.
The argument, put forward by the appellant in Sunshine Ex-
ploration, that the measure was the difference between the value
147 For the precise and rather complicated nature of the consideration, see
[1970) S.C.R., at 15.
14sIbid., p. 22-3.
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[Vol. 17
of the premises if the work had been performed, and their value
with the work unperformed, demonstrates a clear confusion between
measure and remoteness, as we showed in the discussion of Kerwin
J.’s judgment in Cotter’s Case.
The judgments of the Supreme Court on measure of damages
show an application, if a slightly confused application, of the
Wetheim v. Chicoutimi Pulp Co. principle. 149 When it comes to
remoteness of damages, the Court shows a history of application
of Hadley v. Baxedale, with no consideration of the Victoria Laundry
case, and with apparently as yet no opportunity to examine the
applicability to Canada of Koufos v. Czarnikow.’9 0
VIII
Conclusion 151
What conclusions can be drawn from this survey of the more
important cases on the common law of contract decided by the
Supreme Court of Canada? Generally, it can be said that the major
149Two other cases in which the Supreme Court considered particular
aspects of the measure of damages were The Ford Motor Co. of Canada Ltd.
v. Steve Haley [1967] S.C.R. 437, and Miller v. Advanced Farming [1969]
S.C.R. 845. In Ford Motor, there was complete failure of a warranty that
trucks bought by the respondent would be satisfactory for hauling gravel;
the Court held that the onus was on the appellant to establish that the
trucks had any remaining value, and was not on the respondent to prove
his damages as being the difference between the purchase price and the
actual worth of the trucks. In Miller v. Advanced Farming, there had been
the Court,
substantial but not complete performance by the respondent;
applying Hoenig v. Isaacs [1952] 2 All E.R. 176, held that the correct measure
of the appellant’s damages was the cost of making good the defects and
omissions in the work the respondent contracted to do.
150 In connection with damages, the case of Dimensional Investments v.
The Queen [1968] S.C.R. 93, should be noted. In that case the Court looked
at the matter of penalty clauses, considering Stockloser v. Johnson [1954]
1 Q.B. 476, Dunlop Pneumatic Tyre v. New Garage [1915] A.C. 79, and Bridge
v. Campbell Discount Co. Ltd., [1962] A.C. 600. Ritchie J’s., remarks on these
cases (in giving the judgment of the Court) were obiter, since the matter
was governed by s. 48 of the Exchequer Court Act, R.S.C. 1952, c. 98, which
provides that a clause in a contract with the Crown in which a penalty
is stipulated on account of non-performance of any condition shall be
construed as importing an assessment of damages by mutual consent.
151 Space limitations prevent discussion of remedies other than damages.
Readers are referred to the following cases: Deglman v. The Guaranty Trust
et al., [1954] S.C.R. 725, Peter Kiewit Sons’ Co. v. Eakins Construction Ltd.
[1960] S.C.R. 361, and Alkok v. Grymek [1968] S.C.R. 452 (on quantum
No. 3]
THE COMMON LAW OF CONTRACT
theme is absence of a theme. No picture emerges of a dynamic
court, with a well-defined philosophy, revealing and developing its
philosophy through the cases. The Court’s reaction to the cases
has been an ad hoc reaction, a reaction of particular judges to
particular facts. The concern appears almost always to have been
the particular situation before the Court rather than some notion
of evolving community standards or needs.
Limits are, of course, imposed on the reaction of particular
judges to particular facts; the “law” imposes boundaries on the
possibles responses of judges to cases’ 52 What law have judges of
the Supreme Court chosen to restrict their activities? Have they
chosen to take on the least possible restraints, or have they
voluntarily circumscribed their actions, using well-established con-
servative law as a fence enclosing a small piece of judicial ground?
Analysis shows that the Supreme Court has not strayed far from
the law of England. The cases used to support judgments are, with
few exceptions, English cases, or Canadian cases that were them-
selves based on English cases. Seldom is reference made to a
United States judgment 153, and there is no reference to cases from
other common law jurisdictions. Ironically, in following English
cases, the Court has on occasion been seriously out of step with
English courts themselves. 54 Nowhere has there been radical and
explicit departure from what has been decided in other jurisdictions
on the grounds that those decisions are inapplicable in Canada be-
cause of particular features of Canadian life. It cannot be said that
since the abolition of appeals to the Privy Council, the Supreme Court
has fully escaped from judicial dependence and has used particular
meruit); Gray v. Cameron, Ainsworth and Armstrong [1950] S.C.R. 401,
Kloepfer Wholesale Hardware v. Roy [1952] 2 S.C.R. 465, and McKenzie v.
Hiscock and Dowie [1967] S.C.R. 781 (on specific performance); Shortt v.
MacLennan [1959] S.C.R. 3, Field v. Zien [1963] S.C.R. 632, and Pepper v.
Prudential Trust [1965] S.C.R. 417 (on rescission). Readers are also referred
to the following cases on discharge: Canadian Acceptance Corporation Ltd. v.
Fisher [1958] S.C.R. 546 (per Rand J., dissenting); McBride and Hogaboam
v. Johnson [1962] S.C.R. 202, and Chapman v. Ginter [1968] S.C.R. 560
(repudiation); Canada Egg Products v. Canadian Doughnut Company [1955]
S.C.R. 398 (anticipatory repudiation); Fairbanks Soap v. Sheppard [1953]
1 S.C.R. 314 (abandonment).
152 See Slayton, supra, n. 16, at 399.
153The most important reference to a United States case is Rand J.’s,
reference to Wood v. Lady Duff Gordon in Dawson v. Helicopter Exploration,
supra, note 20.
154 See discussion of Foot v. Rawlings, The King v. Canada Steamship
Lines, and Prudential Trust v. Cugnet, infra.
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[Vol. 17
knowledge of peculiar Canadian conditions to develop a law which,
although based on the great English common law tradition, is par-
ticularly suited to Canadian conditions.
It is suggested that the explanation for the timidity of the Court
is its apparent fear of doing anything which could be characterised
as “judicial law-making.” At the time of abolition of appeals to
the Privy Council, as now, there was no great body of Canadian
contract law; the common law that regulated contracts was then
and still is law developed in English courts. To break away from
that law, to develop it in light of the Canadian experience, required
and requires policy courage, the courage to depart from what has
been laid down earlier and elsewhere. New principles must be
justified on grounds of policy. This the Supreme Court of Canada
has been loath to do. There has been a reluctance to use new
principles of construction to allow application of public standards
to private law155; there has been reliance on an English case of
1602 15 when English courts have moved away from the principle
represented by that case; there has been no recognition of the
application in the United States of the unconscionability doctrine
to the problem of exemption clauses; non est factum principles
that the House of Lords has recently abandoned ll7 still appear
to be the law in Canada; strict application of Hadley v. Baxendale
is still the order of the day, although English courts have been
moving towards a loose interpretation of that case since the 1949
decision in the Victoria Laundry case. Fear of justifying new ap-
proaches on policy grounds means not only that an indigenous
law cannot be developed, but also that the Supreme Court of
Canada appears always one step behind English courts.
The Supreme Court of Canada must, as befits the final court
of appeal of an independent state, be prepared to lay down new
principles or modify old ones when Canadian conditions appear
to require it. The Supreme Court should be always on the alert
for discrepancies between law established elsewhere and local needs.
When that is the case, criticisms of the Court levelled before the
abolition of appeals to the Privy Council will at last be met.
155 E.g., Clark’s-Gamble of Canada Ltd. v. Grant Park Plaza Ltd., supra,
note 53.
156 See Foot v. Rawlings, supra, note 56.
157 1n Saunders v. Anglia Building Society [1970J 3 All E.R. 961.
