Importance: a quantum meruit award for damages
A construction contract was formed and it was agreed that certain payments would be made at various dates in the project, as an architect certified work, and that subcontractors had been paid.
Some of the subcontractors had not been paid, there were defects, and the work was delayed.
As a result the owner terminated the contract, and hired replacement contractors.
In the resulting lawsuit the court found that the contractor had not violated the essential terms of the contract. This did not warrant a discharge, and the contractor received an award for work done (quantum meruit).
Importance: sets principle for trade secret protection
In a ruling the court stated: ex-employees should not divulge secrets given in confidence (this may only be implied), or take advantage financially.
- was there some secret process known and used.
- did the employee know that it was a secret.
- did the employee know the secret.
- has the knowledge been misused since leaving the company.
Importance: an example of a lien for design-supervise services.
An architect had prepared plans.
He had applied to a court for a lien. This was refused.
He then supervised the construction of the building.
In appeal the lien was granted.
Importance: an example where a lien was allowed for an engineer.
An engineer had prepared plans for subdivision roads, sewers, and water mains, with the condition that the plans had to be approved by local officials. The contract also called for supervision.
The plans were approved, but financial constraints halted the project.
The engineer applied for a lien.
The court granted the lien saying that the plans were tied to the land, and constituted an improvement. This was differentiated from architects plans that are somewhat independent of the land.
Importance: the limitation period for starting an action was challenged
There were roof design problems.
Attempts had been made to correct problems with the roof.
The engineer that had designed the part of the roof in question had not been contacted about the problem for 11 years, and no longer had his records.
The court heard all of the details but decided not to extend deadline.
Importance: an example of a letter of intent
A letter of intent about stock shares was issued.
This letter discussed a sale of shares, and indicated that transfer of the shares, and finalizing of the sale were all that was left.
Disagreement resulted in the sale not going through.
In a lower court this letter of intent was upheld as a contract, but a higher appeal overturned the decision and ruled that certain elements were missing.
Importance: another example of a fundamental breach
A contractor had failed to pay a subcontractor.
In court the contract was shown to have a clause that waived the subcontractors right to apply a lien.
The court ruled that the failure to pay was a fundamental breach, and that the subcontractor would not be held to the lien waver.
This was upheld in the supreme court.
Importance: a unilateral mistake was upheld
The contractor had prepared a bid and incorrectly transferred a figure lowering the bid by $70,000 to $641,603.
The irrevocable bid was submitted under seal.
Upon discovering the mistake there was an attempt to withdraw the bid. Both sides acknowledged there was an error, but he was not allowed to withdraw the bid.
When the plaintiff who had asked for the bids found out about the mistake, he attempted to accept the bid.
When unable to accept the bid, another subcontractor was contracted and the original contractor sued for the difference in bids.
The court rejected the suit saying that the motives of the plaintiff were less than honorable. And, the plaintiff had not formally accepted the contractors bid by returning it.
The court also pointed out that trying to profit by the mistake of another was a key element in the decision.
Importance: economic losses can only be claimed if some physical damage has occurred
A ship ran into a bridge over a canal. The bridge was destroyed and the canal was obstructed for several days.
In a lawsuit the ship owner was found negligent, and paid damages to the court.
Two claims for damages were rejected. One being a request for lost profits for a ship. Another being the cost of shipping product across land to Toronto for subsequent shipping. Both were rejected because they were purely economic losses.
Importance: an example of an engineer given the power to certify
An engineer was contracted for a construction project. One of the duties was to certify payment certificates.
The court concluded that the certificates are valid if the engineer has acted in an independent and judicial manner.
Importance: the company owns the patent when it is within the scope of the employees work
The court ruled that the employer owned a design because the draughtsman was instructed to do the design.
Importance: engineers may be liable for negligence in report preparation
Consulting engineers had been hired to prepared a soils and ground-water-level report, but had neglected to include some important information.
A contractor was then hired to construct an underground pumping station. The contractor was required by the contract to personally examine the site for conditions to be encountered during construction.
Based on the incomplete report, the contractor did not expect a water problem, and underbid on the job.
The court determined that the contractor was 25% negligent in not requesting the missing information.
The engineers were found 75% liable for their negligence.
Importance: an example of the legal capacity to contract based on licenses
An unlicensed building contractor was unable to enforce a contract because without the license they did not have the legal capacity to enter into the contract.
Importance: a case that was not allowed a dismissal for unilateral mistake
A clerical error on a bid of $9,342,000 left out $181,000
The next highest bid was $9,737,000
When the bid was accepted, the contractor refused to carry out the work.
The next highest bid was accepted and the first contractor sued.
The court chose not to apply the unilateral mistake principle because the contract had been accepted and there was no deposit forfeit escape clause.
Importance: the supreme court upheld [Sparham Souter] and rejected [Pirelli]
Houses were being built with improper foundations
The building inspector noticed the deficient foundations and issued a stop work order. This order was ignored and the building inspector did not enforce it.
A plumbing permit was issued 8 months later.
2 years after the stop work order had been issued the house was finished and sold (an occupancy permit was never issued).
The new owner discovered that the foundation had subsided, and sued.
It was found that the city was 25% liable and the builder 75% liable for damages (costs involved with repair of the house, etc.).
Part of this case involved the limitation date. The court upheld the [Sparham Souter] case and rejected Pirelli.
Importance: the application of equitable estoppel to allow a gratuitous promise.
A time limited option contract was used to allow exploration before mining claims were Pursued.
The contract stated that certain actions were required by a certain date to acquire mining claims.
It became obvious that the tests would not be complete by the expiry date, and the owner implied that an extension would be allowed. (In effect this was a gratuitous promise).
Later the owner held to the strict wording of the contract and enforced the expiry date as written.
The supreme court agreed that enforcing the original contract strictly would be inequitable, therefore the contract was “estopped”, effectively allowing the extension, even though there was no consideration.
Importance: an example of concurrent tort-feasor
An architect had been hired to design a new police station.
The architect hired an engineering firm to do the structural design.
The engineers dug two shallow test pits and recommended deep soils tests to the architects. The architect rejected the recommendation and the engineers submitted a soils report to the owner based on the shallow test pits.
The building was built, and eventually it settled causing damage.
The architect was found 60% liable, and the engineer 40% because they had failed to inform the owner that more soils tests were required.
Importance: an engineers power to certify binding amounts, even with mistakes
A construction contract stated that an engineer would calculate the values of payments to the contractor.
The court ruled that the engineers figures would stand (even with mistakes) as long as there was no fraud or bad faith on the engineers part.
Importance: negligence in inspection can lead to liability
An architect contracted to design then supervise the construction of a house.
During the construction a metal chimney was placed too close to wooden joints.
The architect noticed the metal chimney problem, and ordered the problem corrected.
A second similar chimney was installed and covered over before inspection. The architect did not ask to have the chimney exposed for inspection.
After occupation the metal chimney caused the wood to catch fire, and caused damage.
In court the architect was held liable because of a duty of care to inspect.
Importance: a failed bid for discharge by frustration
A construction contract was made to build 78 houses over 8 months.
After 56 houses were built the contractor determined that the labor shortage was great enough to prevent completion.
In the resulting suit against the contractor the court ruled that although the contractor overlooked the labor shortage and as a result is in an unfortunate situation, but of his own making. Therefore it refused to discharge the contract on the grounds of frustration.
Importance: an engineer has a duty to direct contractors when obvious problems exist
A contractor built a caisson (?) for a bridge pier, but did not use enough reinforcing steel.
An engineer was able to see the construction method, but did not comment. His representative did add a small amount of vertical reinforcement.
After completion the caisson failed and had to be replaced at a cost of $1.4 million.
In the resulting court case the engineer was assumed to have approved the method by remaining silent. There was also implied consent because of the reinforcement added.
The engineer was found 50% liable because of the implied approval.
Importance: contract was rescinded because of fraudulent misrepresentation
Fraudulent misrepresentation is defined as, made “(1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.”
Importance: makes an engineer liable for negligence without a limit, also an example of joint and several liability
Dominion Chain entered into contracts with an engineer and a contractor to construct a factory.
Years after construction the improperly constructed roof began leaking.
The owner sued, but the judge found the contractor was exempted by a clause in the contractors contract.
The judges ruling included statements that,
In the ruling the judge ruled that the fault for the damages were 25% the engineer and 75% the contractor (not liable). But, because the engineer was the only one left in the suit that he would be responsible for 100% of the damages.
A court of appeal released the contractor because they were not joint tort-feasors. But, the court of appeal did state they could be liable in tort and contract.
The supreme court also relieved the contractor of responsibility, based on contractual obligations alone.
Importance: makes a manufacturer responsible to the eventual consumer of the product
a bottle of ginger beer containing a decomposed snail was consumed, leading to an illness. This bottle of ginger beer was not purchased by the consumer, but was given to him by a friend. He Sued.
The court rules that even though there was not privity of contract between the plaintiff and the defendant, a duty of care was owed to the plaintiff.
Importance: established the responsibility of employers for employee actions: vicarious liability
A contractor built a foundation for a house. The foundation was on top of a rubbish deposit, and should have been deeper.
As required by local by-laws, a building inspector was to approve the construction after appropriate inspection. The inspector did not object to the improper foundation.
After the house was in use, and had been resold, the foundation settled and the house was severely damaged.
The local building authority was sued (not the inspector) and found liable for the damages.
Importance: allowed a lien for design work
An architect was allowed to file a lien although he had not done any work on the property.
Importance: an example of substantial compliance
A contractor supplied and installed equipment, but there were a few small defects (fixed at a small cost).
The resulting lawsuit lead to a decision that the contractor had substantially complied and should be paid for work and materials supplied.
Importance: the distinct nature of a corporation disappears when being used fraudulently
the defendant, a director, officer and accountant of the corporation had made an authorized transfer of funds.
these funds were used as a loan by the corporation as a loan to two other companies controlled by the director.
some of the loaned money was used to buy shares in the corporation. (The court ruled this inappropriate).
The court rules that the 2 other corporations had been used as instruments of the director, that the director had breached his trust, and that the companies could not shield his personal conduct.
Importance: an example of an implied term
a construction contract included the supply and installation of two staircases, but neglected to include a requirement that they meet the Building Code.
A representative of the company visited the site, but turned down an offer to review architectural plans, which specified a minimum clearance.
Based on measurements, a variety of staircases were suggested by the representative.
The final staircase did not meet the minimum clearance in the building code, and was ordered replaced.
The resulting lawsuit found that if the Building Code was not mentioned in the contract and the staircase was improperly designed thus being illegal, it would make the contract for an illegal action, therefore by implication the staircase would have to conform to the building code.
Importance: indicates patents must be novel and have use
Basically stated that there must be some creative content, no matter how small. This includes alterations. They also focus on the concept of an improvement.
Importance: a manufacturer can be held liable if the consumer is not adequately warned about dangerous uses of a product
Lem bought a machine for reloading used shotgun shells. The machine had clear instructions on how to load the shells. He also received personal instructions on the machine.
When using the machine Lem did not follow instructions, and as a result produced some dangerous shells.
One of the shells caused Lem’s gun to burst, causing personal injury, and as a result he brought a lawsuit against the manufacturer and distributor.
The court found that a high standard of care to prevent misuse was present, and found Lem fully responsible for his own injuries.
Importance: fraudulent engineers certificates are set aside
An engineer presented a certificate that had been prepared in collusion with a drilling contractor.
In a lawsuit the certificates were ruled invalid because of the fraud.
Importance: established principle of remedies for damages
A part in a mill was broken, and needed to be repaired.
It was given to couriers for transport to the manufacturer.
Not knowing of the urgency of the delivery the couriers delayed.
The resulting delay meant that the mill was inoperative for a prolonged period and business was lost. As a result the courier was sued.
The court said that the lack of notice about the urgency meant that the term for urgency had never been part of the “contract”, and therefore could not have been breached.
The court also said that if there had been a breach of the contract, then the mill owner would have been due any losses that might have reasonably been expected at the start of the contract.
Importance: ruling that a contract overrides a tort
An engineer was to modify a winch system.
As a result of problems, the engineer was sued for negligence.
The court ruled that the contract in the suit replaced the tort.
Importance: an example of fundamental breach
A contract was prepared for the design and construction of storage tanks for stearine wax. Liabilities were limited to 2,300 pounds (approx $5,000).
A plastic pipeline to carry the wax was wrapped with a heating element to allow the wax to flow in a liquid state.
When put into use the pipe warped, cracked and ruptured. Wax spilled on the floor and ignited. The resulting fire destroyed the factory.
The judge ruled that the design was so unsuitable that the contract was breached, and the liability limit did not apply. The damages awarded were 170,000 pounds.
Importance: this allows professionals to be sued for negligently given advice
Byrne asked a bank to look into the credit status of another company that they were doing business with.
The bank then contacted another bank (Heller) that did business with the company.
Heller reported that their financial position was favorable, but also stated that their advice was “without responsibility”.
Based on their advice, Byrne did business with the company and lost 17,000 pounds.
The court rules that the bank would have been liable, if not for the disclaimer.
Importance: an unsuccessful attempt to argue for a unilateral mistake
During bid preparation an incorrect figure had been used for certain material suppliers, entirely because of mistakes by the bidder.
It was obvious to the offeree that the bidder had misestimated.
The mistake was not overturned.
Importance: an example of a tort of nuisance
The blast opened fissures in the bedrock allowing barnyard materials to seep into a well.
The court awarded damages to the farmer.
Importance: an example where equitable estoppel was disallowed
A promissory note (a contract) was,
“FOR VALUE RECEIVED Subsurface Surveys Ltd. promises to pay John Burrows Ltd. or order at the Royal Bank of Canada the sum of forty-two Thousand Dollars ($42,000.00) in nine (9) years and ten (10) months from April 1st, 1963, payable monthly on the first day of May, 1963, and on the first day of each and every month thereafter until payment, provided that the maker may pay on account of principal from time to time the whole or any portion thereof upon giving thirty (30) days’ notice of intention prior to such payment.
In Default of payment of any interest payment or installment for a period of ten (10) days after the same became due the whole amount payable under this note is to become immediately due.
Subsurface Surveys Ltd. [signed by president]”
Some payments were made more than 10 days late, but the contract was not strictly enforced.
One interest payment was 36 days late (the parties had fallen out of favor with each other) and it was decided to call in the notice using the default clause, and Subsurface Surveys Ltd. was notified.
In a resulting lawsuit it was claimed that the previous late payments were an implied modification of the contract and that an equitable estoppel was warranted.
The court ruled that the indulgences taken by the plaintiff in making late payments were not evidence that the defendant intended to negotiate new contractual terms.
Importance: claims for economic loss may be extended to those with no contracts
A floor was laid improperly, but was of no danger.
Although the installer was a subcontractor (note no contract existed between them) the court found that he had a duty of care to provide skillful work. As a result the court found him liable for economic losses, and any repair costs.
Importance: an example of an engineers power of certification
An engineer was contracted for a construction project. The construction contract stated that the engineer had the final decision on the interpretation of the specifications and the quality of work.
During the work the contractor disagreed with one of the engineers decisions, and the relationship between the partys was reduced to petty bickering.
In the resulting lawsuit the court ruled that the engineers decisions would stand, provided he acted in a judicial manner and without influence from the owner.
Importance: an example of an engineers duty of care when preparing estimates
A consulting engineer estimated the cost to do a study.
When done, the engineer realized that the $14,447 for support staff was much higher than the $5,000 allowed in the estimate.
In a lawsuit to recover the difference the court ruled against the engineer stating that the work was entered into based on the estimate (there were also no disclaimers given). And, the result was so far out of line that it implied the engineer had not properly estimated.
Importance: improper licences can set aside a contract because of legality
An electrician had done work and supplied materials. But, against local bylaws did not hold the required electrical contractors licence.
Seeking payment a lawsuit arose.
The judge stated that the purpose of the license was supposed to maintain quality on larger projects, and that by not having a license the electrician was clearly not legally capable of entering into the contract.
Importance: the high standard of care requires that all users are assumed to be idiots
Lambert, a mechanical consulting engineer, purchased two cans of sealant for his basement floor.
He read the labels before starting. These 3 labels indicated repeatedly that, among other horrible things, the product should be kept away from flames, fire, heat or cigarettes. Ventilation was also listed as essential.
Lambert was using the sealant in his basement when a pilot light in an adjoining room started an explosion and a fire in an open can of sealant.
In the resulting lawsuit another can of sealer made by a competitor had a warning label that also mentioned pilot lamps and more.
The court ruled that the chemical company did not provide sufficient warning and that they were liable. It was also noted that even though the engineer ought to have known of the danger, the chemical company could not count on this.
Importance: limits of recoverable economic loss
Foundation’s employees negligently cut a cable supplying MacMillan’s office building.
As a result of lost power, the employees were sent home.
The estimated loss in wages was $48,841.
The court indicated that the negligence was evident, but the “economic loss” would have been paid anyway. With no other evidence of loss, the case was dismissed.
Importance: an example of implied contract terms
The court ruled that a building contract did not clearly state, but implied,
Importance: a discharge by frustration
A contract was signed to build a reservoir from 1914 to 1920.
In 1916 the work was ordered stopped because of the needs for WW-I.
In light of the delay, the contractor did not want to continue the work.
The water board wanted the contract resumed (as indicated in a force majeure clause) with the delay included.
The case was taken to court, and the ruling was that the contract was different than the one entered into and as a result gave a discharge by frustration.
Importance: departed from previous decisions that voided contracts because of lack of licenses made contract illegal
A contractor (not properly licensed) entered into a contract to install drains.
After completion, the contractor was not paid and began a lawsuit
The judge ruled that while a license was required for the contracting work, it was not required for supply of materials. Therefore the supplier was reimbursed for the materials supplied.
Importance: established implied terms in contracts
The plaintiff paid for docking space for his boat, the Moorcock.
As the tide went out the Moorcock settled on hard ground and was damaged.
The court decided in favor of the defense (dock owner) in the ruling that there was an implied term in the contract that the boat would have been safe at low tide.
Importance: an example of fundamental breach
A piece of farm machinery was purchased to harvest.
The machine performance had been much worse than should have been expected.
In the resulting lawsuit the defendant argued that there was an exemption clause in the contract.
The court ruled that the supplier has fundamentally not met the obligations of the contract, and because of the fundamental breach it could not be protected by the exemption clause.
Importance: a contract can be revoked because of duress
A family member had forged (criminal) a previous guarantee.
The forger’s father was ill and might be fatally effected by a disclosure of forgery.
At this point the forger was threatened with disclosure, unless another guarantee was contracted.
The court put the second guarantee aside, as it was made under duress.
Importance: the corporate identity is not absolute and can be partially lifted
Nedco Ltd. was owned by Northern Electric Company Limited.
Northern Electric employees went on strike and picketed Nedco
The court was asked to restrict picketing at Nedco because the two companies were separate entities.
The court rules that Northern both owned and dominated Nedco, making it effectively part of Northern, and in these certain circumstances, the companies would be treated the same and picketing would be allowed.
Importance: an example of a tort of nuisance
An aviation company was spraying crops, and the spray drifted onto the plaintiffs land.
Importance: employees can be held liable in tort suits
The Northwestern Mutual Insurance Co. had routinely asked that one of its agents delete a risk from a policy.
The agent assured Northwestern that it had been deleted.
Later, it was discovered that the risk had not been deleted and Northern had to pay for the risk.
The court ruled that both the agent, and their employer were liable for the losses.
Importance: draws a line between tort and contract liability
Ruled that a tort action could be brought if it was independent of contractual obligations.
There was special mention of non-performance not being mentioned in a clause.
Importance: application of “equitable estoppel” for accepted late payments
A construction contract was made that required payments needed to be made by the owner within 5 days of an architects certificate specifying the value of payment.
The contract also stated that if not paid within 7 days, the contractor could terminate the contract.
Instead of making one payment promptly, the owner requested the corporate seal of a subcontractor affixed to a document that supports the architects certificate.
The contractor then indicated he would obtain the seal.
The contractor did not give the sealed document to the owner, and as a result was not paid within the allowed period.
The contractor used the strict wording the terminate the contract.
In the resulting suit the court maintained that the contractor had implicitly lead the owner to believe that the due date (including the termination clause) had been extended. Therefore an “equitable estoppel” of the clause was granted.
Importance: a tangible (demonstrable) idea is required for a patent
The court said that an idea must be reduced to a definite and useful form before it can be patented.
Importance: an example of a failed fundamental breach (rejected the concept of fundamental breach)
A security contract was set for watching a manufacturing company at night.
During one of the patrols an employee started a fire that destroyed the factory.
In the resulting lawsuit it was noticed that the security contract contained a clause that specifically exempted liability for (among other things) an employee that negligently starts a fire.
The court ruled that the exemption clause reasonably predicted the potential loss, and that there was no fundamental breach.
In effect this overturned the concept of fundamental breach.
Importance: refers to precedents of implied terms in contracts and a breach of a warranty (non-essential) term as grounds for damages, not termination.
A construction contract was made, including some minor terms requesting expeditious work, and to provide heat during winter.
The plaintiff argued that the two minor conditions had not been satisfied, and so the contract should be discharged.
The court said that the breaches had not prevented substantial performance, and therefore are not a reason to discharge the contract, but are grounds for payment of damages.
The court also stated that they would not imply terms into a contract unless it was obvious they should be there.
Importance: reverses the precedent set in [Sparham Souter]
A chimney 160 feet high was built using precast concrete.
An inner lining of a new material was used. The material was not suitable and cracks developed and the chimney had to be replaced.
They stated that the period of limitation started from the date the damage occurred. They said that legislation is required, and that the Sparham-Souter decision may lead to unfairly long limitation periods.
Importance: parol evidence rule exception
An agreement for sharing the ownership of a machine was made.
Two individuals had agreed that invention ownership rights would be purchased, but an unwritten condition was that it would be approved by two engineers first.
When consulted only one of the two engineers approved of the invention.
As a result the case went to trial.
The judge ruled that because of the condition, the contract had never been entered into, effectively sidestepping the parol evidence rule.
Importance: example of mail/courier for a contract and governing law
An offer of conditional sale was prepared by Commercial Credit as an agent to the parties in the contract.
The offer was sent out of Nova Scotia to the offeree. And the acceptance returned by courier.
Commercial Credit attempted to apply the Installment Payments Contract Act of Nova Scotia, but this was disallowed because the contract was made outside the province.
Importance: recognizes mistakes as separate from negligence
the crown was sued alleging that poor dam design lead to flooding of lands
the statement said that engineers are “not infallible, nor is perfection expected, and the most that can be required of them is the exercise of reasonable care and prudence in light of scientific knowledge at the time, of which they should be aware...” (Marston, pg. 30)
Importance: recognizes the legal overlap of engineers and architects duties
An engineering firm was charged with acting as architects
In reviewing the acts the court found too much overlap to distinguish between the duties of the engineers and the architects.
The court ruled that clients should be free to contract who they wish.
Importance: an engineer can be convicted for doing architectural work
An engineer had prepared plans for a theatre and then supervised construction.
He was later convicted of practicing as an architect.
Importance: economic losses caused by a defective product can be recovered
Rivtow chartered a barge that had a crane manufactured by Washington (a U.S. company)
An identical crane manufactured by Washington had been used in a similar situation before, and it had collapsed. An investigation determined that there were structural defects in the crane Rivtow had chartered that were similar to those in the crane that had collapsed.
The defendants were previously aware that design problems left the cranes prone to cracking, but they did not warn the plaintiff or attempt repairs.
As a result of the failure to warn, the defendants were found liable for economic losses while the crane was being repaired.
Importance: upheld the time of action principle of [Sparham Souter]
Some ceiling anchors were negligently designed, manufactured and installed. These were also misrepresented as adequate.
More than 6 years after the work the problems were detected, therefore the court was asked to consider the limitation from the detection of damages.
A lower court rejected the Sparham Souter principle, but a higher court heard an appeal that accepted the limitation period started when the damage was detected.
Importance: an example of the unilateral mistake principle
A bid was submitted to The Water Resources Commission, along with a deposit cheque of $150,000.
It was discovered before the tenders were opened that a bid of $2,748,000 was low by $750,058.
An hour before the tenders were opened the contractor informed the commission, and also sent a telegram to the commission which arrived the following morning to tell them of the error.
The next higher bid was $3,380,464 making the mistake obvious, but the bid was accepted.
A lower court maintained the contract.
An appeal lead to a successful overturn allowing the contract to be dismissed because of a unilateral mistake.
The supreme court held the position that the construction contract could be overturned, but the tender contract meant that the deposit had to be forfeit, as described in a forfeit clause.
Importance: Only the appropriate officials in a company have the capacity to contract
A corporation must observe contracts if the contracts were entered into normally, by a normally authorized employee/official, and the corporations records are in order.
Importance: recognition of a corporation as a distinct entity
Salomon had been a leather merchant and boot manufacturer for a number of years.
he incorporated a company and sold his business to it.
the shareholders were Salomon and his family. Salomon was the majority shareholder, having received shares as part of his payment for the business, as well as debentures constituting security.
all of the requirements for incorporation were met and the business was solvent.
eventually the business became insolvent and was sued: Salomon claimed he should be satisfied ahead of the unsecured creditors by holding a secured debenture.
In the court of appeal the corporation was viewed as a scheme only for limiting liability, and putting Salomon ahead of the creditors.
But, the House of Lords upheld Salomon’s corporation as properly formed, and a distinct entity, with no evidence of deception or fraud.
Importance: an example of the contract overriding tort
A notary public was to act for an individual in purchasing a home.
The notary public was sued for negligence.
The court ruled that the relationship between the two was contractual and thus the limitation is counted from the date of the breach or duty, and not discovery.
Importance: an example of a contract over a tort
An architect had failed to determine the properties of an experimental material.
The court ruled that the contract would overrule the tort and awarded damages.
Importance: sets the start of the limitation period to when damage occurred
A building was negligently constructed.
Some time later damage resulted and the law suit was allowed.
The guideline is that the damage is said to have occurred when it should be obvious or detected by a reasonable level of skill or diligence.
This decision was later overturned by a higher court, but it was used as the basis for other decisions. [XXXX]
Importance: negligently prepared certificates make the certifier liable
An architect was to prepare payment certificates.
The court ruled that the architect had a duty of care when preparing certificates. And, if an overpayment was made without just cause, the architect was liable. The only just reason for overpayment would be the architect acting as arbiter.
Importance: an example of a failed bid for discharge by frustration
A bid was prepared for work, assuming the work was to be done in the warm summer months.
The contract was accepted, but the work was delayed to the winter months.
In court the contractor argued that the delay should constitute grounds for a discharge by frustration.
The court did not discharge the contract saying that the delay was an event that might be reasonably expected during construction, and should have been considered in the bid.
Importance: the decision of an arbitrator can be overturned when improper
A contract had stated that arbitration would be used without using the court system.
The court overruled this point saying that a dispute can always be taken to court.
Importance: a contract was rescinded for innocent misrepresentation
An engineer prepared plans and specifications for bidding.
A contractor prepared a bid on the job based on the engineers plans and specifications.
The specifications were found to underestimate to work significantly.
As a result the contractor terminated the contract, and a lawsuit was initiated.
The court concluded that the estimate was grossly in error (more than allowable by a disclaimer clause) and that because of the error, the contractor had entered into the contract.
The court allowed the contractor the right to rescind the contract.
Importance: Hedley Byrne decision applied to engineering, improperly prepared drawings and specifications leave an engineer liable
An engineer designed a sewage disposal plant
A contractor (no contract existed between the engineer and contractor) was to build the plant based on the engineers design.
The contractor found the design unsuitable as a result the contractor brought a lawsuit against the engineer for his losses.
The engineer was found liable for the design because he owed a duty of care to the contractor that would eventually build the plant.
The judge specifically noted that contractors are so pressed for time preparing tenders that they could not be expected to check the engineers designs.
Importance: an engineer can be liable for advice given without a fee
A contractor was hired to construct a barn over a manure pit.
In the past the contractor had used advice given by an engineer working for the government to assist farmers with plans.
The contractor discussed the plans for the barn on the phone, and dropped the set on the engineers desk. The two did not meet, but he superficially reviewed the set and wrote a note “Good set of plans. I like the detail. Wish I could spend that amount of time on each project. Keep up the good work.” The engineer and the contractor never met to review the plans for the barn.
The contractor assumed that the plans were adequate and built the barn.
As a result of design deficiencies the manure pit walls failed.
The court rules against the engineer (and Crown) noting that “good plans” was an implied approval and that the plans had been properly reviewed. There was also recognition that the contractor had been asking for advice.
An appeal court then found liability 75% for the engineer and 25% for the contractor.
Importance: example of a limitation from the date of discovery
A negligent land survey was done, but not discovered until a few years later.
The judge allowed the limitation period to be from the date the damage was discovered.
Importance: an employee may use an employers time and equipment to create an invention, but the employee owns the patent unless stated otherwise in the contract