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page 126

• 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.

5.7.68 Ron Engineering et. al. v. The Queen in right of Ontario et. al.

Location: Ontario, Canada

Court:

Year: 1979, 1981

Importance: an example of the unilateral mistake principle

Details:

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.

5.7.69 Royal British Bank v. Turquand

Location: England Court:

Year: 1856

Importance: Only the appropriate officials in a company have the capacity to contract Details:

• 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.

5.7.70 Salomon v. Salomon & Co. Ltd.

Location: England

Court:

Year: 1897

page 127

Importance: recognition of a corporation as a distinct entity

Details:

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.

5.7.71 Schewebel v. Telekes

Location: Ontario

Court:

Year: 1967

Importance: an example of the contract overriding tort

Details:

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.

5.7.72 Sealand of the Pacific Ltd. v. R.C. McHaffie Ltd. et. al.

Location: British Columbia

Court:

Year: 1973

Importance: an example of a contract over a tort

Details:

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.

5.7.73 Sparham Souter et. al. v. Town & Country Developments (Essex) Ltd. et. al.

Location: England

page 128

Court: Year: 1976

Importance: sets the start of the limitation period to when damage occurred Details:

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]

5.7.74 Sutcliffe v. Thackrah et. al.

Location: England

Court:

Year: 1974

Importance: negligently prepared certificates make the certifier liable

Details:

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.

5.7.75 Swanson Construction Company Ltd. v. Government of Manitoba; Dominion Structural Steel Ltd., Third Party

Location: Manitoba

Court:

Year: 1963

Importance: an example of a failed bid for discharge by frustration

Details:

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.

page 129

5.7.76 Re Thomas Hackett

Location: Nova Scotia Court:

Year: ?

Importance: the decision of an arbitrator can be overturned when improper Details:

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.

5.7.77 Township ofMcKillop v. Pidgeon and Foley

Location: ?

Court:

Year: ?

Importance: a contract was rescinded for innocent misrepresentation

Details:

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.

5.7.78 Trident Construction Ltd. v. W.L. Wardrop and Assoc. et. al.

Location: Manitoba Court:

Year: 1979

Importance: Hedley Byrne decision applied to engineering, improperly prepared drawings and specifications leave an engineer liable

Details:

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.

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