Court Changes Basic Contract Law: Consideration
The British Columbia Court of Appeal just changed the law of contracts on 18 May 2018. It dealt with the issue of “consideration” and appeared to get around a long standing rule of the Supreme Court of Canada.
Mrs. Toca borrowed money from Mrs. Rosas, but each time it was due for payment, she said that she didn’t have the money. Mrs. Rosas continually gave her “time to pay”. The series of extensions were verbal and there was no actual consideration offered for such extensions.
Eventually, Mrs. Toca consulted a lawyer and took the position that she didn’t have to pay Mrs. Rosas at all, either the principal or the interest. Mrs. Toca took the position that the Limitations period had expired. She took advantage of Mrs. Rosas’ kind-hearted generosity in extending the deadlines for payment.
The Court basically changed the law. That was “unfair”. The lack of consideration didn’t scuttle the deal. Mrs. Toca still had to repay the loan.
In all likelihood, this case will be “approved” and become part of a decision by an Ontario Court which will then make it “official” in this jurisdiction. If it goes to the Ontario Court of Appeal, it will then be a “binding decision” on all Courts throughout Ontario. Right at the moment, there are two choices: 1) a decision of the Supreme Court of Canada (1948) which would deny Mrs. Rosas her money, and 2) the BC case (2018) which offered a modern interpretation to the law of consideration and offered a fair result.
It is noteworthy that the laws are always changing. Courts are attempting to establish rules which will lead to a fair result. They are also trying to establish precedents so that each person doesn’t have to go to Court to have their own interpretation of their contract.
You will appreciate that the Courts don’t write new laws; they can only interpret the cases that come before them. The Supreme Court of Canada had dealt with a similar issue in1948, but this new case seemed quite unfair unless the Courts changed the law, which they did.
Brian Madigan LL.B., Broker