Issues involving an alleged breach of contract occasionally occur in estate disputes, especially involving the executor.
A cause of action in breach of contract requires, as its foundation, the existence of a valid and enforceable contract.
The plaintiff must prove, on the balance of probabilities that:
- there was a mutual intention to create legal relations;
- consideration flowed in return for a promise;
- the essential terms of the alleged contract are sufficiently clear, on an objective assessment; and
- there was matching offer and acceptance of the terms of the contract.
See: Govorcin Fisheries Ltd. v. Medanic Fisheries Ltd., 2021 BCSC 1092 at para. 22.
A determination of whether there is an enforceable contract involves a contextual analysis of all the material facts and circumstances: Oswald v. Start Up SRL, 2020 BCSC 1730 at para. 122; Berthin v. Berthin, 2016 BCCA 104 at para. 46. Whatever the subjective intentions of the parties were is irrelevant: Oswald at para. 122; Berthin at para. 46.
The usual principles of contract formation apply. That is, the court must analyze the evidence to determine whether, in all the circumstances, it is clear to the objective, reasonable bystander that the parties intended to contract, and whether the essential terms of that contract can be determined with a reasonable degree of certainty: Kuo v. Kuo, 2017 BCCA 245 at para. 38.
To determine whether a binding agreement was created vis-à-vis the parties’ manifest intentions, the court may consider their conduct leading up to, and following, the conclusion of the alleged agreement: Salminen v. Garvie, 2011 BCSC 339 at para. 28. Where the alleged agreement contemplates the execution of a further formal contract or further negotiations to take place, the court must determine whether the parties intended to create a binding contract or whether they simply reached a basis for further agreement: Salminen at para. 32.
The analysis is an objective one: the mere perception on the part of one party that another has agreed to the terms of a contract is insufficient in law to support a finding that a contract has come into existence: Hammerton v. MGM Ford-Lincoln Sales Ltd., 2007 BCCA 188 at para. 23.
A party’s subjective intention is irrelevant and the court must instead determine the parties’ mutual intention based on “objective evidence of their conduct and the surrounding circumstances”: Leemhuis v Kardash Plumbing Ltd 2020 BCCA 99 at paras. 15-17;
While the existence of a binding and enforceable contract requires an intention to contract, it is not subjective intention that is relevant, but objective intention: Aubrey v. Teck Highland Valley Copper Partnership, 2017 BCCA 144 at para. 35; Rudyak v. Bekturova, 2018 BCCA 414 at para. 23.
The seminal case, Smith v. Hughes (1871), L.R. 6 Q.B. 597 at 607 stated:
“If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that [the] other party upon that belief enters into the 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.”
This Court in Berthin v. Berthin, 2016 BCCA 104, put the requirement this way:
 The test, of course, is not what the parties subjectively intended but “whether parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”: see G.H.L. Fridman, The Law of Contract in Canada (6th ed, 2011) at 15. As stated by Mr. Justice Williams in Salminen v. Garvie 2011 BCSC 339:
The test for determining consensus ad idem at the time of contract formation is objective: it is “whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract”; it is “whether a reasonable… [person] in the situation of that party would have believed and understood that the other party was consenting to the identical term”: Fridman, supra, p. 15; see also Smith v. Hughes (1871), L.R. 6 Q.B. 597 at 607 adopted in St. John Tugboat Co. Ltd. v. Irving Refining Ltd.,  S.C.R. 614, 1964 CarswellNB 4 at para. 19, and Remington Energy Ltd. v. B.C. Hydro & Power Authority, 2005 BCCA 191 at para. 31, 42 B.C.L.R. (4th) 31. The actual state of mind and personal knowledge or understanding of the promisor are not relevant in this inquiry: Hammerton v. MGM Ford‑Lincoln Sales Ltd., 2007 BCCA 188 at para. 23, 30 B.L.R. (4th) 183, citing S.M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Book Inc., 2005) at 103. … [At para. 27.]
In determining intention to contract, a court is not confined to the four corners of the agreement, but may look at “all the circumstances” or “all the material facts”: Langley Lo‑Cost Builders Ltd. v. 474835 B.C. Ltd., 2000 BCCA 365 at para. 21; Vancouver Canucks Limited Partnership v. Canon Canada Inc., 2015 BCCA 144 at para. 75; Lacroix v. Loewen, 2010 BCCA 224 at para. 36 (per Finch C.J.B.C.). In Langley, McEachern C.J.B.C. observed that McLachlin J. (as she then was) in Osorio v. Cardona (1984), 15 D.L.R. (4th) 619 (B.C.S.C.), considered “evidence of past agreements involving other parties, the circumstances in which the alleged agreement was made, and future actions and representations by both parties.”