Law Assignment
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Law Assignment
Section A
Over the years, lawmakers have sought to define the various conditions that make a party eligible for expectation damages. In Fidler v. Sun Life Insurance, the Canadian Supreme Court outlines the state of compensation for mental distress under contract law. The ruling explains the correct circumstances for the awarding of punitive damages. The case is an expansion of Hadley v. Baxendale, as emotional distress upon the unanticipated termination of a contract is now acknowledged to be within reasonable thought of parties covering a disability insurance contract. Traditionally, the court reasoned damages should arise naturally from a breach. Under this rule, the law distinguishes consequential and general damages. However, the ruling was insufficient to cover all forms of losses associated with the mental distress of a contract ending. The Fidler ruling implies there will be further changes to the Hadley principle. While the law of damages in Canada is still subject to change, the context of bad faith will continue to determine how Canadian courts award punitive and aggravated claims.
Earlier versions of the expectation interest law were not wide enough to cover all types of damages associated with the unanticipated termination of a contract. The courts required that aggravated damages be awarded through separate actionable conduct. In Hadley v. Baxendale, the court ruled damages are limited to those occurring naturally for contract termination (Eisenberg, 2018). The ruling only covers general damages associated with a breach of contract that does not directly harm the claimant. Damages should reflect what is reasonable within the deliberation of both parties during the formation of a contract. While the approach allows a party in a contract to recover losses, the expectation damages only provide access to nominal damages. Such a law is effective in recovering damages in the form of profits. However, it does not cover other indirect damages, such as mental distress. Under the previous rule, claimants have to show an independent actionable wrong to receive expectation damages for mental distress.
Fidler’s ruling sought to consistently embrace damages for mental distress in a breach of contract. Earlier rulings in Hadley v. Baxendale and Warrington v. Great West Life Assurance Co. did not distinguish the type of losses recoverable from a breached contract. The focus was only in returning disputing parties to their original position. In Hadley’s case, the court determined what type of promise the contract offered to restore the affected party to its original position. The same position occurred in Fidler v. Sun Life. Despite the defendant re-offering the claimant’s original health insurance package, the court still awarded aggravated damages. The defendant’s actions before the ruling highlight an understanding of restitution in integrum. Compensatory damages that include monetary rewards do not seek to punish the defendant but rather restore the plaintiff to their original position. The rule applies to private law damages caused by tort or contractual violations.
The introduction of the duty of good faith in Fidler’s ruling expanded expectation damages to include aggravated damages in special cases. As seen through Vorvis v. Insurance Corp of British Colombia, damages resulting from mental distress from a breach of contract tend not to be awarded if parties had not contemplated mental distress during the formation of the contract (Eisenberg, 2018). However, there is an exception to this rule, specifically cases where a contract is supposed to offer peace of mind. In Fidler v. Sun Life Assurance, the claimant received $20000 in aggravated damages following the defendant’s withdrawal of his medical insurance. The court’s ruling in favour of Fidler highlights a change in damages law. It is no longer necessary to show independent actionable wrongs to receive damages for mental distress in contracts involving ‘peace of mind’. The breach of duty of good faith represents the independent actionable wrong. Punitive damages remain inapplicable in such a scenario.
Recent changes in expectation damages highlight the importance of duty of honest contractual performance. Parties engaged in a contract should not mislead counterparties concerning the functioning and performance of a contract (Eisenberg, 2018). In Fidler v. Sun Life Insurance, the defendant investigated whether the claimant could carry light objects and move freely, conditions that could render the health insurance contract void. In the court ruling, the presiding judge ruled that if were there any ill intentions behind the withdrawal of the contract, the claimant would have received a bigger monetary reward. Had the defendant used out of ordinary steps to determine the claimant’s disability status, the company would have paid a bigger compensation. The relationship between the size of compensatory rewards and the nature of the breach of contract outlines the importance of parties abiding by the duty of honest contractual performance.
In light of contractual disputes, it is important to know which type of damages are recoverable. Since the introduction of expectation damages, Canadian courts have awarded pecuniary and non-pecuniary losses, including pain or mental distress. The evolution of the law highlights Canada’s emphasis on the duty of honest performance and good faith. An anticipated breach of contract that disrupts the peace of mind of a contracting party makes them legible for aggravated damages. Service providers are anticipated to operate in good faith or risk incurring damages, which have been increasing with each ruling. Nevertheless, it remains unclear if a breach of the duty of good faith can result in the issuance of punitive damages. The award of punitive damages remains highly rare in Canadian courts, but the absence does not suggest contracting parties cannot obtain it in the correct conditions.
Section B
Question One
The laws covering the contractual aspect of privacy policies online remains largely unsettled. It is unclear whether privacy policies are enforceable contracts or simple statements given by a company. Some courts believe the corporate statements are not comprehensive or sufficiently definite to create a contractual obligation. However, as seen through Carlill v. Carbolic Small Ball Co., privacy policies outline a promise from the service provider to the customer that can form a contract. The legal obligation exists where parties rely on the privacy policy while transacting businesses online. Privacy policies are binding when individuals agree to abide by the set policies. Therefore, a successful breach of contract in Tinder will result in a compensable loss based on the claim of loss of privacy. While privacy policies are brief, simple statements, they contain a language and promise that become legally binding when a user agrees to comply when transacting business online.
Privacy policies are legally binding because they entail an offer and an acceptance. Tinder users must agree with the site’s privacy policies and safety tips in all purchases. In an empirical investigation involving nineteen Tinder users, the majority of participants considered accepting the site’s privacy policy as computer-mediated consent to sexual activity (Zytko et al. 2021). The interviews highlight a comprehensive understanding of what Tinder offers its users. In this case, the offer is the user’s safety while using the site. In Carlill v. Carbolic Small Ball, there was the explicit offer that the use of the small balls would prevent influenza (Prasad, 2011). The claimant agreed to use the product as prescribed by the manufacturer because of the anticipated service. The client read the product information and understood how it helps prevent flu, accepting the offer via purchase and use. As a result, the manufacturer becomes legally obligated to prevent the disease.
Privacy policies become legally binding when there is a form of commitment to an offer. According to contractual law, if a party makes an offer, he or she must be prepared to perform if and when the offer is accepted (Cunningham, 2012). The intent to make an offer has to be stated clearly for the user to make an informed agreement. In Carlill v. Carbolic Small Ball, the defendant clearly communicated the intent to fulfil their offer when they deposited a thousand euros as a sign of sincerity (Prasad, 2011). The bank deposit was a guarantee of the reward included if the product fails to prevent influenza. While the language regarding the refund is generally a puff with no enforceability, the defendant’s actions make the offer legally binding. The notion of intent becomes an issue of relevance when considering the validity of a contract. Intent is evident in Carlill depositing the reward money and advertising the rewards.
The interaction between a user and Tinder is enforceable where there is a showing of compensable loss stemming from an alleged breach. In Smith v. Trusted Universal Standards in Electronics Transactions Inc., the plaintiff argued that the internet service provider failed to abide by its privacy policy by failing to expound on why communications were jammed by spam-related violations (Cunningham, 2012). The court dismissed the claim because of the claimant’s inability to plead any losses associated with the breach. As per the subject case, Carlill was entitled to recover a hundred euros, initially spent purchasing the small balls (Prasad, 2011). The receipt of purchase is proof enough to show compensable loss. Tinder users will have to show some form of damages related to a breach of privacy when using the site to enforce compensation.
Privacy policies are legally binding when a party consents and signs an agreement to abide by the policies. While the contractual aspect of the policies remains vague, the promise of privacy and the legal obligations to protect personal data can form the basis of a successful contract claim. Through Carlill v. Carbolic Small Ball Co, offer, and the intent to fulfil an offer are presented as additional factors when considering the enforceability of privacy policies. Tinder offers to provide user privacy and anonymity, which the user considers accepting. Therefore, users can enforce tort and breach of contract claims during any alleged violation by accepting Tinder’s privacy policies. Pressing the pop-up button with the policies has the same legal weight as signing a written document with the same policies. Tinder’s privacy policy is not a mere corporate statement because it carries with it legal obligations that can have drastic financial implications in the event of a breach.
Section C
Smart contracts are increasingly becoming important in contemporary society, as technology permeates into almost every aspect of human life. Ethereum’s introduction of smart contracts allowed the world to imagine a space with decentralized financial systems for the first time. The smart contract automatically executes an agreement contained in a blockchain to meet a particular objective. However, the implementation of smart contracts has not been without problems. The legal technology, as a concept, is in its infancy. As seen through Uber Technologies Inc v. Heller, legal gaps prevent the effective adoption of smart contracts. A lack of universality and the inability for clauses to be quantifiable for machine execution are other impediments to online-based agreements. With the dynamic and ever-evolving technological space, further research and reformulation of smart contracts are required to provide the same level of security and assurance as traditional contracts.
Smart contracts do not consider the capacity of contracting parties during formation, making it difficult to determine validity. Under English law, an offer has to be made explicitly with detail, highlighting the possibility of a transaction (Khan et al. 2021). A party reads the offer to make an informed acceptance. In Uber v. Heller, the majority rule was there was no evidence showing the stronger party had knowledge regarding the weaker party’s vulnerability (Harvard Law Review, 2021). Because there was no offer, Heller could not negotiate the terms and conditions of the agreements. Smart contracts only focus on the execution of the agreed terms and do not consider the unequal capacity between contracting parties. Because Heller and Uber were in different positions, the court concluded arbitration was an unrealistic solution. Conventional law would have terminated the contract if it deemed parties were in unequal positions during the formation of the agreement.
Smart contracts fail to identify what could go wrong and stipulate remedies in advance. People input parameters and execution steps for smart contracts, leaving them to run and function autonomously (Khan et al. 2021). A key challenge occurs during implementation when non-technical parties identify issues in the off-chain resource. In Uber v. Heller, the claimant took time before realizing he and his fellow drivers are not included under Ontario’s Employment Standards Act (Harvard Law Review, 2021). However, the smart contract the parties entered with the company did not have an arbitration remedy for the lapse. The contract had no provisions for dealing with unexpected issues. Smart contracts anticipated that everything would run smoothly despite not all business transactions being automatic. Smart contracts are cyclic in their code execution; hence they do not anticipate future problems.
Smart contracts remove the people element increasing the opportunities for issues to arise. According to Khan et al. (2021), smart contracts assume the role of intermediaries by automating exchanges, adding no value to a business transaction. In conventional financial agreements, intermediaries, such as banks, lawyers and accountants, add value by providing verification services, among other functions. In Uber v. Heller, there is no such verification process during contract formulation and interpretation. The lack of the people aspect explains why the claimant was not detail-oriented when entering into the agreement with Uber. Smart contracts self-draft, not providing contracting parties with an opportunity to go over the details to remove discrepancies (Khan et al. 2021). If Heller had access to information on Uber’s employment contract, it would have been clear he needed further accommodation.
Smart contracts will be of great utility in the modern world as business transactions become more remote and digitalized. The special form of agreement breaks out into the digital world, creating opportunities for decentralized finance. However, smart contracts will have to evolve and integrate aspects of traditional contracts to improve their applicability. At present, the reduced role of men and the capacity issue result in agreements where there is unequal bargaining power between parties. In addition, the automated function cannot anticipate future problems and provide remedies. Further research and policy modifications are required to effectively apply smart contracts in sophisticated commercial relationships. Unfortunately, the true evolution of smart contracts is bound to come from new paradigms that the legal and scholarly environments are yet to envision.
References
Cunningham, L. A. (2012). Contracts in the real world: Stories of popular contracts and why they matter. Cambridge University Press.
Eisenberg, M. (2018). Foundational principles of contract law. Oxford University Press.
Harvard Law Review. (2021, May 10). Uber Technologies Inc. v. Heller. Harvard Law Review, https://harvardlawreview.org/2021/05/uber-technologies-inc-v-heller/
Khan, S. N., Loukil, F., Ghedira-Guegan, C. & Hani, A. (2021). Blockchain smart contracts: Applications, challenges, and future trends. Peer-to-Peer Network Applications, 14, 2901–2925. https://doi.org/10.1007/s12083-021-01127-0
Prasad, K. (2011). Problems and solutions in civil law. Universal Law Publishing.
Zytko, D., Furlo, N., Carlin, B. & Archer, M. (2021). Computer-mediated consent to sex: The context of Tinder. PACM on Human-Computer Interaction, 5(189), 1-27.