Shelanu Inc. v. Print Three Franchising, (2003) 172 O.A.C. 78 (CA)

• Judge: Weiler, Austin and Laskin, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: August 26, 2002
• Jurisdiction: Ontario
• Citations: (2003), 172 O.A.C. 78 (CA);2003 CanLII 52151 (ON CA);2003 CanLII 52151 (NS CA);64 OR (3d) 533;226 DLR (4th) 577;38 BLR (3d) 42;[2003] CarswellOnt 2038;[2003] OJ No 1919 (QL);123 ACWS (3d) 267;172 OAC 78

Shelanu Inc. v. Print Three Franchising (2003), 172 O.A.C. 78 (CA)

MLB headnote and full text

Temp. Cite: [2003] O.A.C. TBEd. MY.066

Shelanu Inc. (plaintiff/respondent) v. Print Three Franchising Corporation (defendant/appellant)

Print Three Franchising Corporation (plaintiff by counterclaim/appellant) v. Shelanu Inc., Brian Deslauriers and Mary Deslauriers (defendants by counterclaim/respondents)

(C35392)

Indexed As: Shelanu Inc. v. Print Three Franchising Corp.

Ontario Court of Appeal

Weiler, Austin and Laskin, JJ.A.

May 20, 2003.

Summary:

The plaintiff, a former franchisee of the defendant, sued for, inter alia, a declaration that the franchise agreement ended May 8, 1997, repayment of all royalties paid by the plaintiff subsequent to May 8, 1997, and payment of overdue royalty rebates. The plaintiff asserted that, as a result of the defendant's fundamental breach of its obligations to the plaintiff, it had been entitled to terminate the franchise agreement before the expiration of its term. The defendant counterclaimed for damages for breach of the franchise agreement and an injunction requiring the plaintiff to comply with the agreement's termination provisions. The defendant also sought a declaration that a lease for franchised premises was an asset belonging to the defendant or, alternatively, damages for the loss of that lease.

The Ontario Supreme Court, in a decision reported at [2000] O.T.C. 768, allowed the action, declared that the franchise agreement was at an end as of May 8, 1997, and awarded the plaintiff damages totalling $369,160.24. The court dismissed the counterclaim, but provisionally assessed the defendant's damages. The defendant appealed, raising three issues: (1) whether the trial judge erred in holding that the defendant had breached obligations under an oral contract that had the effect of entitling the plaintiff to a greater royalty rebate; (2) whether the trial judge erred in holding that the parties owed each other a duty of good faith and that the defendant breached that duty by allowing for the establishment of a related franchise; and (3) if the defendant breached its obligations to the plaintiff, whether the breach was so fundamental that the plaintiff was released from further performance of the agreement after May 8, 1997. The plaintiff cross-appealed the assessment of damages.

The Ontario Court of Appeal held that the defendant had breached its obligations under the oral contract and its duty of good faith. However, the trial judge erred in holding that the plaintiff breached the duty of good faith by allowing for the establishment of the related franchise. The trial judge also erred in excusing the plaintiff from further performance under the agreement. The court allowed the cross-appeal and substituted an award of damages fixed at $29,700.

Contracts - Topic 2116

Terms - Express terms - "Entire agreement" or "four corners" clause - At issue was whether an entire agreement clause contained in BCD's and Shelanu's franchise agreements applied to exclude a subsequent oral agreement between the franchisor, BCD and Shelanu to permit BC to surrender its license and continue the operation under Shelanu's license - The Ontario Court of Appeal held that the exclusion clauses did not apply to the tri-partite oral agreement - The court stated, inter alia, that such clauses were normally used to try to exclude representations made prior to the signing of the written agreement - Nothing in the clauses suggested that an oral agreement to surrender the license several years later would be of no effect - It could not be said that the entire agreement clause was clearly intended to cover any and all future contractual relations between the franchisor and Shelanu - See paragraph 50.

Contracts - Topic 2116

Terms - Express terms - "Entire agreement" or "four corners" clause - BCD and Shelanu each had a license for the defendant's franchise and operated out of the same building - The franchise agreements contained clauses that excluded liability for statements other than those set out in the agreement - The defendant orally agreed to permit BCD to surrender its license and the operation to be continued under Shelanu's license - Reporting sales under one license had the effect of entitling Shelanu to a larger royalty rebate than that which would have been received under two licenses - The Ontario Court of Appeal affirmed that Shelanu was entitled to enforce the oral agreement - The franchise agreements' exclusion clauses did not conflict with or prevent enforcement of the tri-partite oral agreement - Alternatively, the court was entitled to refuse to enforce the exclusion clauses - The requirement of consideration was met where BCD gave up territory, Shelanu agreed to report the franchises' earnings jointly and pay royalty on higher sales and the defendant gained the benefit of one healthy franchise instead of two having financial difficulty - The consideration from the defendant was the promise to allow the sales to be merged and reported as one - See paragraphs 30 to 62.

Contracts - Topic 2504

Variation or alteration - General - Requirement of consideration - [See second Contracts - Topic 2116 ].

Contracts - Topic 2504

Variation or alteration - General - Requirement of consideration - A franchisor misrepresented to franchisees that their entire advertising fee had to go to the Air Miles program to qualify for the program - To get over the franchisees' opposition to the program, the franchisor represented that any air miles purchased and not distributed to their customers could be used by the franchisees - Shortly after the Air Miles program began, the franchisor directed that all undistributed Air Miles could only be used with its approval - The unused Air Miles were placed in accounts of certain employees - Shelanu, one of the franchisees, sued the franchisor - The trial judge held that the franchisor's unilateral change was a clear breach of its representations and awarded Shelanu damages equivalent to the value of the undistributed air miles earned by Shelanu's franchise - The Ontario Court of Appeal affirmed the award - There was an enforceable oral contract which amended the agreement respecting advertising - The parties' subsequent conduct was indicative of part performance - The franchisor did not have an absolute discretion respecting use of advertising funds and, if it did, it was under a duty of good faith and had to exercise that discretion reasonably and with regard to the franchisees' interests - Also, the franchisor's misrepresentation was not a gratuitous offer - The consideration for the agreement to credit unused air miles to the franchisees was their joining the program - See paragraphs 89 to 98.

Contracts - Topic 2533

Variation or alteration - By parties - Oral variation of written contract - [See second Contracts - Topic 2116 and second Contracts - Topic 2504 ].

Contracts - Topic 3502

Performance or breach - Obligation to perform - Good faith - Exercise of - The Ontario Court of Appeal affirmed a trial judge's finding that a franchisor had a duty of good faith in the sense that it had to have regard to the franchisee's legitimate interest and to deal promptly, honestly, fairly and reasonably with the franchisee - The trial judge's reference to partners did not result in his applying a fiduciary standard - The imposition of a duty of good faith and a fiduciary duty were closely related - They, along with the standard of unconscionability, were points on a continuum in which the law acknowledged a limitation on the principle of self-reliance and imposed an obligation respecting the interests of the other - However, there was at least one important difference - If A owed a fiduciary duty to B, A had to act only in accordance with B's interests when exercising its powers or a discretion arising out of the relationship - However, if A owed a duty of good faith, A had to consider B's interests as well as its own interests before exercising its power - The trial judge understood the distinction and recognized that the franchisor-franchisee relationship would not normally be characterized as a fiduciary one - See paragraphs 5 and 64 to 66.

Contracts - Topic 3502

Performance or breach - Obligation to perform - Good faith - Exercise of - A franchisor, relying on an "entire agreement clause" contained in a franchise agreement, refused to recognize a subsequent oral agreement that had the effect of the franchisee receiving a greater royalty rebate - The franchisor withheld royalty rebates - The Ontario Court of Appeal affirmed that the franchisor acted arbitrarily in withholding the portion of the rebate that was not in dispute - The fact that the rebates were ultimately paid did not mean that the franchisor did not breach its obligations - The duty of good faith comprised a time component - The time component required the party under the duty to respond promptly to a request from the other party and to make a decision within a reasonable time - Parties under a duty of good faith also had an obligation to make payment of any amounts that were clearly owed to the other party in a timely manner - See paragraphs 77 and 78.

Contracts - Topic 3730

Performance or breach - Fundamental breach - What constitutes - A franchisor breached its duties owed toward a franchisee by abusing its discretion respecting the usage of advertising funds, not paying a full royalty rebate owed pursuant to an oral agreement, delaying in making royalty rebates on three occasions, and refusing to pay one royalty rebate based on the franchisee's refusal to allow an inspection - The franchisee gave notice of termination of the franchise agreement on May 8, 1997, but continued to use the franchise's name for a further 2.5 years and continued to have an exclusive territory - The breaches respecting the advertising fund and the non-payment of the royalty rebate were the subject of a damage award - The Ontario Court of Appeal held that the breaches, although serious, were not so fundamental as to prevent the franchisee from continuing to operate the franchise - Accordingly, the franchisee was not entitled to recover the royalties and advertising feeds paid by it after May 8, 1997 - See paragraphs 109 to 129.

Contracts - Topic 7400

Interpretation - General principles - The Ontario Court of Appeal stated that the principles which govern the interpretation of contracts were essentially the same as for statutory interpretation - See paragraph 45.

Damages - Topic 6465

Contracts - Franchise agreements - Breach of restrictive covenants - A trial judge held that a defendant franchisor had fundamentally breached a franchise agreement and dismissed the franchisor's counterclaim for damages for breach of a competition clause - The trial judge provisionally assessed the franchisor's damages including amounts for lost royalties and lost advertising fees based on what the average franchisee paid over a 10 year period - The trial judge based the award on the assumption that the franchisee would have continued as a franchisee or that another franchisee would have been found for the location - The Ontario Court of Appeal held that the franchisor had breached its obligations, but that the breaches had not been fundamental - With respect to damages, the trial judge erred in basing his assessment on an assumption that did not accord with the specific facts - The franchisor had to prove its damages on a reasonable preponderance of credible evidence - The trial judge was required to put the franchisor in the same position it would have been in had the franchisee not breached the one year noncompetition clause - The court substituted awards based on what the average franchisee paid over a one year period - See paragraphs 130 to 139.

Equity - Topic 3608

Fiduciary or confidential relationships - General principles - Standard of conduct - [See first Contracts - Topic 3502 ].

Franchises - Topic 2022

Franchise agreement - Breach of agreement - What constitutes - [See Contracts - Topic 3730 ].

Franchises - Topic 2025

Franchise agreement - Breach of agreement - Damages - [See Damages - Topic 6465 ].

Franchises - Topic 2045

Franchise agreement - Terms - Exclusivity clause - [See both Contracts - Topic 2116 ].

Franchises - Topic 2045

Franchise agreement - Terms - Exclusivity clause - The Ontario Court of Appeal stated that "A franchise agreement is a type of contract of adhesion, that is, a type of contract whose main provisions are presented on a 'take it or leave it basis'. In such situations, the case for holding that an exclusion clause represents the intention of the signer and that the signer should be bound by it is weaker because there is usually an inherent inequality of bargaining power between the parties. ... Enforcing an exclusion clause that is contrary to the reasonable expectation and understanding of the parties in these circumstances would not be fair or reasonable" and would come within the exception [to enforcing a contract as written] as enunciated in [Guarantee Co. of North America v. Gordon Capital Corp. (S.C.C.)] - See paragraphs 58 and 59.

Franchises - Topic 2067

Franchise agreement - Duties of franchisor - Duty of good faith - [See second Contracts - Topic 2504 and both Contracts - Topic 3502 ].

Franchises - Topic 2067

Franchise agreement - Duties of franchisor - Duty of good faith - Shelanu held a licence for a Print Three franchise which targeted corporate accounts - Print Three commenced a new business called Le Print Express - Le Print Express outlets were smaller and targeted individuals and small businesses - Three Le Print Express franchises were set up outside of Shelanu territory - A trial judge held that the establishment of the Le Print Express business breached Print Three's duty of good faith towards Shelanu - The Ontario Court of Appeal reversed the holding because of (1) the different nature of the Le Print Express business; (2) Shelanu's seven year delay in complaining about the establishment of the business; (3) the lack of evidence respecting Shelanu's consequential loss of income; (4) the trial judge's findings that there had been no misrepresentation concerning what Print Three had to provide in exchange for royalty payments and that Print Three had done the minimum required to discharge those obligations; and 5) the trial judge's finding that the decline in Print Three franchises was primarily due to prevailing economic conditions - The finding that Print Three breached "reasonable commercial standards" failed for the same reasons - See paragraphs 100 to 108.

Franchises - Topic 2067

Franchise agreement - Duties of franchisor - Duty of good faith - At issue was whether a franchisor had breached the duty of good faith owed to a franchisee - The Ontario Court of Appeal stated that "Whether or not a party under a duty of good faith has breached that duty will depend on all the circumstances of the case, including whether the party subject to a duty of good faith conducted itself fairly throughout the process." - See paragraph 74.

Franchises - Topic 2067

Franchise agreement - Duties of franchisor - Duty of good faith - A franchisor, relying on an "entire agreement clause" contained in the franchise agreement, refused to recognize an oral agreement that had the effect of the franchisee receiving a greater royalty rebate - In allowing the franchisee's action, the trial judge held that the franchisor had breached a duty of good faith - The Ontario Court of Appeal stated that not every breach of contract constituted a breach of the duty of good faith - However, the evidence indicated that the franchisor's refusal to pay the franchisee pursuant to the oral agreement was linked to its anger concerning the franchisee's position on another matter - This supported the finding that the franchisor's refusal to recognize the oral agreement was also a breach of the duty of good faith - See paragraphs 75 and 76.

Franchises - Topic 2068

Franchise agreement - Duties of franchisor - Reasonable commercial standards - [See second Franchises - Topic 2067 ].

Franchises - Topic 2126

Franchise agreement - Royalties - Rebates - A franchisor and franchisee held a meeting to discuss a dispute over a royalty rebate that the franchisor had withheld - At the meeting, the franchisor sought to exercise its right to inspect under the franchise agreement - The franchisee refused - Subsequently, upon receiving written notice, the franchisee agreed to an inspection - The franchisor asserted that the franchisee was disentitled from receiving the royalty payment because of refusal to allow the inspection - The Ontario Court of Appeal held that the rebate was payable - A franchisee was entitled to receive a royalty rebate under paragraph 3C of the franchise agreement if it had fully complied with the terms and conditions - Paragraph 3C set out the specific requirement of full compliance which were "in addition to other provisions of this agreement" - That phrase was vague and ambiguous - The terms specified all had a financial component - The inspection had no financial impact and none of the specific requirements defined as "full compliance" were breached - Upon receiving written notice, the franchisee promptly offered to remedy the situation - In these circumstances, the franchisee's refusal did not affect its right to a rebate - See paragraphs 79 to 87.

Cases Noticed:

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1, refd to. [para. 5].

Kenyon, Son & Craven Ltd. v. Baxter Hoare & Co., [1971] 1 W.L.R. 519 (Q.B.), refd to. [para. 31].

Betker v. Williams (1991), 8 B.C.A.C. 265; 17 W.A.C. 265; 86 D.L.R.(4th) 395 (C.A.), refd to. [para. 31].

Zippy Print Enterprises Ltd. v. Pawliuk (1994), 100 B.C.L.R.(2d) 55 (C.A.), refd to. [para. 31].

Beer et al. v. Townsgate I Ltd. et al. (1997), 104 O.A.C. 161; 36 O.R.(3d) 136 (C.A.), refd to. [para. 31].

Syncrude Canada Ltd. et al. v. Hunter Engineering Co. and Allis-Chalmers Canada Ltd. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [para. 32].

Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.), refd to. [para. 32].

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; 247 N.R. 97; 126 O.A.C. 1, refd to. [para. 35].

Stearns Catalytic Pension Plans, Re, [1994] 2 S.C.R. 611; 168 N.R. 81; 155 A.R. 81; 73 W.A.C. 81, refd to. [para. 44].

Schmidt v. Air Products of Canada Ltd. - see Stearns Catalytic Pension Plans, Re.

Harvard College v. Commissioner of Patents (2002), 296 N.R. 1 (S.C.C.), refd to. [para. 44].

River Wear Commissioners v. Adamson (1877), 2 App. Cas. 743 (H.L.), refd to. [para. 45].

Manulife Bank of Canada v. Conlin et al., [1996] 3 S.C.R. 415; 203 N.R. 81; 94 O.A.C. 161, refd to. [para. 45].

Hydro Electric Board (Man.) v. Inglis (John) Co. et al. (1999), 142 Man.R.(2d) 1; 212 W.A.C. 1 (C.A.), refd to. [para. 45].

Ellis v. Abell (1884), 10 O.A.R. 226 (C.A.), refd to. [para. 49].

Turner v. Visscher Holdings Inc. (1996), 77 B.C.A.C. 48; 126 W.A.C. 48 (C.A.), refd to. [para. 50].

Colautti Construction Ltd. v. Ottawa (City) (1984), 5 O.A.C. 74; 9 D.L.R.(4th) 265 (C.A.), refd to. [para. 54].

Solway et al. v. Davis Moving & Storage Inc. et al. (2002), 166 O.A.C. 370 (C.A.), refd to. [para. 58].

Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 166 O.A.C. 233 (C.A.), refd to. [para. 58].

Mellco Developments Ltd. et al. v. Portage la Prairie (City) et al. (2002), 166 Man.R.(2d) 285; 278 W.A.C. 285 (C.A.), refd to. [para. 58].

978011 Ontario Ltd. v. Cornell Engineering Co. (2001), 144 O.A.C. 262; 53 O.R.(3d) 783 (C.A.), refd to. [para. 65].

Kentucky Fried Chicken Canada v. Scott's Food Services Inc. et al. (1998), 114 O.A.C. 357 (C.A.), refd to. [para. 66].

Machias v. Mr. Submarine Ltd., [2002] O.T.C. 190 (Sup. Ct.), refd to. [para. 66].

Imasco Retail Inc. v. Blanaru et al., [1995] 9 W.W.R. 44; 104 Man.R.(2d) 286 (Q.B.), affd. [1997] 2 W.W.R. 295; 113 Man.R.(2d) 269; 131 W.A.C. 269 (C.A.), refd to. [para. 66].

York Condominium Corp. No. 167 et al. v. Newrey Holdings Ltd. et al. (1981), 122 D.L.R.(3d) 280 (Ont. C.A.), leave to appeal dismissed [1981] 1 S.C.R. xi; 38 N.R. 129, refd to. [para. 69].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 69].

Mason v. Freedman, [1958] S.C.R. 483, refd to. [para. 69].

Jirna Ltd. v. Mister Donut of Canada Ltd., [1972] 1 O.R. 251 (C.A.), affd. [1975] 1 S.C.R. 2, refd to. [para. 70].

Gateway Realty Ltd. v. Arton Holdings Ltd. and LaHave Developments Ltd. (1991), 106 N.S.R.(2d) 180; 288 A.P.R. 180 (T.D.), affd. (1992), 112 N.S.R.(2d) 180; 307 A.P.R. 180 (C.A.), refd to. [para. 70].

702535 Ontario Inc. et al. v. Non-Marine Underwriters, Lloyd's, London et al. (2000), 130 O.A.C. 373; 184 D.L.R.(4th) 687 (C.A.), leave to appeal dismissed (2000), 264 N.R. 400; 145 O.A.C. 400 (S.C.C.), refd to. [para. 74].

Whiten v. Pilot Insurance Co. et al. (1999), 117 O.A.C. 201; 170 D.L.R.(4th) 280 (C.A.), revd. [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201, refd to. [para. 74].

Greenberg v. Montreal Trust Co., Meffert and Melfi (1985), 9 O.A.C. 69; 18 D.L.R.(4th) 548 (C.A.), leave to appeal dismissed (1985), 64 N.R. 156; 14 O.A.C. 240; 30 D.L.R.(4th) 768 (S.C.C.), refd to. [para. 96].

LeMesurier v. Andrus (1986), 12 O.A.C. 299; 25 D.L.R.(4th) 424 (C.A.), refd to. [para. 96].

Housen v. Nikolaisen et al. (2002), 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1 (S.C.C.), refd to. [para. 101].

Supermarché A.R.G. Inc. v. Provigo Distribution Inc., [1997] A.Q. No. 3710 (C.A.), refd to. [para. 102, footnote 1].

Kelsey Group Inc. v. 756766 Ontario Ltd., [1990] O.J. No. 598 (H.C.), refd to. [para. 102, footnote 1].

Metro-Pacific Cellular Inc. v. Rogers Cantel Inc. et al. (1994), 57 C.P.R.(3d) 538 (B.C.S.C.), refd to. [para. 102, footnote 1].

Khagen Investments Ltd. v. 710497 Ontario Ltd. et al. (1999), 98 O.T.C. 241 (Sup. Ct.), refd to. [para. 105].

Director of Investigation and Research, Competition Act v. Southam Inc. et al., [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 110].

Algoma Steel Inc., Re (2003), 168 O.A.C. 89 (C.A.), refd to. [para. 110].

Algoma Steel Inc. v. Union Gas Ltd. - see Algoma Steel Inc., Re.

Majdpour et al. v. M&B Acquisition Corp. et al. (2001), 151 O.A.C. 351; 56 O.R.(3d) 481 (C.A.), refd to. [para. 113].

Hongkong Fir Shipping Co. v. Kawasaki Kisen Kaisha Ltd., [1962] 2 Q.B. 26 (C.A.), refd to. [para. 114].

Farber v. Compagnie Trust Royal, [1997] 1 S.C.R. 846; 210 N.R. 161, refd to. [para. 115].

Farber v. Royal Trust Co. - see Farber v. Compagnie Trust Royal.

Robson et al. v. Thorne, Ernst & Whinney (1999), 127 O.A.C. 215 (C.A.), refd to. [para. 117].

Bayer Aktiengesellschaft et al. v. Apotex Inc. (1998), 113 O.A.C. 1 (C.A.), refd to. [para. 117].

968703 Ontario Ltd. v. Vernon et al. (2002), 155 O.A.C. 386; 58 O.R.(3d) 215 (C.A.), refd to. [para. 118].

Fairbanks Soap Co. v. Sheppard, [1953] 2 D.L.R. 193 (S.C.C.), refd to. [para. 119].

Shah v. Xerox Canada Ltd. (2000), 131 O.A.C. 44 (C.A.), refd to. [para. 122].

Whiting v. Winnipeg River Brokenhead Community Futures Development Corp. (1998), 126 Man.R.(2d) 176; 167 W.A.C. 176; 159 D.L.R.(4th) 18 (C.A.), refd to. [para. 122].

Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943; 277 N.R. 1; 153 O.A.C. 341, refd to. [para. 130].

Martin v. Goldfarb et al. (1998), 112 O.A.C. 138; 41 O.R.(3d) 161 (C.A.), refd to. [para. 138].

Authors and Works Noticed:

Anson's Law of Contract (27th Ed. 1998), pp. 494, 495 [para. 48].

Cheshire, G.C., and Fifoot, C.H.S, The Law of Contract (5th Ed. 1960), p. 488 [para. 116].

Chitty on Contracts (28th Ed. 1999), vol. 1, para. 12-102 [para. 31].

Corbin on Contracts (1993), para. 1295 [para. 50].

Hoffman, J.P., Statutory Obligations of Fair Dealing and Good Faith in Canada (February 22, 2002), p. 22 [para. 102, footnote 1].

McCamus, J.D., The Duty of Good Faith Contractual Performance (May 17, 2000), generally [para. 96].

Perell, P.M., A Riddle Inside an Enigma: The Entire Agreement Clause (1998), The Advocates' Q. 287, generally [para. 50].

Rafferty, N., Developments in Contract and Tort Law: The 1999-2000 Term (2000), 13 S.C.L.R.(2d) 125, pp. 141, 142 [para. 34]; 143 [paras. 34, 35].

Sullivan, R., Contract Interpretation in Practice and Theory (2000), 13 S.C.L.R.(2d) 369, generally [para. 55]; p. 378 [para. 56].

Waddams, S.M., The Law of Contracts (3rd Ed. 1993), paras. 328, 329 [para. 56]; 342 [para. 58]; 583, 587 [para. 118].

Counsel:

Benjamin Zarnett and Elliot S. Birnboim, for the appellant;

F. Scott Turton, for the respondents.

This appeal was heard on August 26, 2002, by Weiler, Austin and Laskin, JJ.A., of the Ontario Court of Appeal. Weiler, J.A., delivered the following judgment for the court on May 20, 2003.