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A study of the legal aspects of abortive contract negotiations MacLean, Murdo 1979

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A STUDY OF THE LEGAL ASPECTS OF ABORTIVE CONTRACT NEGOTIATIONS by MURDO MACLEAN L.L.B. ,(HONS).f The University of Aberdeen, 1973 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE-FACULTY :m GRADUATE STUDIES (Department of Law) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA September 1979 (c) Murdo MacLean, 1979 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f the r e q u i r e m e n t s f o r an advanced degree a t the U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d by the Head o f my Department o r by h i s r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department o f L JQW  The U n i v e r s i t y o f B r i t i s h Columbia 2075 Wesbrook P l a c e V a n c o u v e r , Canada V6T 1W5 Date D E - 6 B P 75-51 1 E ( i i ) I ABSTRACT The problems which a r e t o be d e a l t w i t h i n t h i s p a per have a t t r a c t e d r e l a t i v e l y l i t t l e a t t e n t i o n i n t h e l i t e r a t u r e . One; o f ' t h e r e a s o n s f o r t h i s i s u n d o u b t e d l y t h e p a u c i t y o f r e p o r t e d c a s e s i n w h i c h a g g r i e v e d n e g o t i a t o r s have s o u g h t t o r e c o v e r f o r e x p e n d i t u r e s i n c u r r e d d u r i n g a b o r t i v e n e g o t i a t i o n s . N e v e r t h e l e s s , t h e q u e s t i o n o f th e r i g h t s o f n e g o t i a t i n g p a r t i e s i s becoming i n c r e a s i n g l y i m p o r t a n t i n p r e s e n t day c o n d i t i o n s , i n view o f t h e f a c t t h a t much o f t h e c o n t r a c t i n g o f bu s i n e s s m e n i s now p r e c e d e d by a p e r i o d o f p r o t r a c t e d n e g o t i a t i o n . The d i f f i c u l t y a r i s e s when one o f t h e p r o s p e c t i v e c o n t r a c t o r s has i n c u r r e d s u b s t a n t i a l e x p e n d i t u r e i n t h e c o u r s e o f n e g o t i a t i o n s : ? , and t h e o t h e r u n i l a t e r a l l y d e c i d e s t o r e s i l e , r e f u s i n g t o e n t e r i n t o a c o n t r a c t . As w i l l be seen, t h e r e a r e a v a r i e t y o f r e a s o n s why t h e d e f e n d a n t may no l o n g e r w i s h t o c o n t r a c t , and i t i s p o s s i b l e t h a t t h e s e s h o u l d , t o some e x t e n t , be d e t e r m i n a t i v e o f h i s l i a b i l i t y t o make recompense t o t h e p l a i n t i f f , Not e v e r y r e f u s a l t o c o n c l u d e an agreement s h o u l d c u l m i n a t e i n a l i a b i l i t y t o r e c o u p t h e o t h e r p a r t y f o r h i s e x p e n s e s . T h i s a s p e c t w i l l be p u r s u e d f u r t h e r a t a l a t e r s t a g e . F o r t h e most p a r t , we w i l l be c o n f i n i n g o u r s e l v e s t o a d i s c u s s i o n o f t h e q u e s t i o n when, i f e v e r , an a g g r i e v e d n e g o t i a t o r has r e c o u r s e a g a i n s t h i s c o - n e g o t i a t o r f o r t h e s e v a r i o u s l o s s e s and e x p e n d i t u r e s . The somewhat s i m i l a r p r o b l e m o f t h e case where p a r t i e s have r e a c h e d a n agreement w h i c h makes payment c o n d i t i o n a l upon t h e o c c u r r e n c e o f a f u t u r e f a c t w h i c h t h e d e f e n d a n t p r e v e n t s f r o m m a t e r i a l i s i n g w i l l be c o n s i d e r e d i n s o f a r as r e l e v a n t t o t h e n e g o t i a t i o n cases."'" 1 See, f o r example, L u x o r ( E a s t b o u r n e ) L t d and O t h e r s v Cooper, [19^1] 1 ALL ER 33; P l a n c h e v C o l b u r n , (1831) 8 BING 14; P r i c k e t t v Badger (I856) 1 CBNS 296; I n c h b a l d v Western C o f f e e Co (1864) 17 CBNS 733; T r o l l o p e (George) and Sons v Ma r t y n B r o s , U9341 2 KB 436; Crooks v G e r a r d [1951] ^ D L R ^ 3 ; B l a c k , G a v i n and Co  v Chalmers' (1966) 56 WWR 203. ( i i i ) In both cases the p l a i n t i f f seeks to recover what i s essentially remuneration for wasted time and expenses, the defendant having put i t out of his power to recompense him for those in the mode originally contemplated, viz, under an expected contract i n the one case, and on • the fulfilment of a stipulated condition in the other-. The picture w i l l become clearer i f some illustrations are given. Suppose two parties (say, a building contractor and a developer) enter into negotiations with a view to entering into a contract for the construction of a shopping centre. After i n i t i a l discussion, i t i s apparent to each party that-he has found the "right man". The contractor is then instructed to carry out geological surveys of the proposed si t e , i s advised that he should also prepare plans of the proposed buildings (which invariably involves the services of an independent architect), i s requested to prepare quantities, to submit and.resubmit tenders, and so forth. The cost of these various services runs into thousands of dollars, and the contractor devotes many months of his time to the project. He has bypassed the. opportunity of entering into other contracts elsewhere. A l l along, the developer holds himself out as being ready and willing to contract. The contractor i s sure the "deal i s on", the only apparent question between the parties being when i t w i l l be consummated. The contractor's expectations of obtaining the contract are so strong that he may even go to extra expense without being specifically requested by the other party. So clear i s the understanding that a contract i s just about to be entered . , 2 into. 2 See, for example, William Lacey (Hounslow) Ltd v Davis f l 1 l'.'WLR 932; Brewer v> Chrysler Canada Ltd [1977 / 3 WWR 69 (iv) Aftter-.having done this preparatory work for several months, and just when i t appeared that a contract was about to be consummated, the developer announces that he no longer wishes to proceed with the proposed transaction, and he lets the project to another contractor or abandons it- altogether. He does not even offer a reason for this .sudden change of mind. What has happened has had severe financial implications for the contractor. If he i s a "small" contractor, i t may even have threatened the financial substratum of his entire business. The question now'being asked, and which we shall attempt to answer i n this paper, i s whether the law affords the contractor any protection in such a case.. An i l l u s t r a t i o n of abortive negotiations resulting i n considerable loss to a prospective contractor may be given in a different setting. X i s approached by Y, who i s the managing director of a large company.. Y indicates that the board is desirous of having X join the company, and invites X to enter into negotiations with a view to securing that end. A course of protracted negotiations ensues between X and other company representatives with the object of settling the terms of his employment, his role i n the management and internal affairs of the company, and so forth. Again there emerges a belief, apparently common to both parties, that X w i l l be joining the company in due course. X s e l l s his existing business at a loss. He also s e l l s his house and moves with his family to the locality where "the company's offices are situated, a l l at the urging or with the knowledge of company o f f i c i a l s , and i n reliance on the assurances which were given as to him being acceptable to the company. Were i t not for the fact that X understood the position i n the company to be his, i t being, i n his view, a matter of " r a t i f i c a t i o n rather (v) 3 than a matter of s e l e c t i o n " , he would not have changed h i s p o s i t i o n thus, even i f encouraged to by company o f f i c i a l s . No co n t r a c t i s i n f a c t concluded, the defendants having changed t h e i r minds about engaging the p l a i n t i f f . Should the law gi v e X a measure of p r o t e c t i o n i n such a s i t u a t i o n ? On elementary p r i n c i p l e s of j u s t i c e the answer must c l e a r l y be i n the a f f i r m a t i v e ; a p a r t y should not be permitted w i t h impunity to generate expectations i n another p a r t y , and l e a d or d i r e c t him to a c t to h i s detriment when h i s expectations are thus r a i s e d , i f the f i r s t p a r t y should now change h i s mind and withhold the contract.-' F o r t u n a t e l y , however, as w i l l be seen s h o r t l y , many l e g a l systems w i l l , i f c e r t a i n c o n d i t i o n s are s a t i s f i e d , permit the p l a i n t i f f to recover h i s " r e l i a n c e " expenditures i n such a case. An attempt w i l l be made i n the f o l l o w i n g pages to analyse the E n g l i s h and Canadian pr e - c o n t r a c t case law, and a comparison w i l l be drawn with the r e l e v a n t a u t h o r i t y i n Scotland and i n the United S t a t e s . 3 This phrase was used by H J MacDonald J i n Brewer v C h r y s l e r (supra) a t p 76. 4 These f a c t s bear a s i m i l a r i t y to those i n the American case of Hoffman v Red Owl Stores Inc (1965) 133 NW (2d) 26? (S CT WIS). Hoffman, i n v o l v i n g an extended use of the d o c t r i n e of promissory estoppel i n con t r a c t n e g o t i a t i o n s , w i l l be examined i n a l a t e r s e c t i o n . 5 " I t was contemplated t h a t the p l a i n t i f f would go to trouble and expense and i n the normal course of events he would be e v e n t u a l l y recompensed. There were assurances h e l d out to the p l a i n t i f f as to h i s eventual p o s i t i o n , upon which i t was intended he would a c t and i n e f f e c t upon which he d i d a c t . " per H J MacDonald J i n Brewer v C h r y s l e r (supra) a t p 78. This strong expectation of con t r a c t enabled the co u r t to give the p l a i n t i f f r e s t i t u t i o n a r y r e l i e f f o r expenses and outlays i n c u r r e d i n a n t i c i p a t i o n of g e t t i n g a proposed d e a l e r s h i p . (vi) TABLE OF CONTENTS I Abstract • ( i i ) II The Legal Setting 1 1 Restitution and Unjust Enrichment 1 (a) The Meaning of Benefit i n Restitution 4 (b) A Brief Comment on the American Position 9 (c) The "Risk-Assumption" Factor i n Contract Netotiations .. 12 (d) Some Specific Case Illustrations 17 (e) Analysis of the Anglo-Canadian Pre-Contract Authorities: The "Fault-Risk" Hypothesis 22 (f) The Mutual Breakdown of Negotiations 51 (g) Restitutionary Relief and the P l a i n t i f f Who Refuses To Go On 61 (h) A Brief Comparison with the Legal Position of an Estate-Agent 70 (i) A Final Comment on the Meaning of Benefit 78 (j) Conclusion 86 2 Promissory Estoppel and Abortive Contract Negotiations i n the United States 90 (a) Background 90 (b) A Functional Analysis of Promissory Estoppel Theory i n Abortive Negotiation Situations 105 (c) Conclusion 112 % 3 The Implied-In-Fact Contract and Abortive Contract; Negotiations • 113 (a) The Case Law Examined 113 (b) Conclusion 125 ( v i i ) III Initiating Negotiations Without Serious Intent to Contract 127 (a) A Look at the Case-Law 127 (b) Conclusion 132 IV The Aggrieved Contract Negotiator i n Scots Law 134 (a) A Look at the Scottish Cases allowing Recovery on the basis of the "fault-risk" formula 135 (b) A Look at the Scottish cases basing Recovery on the defender's "Wrongdoing" 140 V Summary and Conclusion 145 Bibliography 148 ( v i i i ) ACKNOWLEDGEMENT; I take this opportunity to extend my sincere thanks to Professors Blom, KLippert and McRae for their kind and unfailing assistance with earlier versions of this thesis at the U.B.C. Law School, and for the very many helpful suggestions made at each stage of i t s production. MURDO MACLEAN Glasgow, Scotland, September, 1979. 1. II THE LEGAL SETTING AND APPLICABLE PRINCIPLES t 1 RESTITUTION AND UNJUST ENRICHMENT When a breakdown in contract negotiations causes heavy losses to one of the parties to the proposed transaction we have, in essence, a situation i n which a party i s seeking recompanse for losses and expenditures incurred on the advice or instructions of the other, which expenditures w i l l rarely be conformable with any monetary advantage 6 acquired by that party. Before going on to discuss i n detail the applicability of restitutionary remedies to the pre-contract situation, however, i t is necessary that we f i r s t make some observations concerning general restitutionary theory i n present day Anglo-Canadian law. An attempt w i l l then be made to show that the pre-contract cases giving the desired r e l i e f f a l l four square within this general restitutionary framework. 7 The Deglman'case, a 1954 Canadian Supreme Court decision, i s now widely accepted to have based Canada's law.of restitution upon 8 the doctrine of unjust enrichment. A few months earlier the same 6 It i s prima facie "easier" to recover i n restitution i n a case where i t can be shown that the defendant has obtained a financial gain from the abortive negotiations^ ,eg. See Maclver v American Motors (Canada) Ltd, (I976) 63 DLR~*(3d) 154, affirmed [1976J 5 WWR 217 (Manitoba Court of Appeal). Such cases are uncommon, however, and i f aggrieved negotiators are to be adequately protected, then restitutionary recovery must be permitted regardless of such gain. As w i l l be seen, the authorities indicate that the trend i s i n this direction. 7 Deglman v Guaranty Trust Co of Canada and Constantineau, [1954J 3 DLR 785. 8 For example, see McCamus, "Restitutionary Remedies", Law Society of Upper Canada, Special Lectures, (1975) 255; Angus, "Restitution i n Canada since the Deglman case", (1964) 42 Caiv B Rev 529; Shelton, "Unjust Enrichment and the Deglman case", 1 Alta L R&V 30 (1955); Schiff, "The Deglman case and Canada's Law of Unjust Enrichment," (1955) 13 UXToronto Fac L Rev 30 2 9 conclusion had been arrived at by the Manitoba Court of Appeal in Morrison v Canadian Surety Company.^ There are numerous post 1954 Supreme Court decisions"'""'" which apply Deglman and quote with approval Lord Wright's well-known 12 dictum i n the Fibrosa case that: ' "It i s clear that any c i v i l i s e d system of law .is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit, derived from another which i t i s against conscience that he should keep." There is certainly no room l e f t i n Canada now for application of the implied-in-law contract f i c t i o n which dominated thinking in 13 the English law of restitution for such a long time. ^ 14 As Cartwright J put i t in the Deglman case: 9 Viz., that the backbone of the law of restitution was to be found in the doctrine of unjust enrichment. 10 £l954] 4 DLR 736, 12 WWR 57 11 To name but a few, Shortoaks R M v Mobil Oil Canada Ltd, [1975] 4 WW,R 591 at.604 per Martland J; County of Carleton v City of Ottawa, [I966] 52 DLR (2d) 220 per Hall J at 225; Peter Kiewit  Sons Company of^Canada Ltd v Eakins Construction Ltd fl96Ql SCR 361, 22 DLR (2d) 465 Ver Cartwright J, as he then was, (dissenting on a different point) at 474. 12 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour, £l943J AC 32 at P61. 13 For example, see Sinclair v Brougham [l9l4j AC 398. Traces of the implied-in-law contract theory are s t i l l to be found i n the decisions of some English Courts, .;!eg Re Diplock [19^7] Ch 716 14 At pp 794-795» with the concurrence of Estey, Locke and Fauteaux J.J. "[The p l a i n t i f f ' s ] right appears to me to be based, not on contract, but on an obligation imposed by law. [ i n Scott v  Pattison, [1923J 2 KB 723] i t was held that [the p l a i n t i f f ] could sue i n assumpsit on an implied contract to pay him according to his deserts I do not think i t is accurate to say;that there was an implied promise. In my view i t was correctly decided, in Britain v Rossiter, (1879) H QBD 123, that where there i s an express contract between the parties which turns out to be unenforceable by reason of the Statute of Frauds tio other contract between the parties can be implied from the doing of acts in performance of the express but unenforceable contract."''"^ The Supreme Court has never departed from the principle expounded in Deglman of allowing "restitution against what would otherwise be „16 an unjust enrichment of the defendant at the expense of the p l a i n t i f f . Central to the doctrine of unjust enrichment i s the notion 17 of benefit conferred upon the defendant. Thus, the success or failure of a restitutionary claim w i l l depend, inter a l i a , upon whether a benefit has been conferred i n law on the defendant. 15 Where performance i s referable to an existing, albeit unenforceable, agreement; finding an implied contract for payment of reasonable remuneration, i t i s said, would be "to draw an inference contrary to the facts." 16 per Rand J, with the concurrence of Rinfret C J C and Taschereau J, at P 778. 17 Paradoxically, therefore, i t may be argued that the emergent unjust enrichment doctrine w i l l i n some cases deny recovery where previously i t could be got under notions of implied contract; i t i s f a t a l "to a claim on a quantum meruit that the employer has not obtained any benefit." per Lord Wright in Luxor (Eastbourne) Ltd and others v Cooper. (0-941] 1 ALL ER 33 at 5571 The validity of the above proposition,- however, depends on the meaning of benefit in restitution. a) The Meaning of Benefit i n Restitution There have been very few cases before the Canadian Courts in . which the question of whether or not'the defendant received a benefit 18 has been squarely i n issue. Estok v Heguy , however, a decision of the British Columbia Supreme Court, was such a case. The fact that i n this, case there was an objective increase i n the value of the defendant's land, as a result of a load of manure dumped there by the. p l a i n t i f f , was held to be controlling. A benefit had been conferred, and the defendant's arguement that he did not want the manure, and that he had now proceeded to subdivide his land for purposes other than farming, 19 could not displace this finding. There are also indications that i t i s not essential to show that a defendant has made a financial gain, even in an objective sense, i n order to support a finding of . . . . 20 benefit. Thus, in McCarthy Milling Co Ltd v Elder Packing Co L t d 2 1 the Ontario High Court found that a benefit had been conferred upon the defendant buyer when the p l a i n t i f f seller's goods were found to be no longer eligible for a particular subsidy. The p l a i n t i f f had 18 [1963] 40 DLR (2d) 88; Estok was applied by that same court to an essentially similar fact situation i n T & E Development v  Hoornaert, (Unrptd., June 22, 1977). For criticism of the Estok decision see Crawford, (1964) 42 Can B Rev 318. Also McCamus, "Restitutionary Remedies", Special Lectures of the Law Society of Upper Canada, (1975) 255 at P 287. 19 Although the decision i n Estok may be wrong i n allowing the p l a i n t i f f recovery (the defendant had not requested the manure, and did not even know i t was being dumped on his land), i t can be supported on-the issue of "benefit". As w i l l be seen shortly, there i s plenty of support to be found in the United States for an expanded definition of benefit. -20 See, for example, Planche v Colburn, Prickett v Badger, William Lacey, a l l supra. 21 (1973), 33 DLR (3d) 52. 5 sold substantial quantities of his product to the defendant over an extended period of time. The s e l l i n g price was computed on the basis that the above subsidy was payable on a l l the p l a i n t i f f ' s sales, and was therefore lower than i t would have been had there been.no question of entitlement to subsidy. The p l a i n t i f f successfully argued that, as he would have demanded a higher selling price had; he been aware of his non-entitlement to subsidy at the time of entering into business with the defendant buyer, the latter had been unjustly enriched by the amount of the price difference. There was no evidence before the court showing that the defendant had profited' in any way from the misapprehension. It i s most l i k e l y that the defendant (a manufacturer of pet food) had passed the advantages of the allegedly lower selling price on to consumers and retailers. Osier J, however, was content to hold that: "the defendant was unjustly enriched by the amount demanded by the Feed Board and paid to i t by the p l a i n t i f f as repayment of ineligible subsidy received." Again, i n William Lacey (Hounslow) Ltd v Davis, a case where" no evidence was led to show that the defendant had made a pecuniary gain, Barry J said that the defendant had received "the benefit of a l l [the p l a i n t i f f ' s ] services." The p l a i n t i f f ' s preparation of'..' various plans and estimates i n that case, and their submission to the defendant for his opinion on their s u i t a b i l i t y , constituted a benefit i n the hands of the defendant. It was not material that i t was not turned to financial advantage. In the same way, the p l a i n t i f f i n the case of Planche v Colburn 2^ 22 [1957] 1 WLR 932. incidentally, this case i s v i t a l l y important to the pre-contract analysis conducted i n this paper. 23 (1831) 8'Bing. 14. 6 was h e l d e n t i t l e d to recover on a quantum meruit f o r h i s s e r v i c e s , 24 "because he ought not t o l o s e the f r u i t of h i s labour". The defendant had repudiated an " e n t i r e " c ontract under which the p l a i n t i f f o b l i g e d h i m s e l f to w r i t e a manuscript. Repudiation occured before the work was completed. The defendant d i d not even see the u n f i n i s h e d manuscript, so c l e a r l y there could have been no f i n a n c i a l g a i n on h i s p a r t . ^ The above cases i l l u s t r a t e t h a t i t i s not necessary f o r there t o be any f i n a n c i a l g a i n on the defendant's p a r t f o r a b e n e f i t t o 26 have been conferred on him i n law. The s i m i l a r p o i n t a l s o a r i s e s of whether, i n a case where some gai n has r e s u l t e d from the p l a i n t i f f ' s e f f o r t s , t h a t g a i n or the reasonable cost of the s e r v i c e s t o him i s recoverable. An-:-action on a quantum meruit always give s the l a t t e r ; "the respondent i s e n t i t l e d t o recover f o r h i s s e r v i c e s and o u t l a y s what the deceased would have had t o pay f o r them on a purely business b a s i s t o any other person i n 27 the p o s i t i o n of the respondent." 24 per T i n d a l C J a t p l 6 . 25 Therefore, i f we analogize the Planche - P r i e k e t t type of case w i t h the o r d i n a r y a b o r t i v e n e g o t i a t i o n s s i t u a t i o n (where the defendant makes no g a i n ) , then our a n a l y s i s i s sound i n s o f a r as the i s s u e of b e n e f i t i s concerned. 26 Cf., f o r example, W i l l i a m Lacev (Hounslow) v Davis (supra); Brewer  S t r e e t Investments. L t d v Ba r c l a y s Wo'Ilen Cn L t d [1954] 1 QB 428; Hosmer v Wilson. 7 Mich. 294, 74 AM Dec. 7l6 (1859). T h i s expansive d e f i n i t i o n of b e n e f i t i s i m p l i c i t i n Goff and Jones' book on r e s t i t u t i o n (The Law of R e s t i t u t i o n , (1966)), where the w r i t e r s a s s e r t t h a t the u n i f y i n g p r i n c i p l e of the law of r e s t i t u t i o n i s t o be found i n the d o c t r i n e of unjust enrichment. See a l s o Jones, ' R e s t i t u t i o n a r y Claims f o r S e r v i c e s Rendered,* (1977) 93 LQR 273. 27 per Rand J . , i n Deglman a t p 788. I n Reeve v Abraham. ((1957) 22 WWR 429, A l t a . S. Ct.) the court s a i d t h a t the cost of the aggrieved party's s e r v i c e s was t o be taken as the measure of the other's u n j u s t enrichment. Cf. Parklane P r i v a t e H o s p i t a l L t d v  Corporation of C i t y of Vancouver and Attorney General f o r B r i t i s h  Columbia. [1973] 2 WWR 289. 7 These factors make i t possible for one to analyse the pre-contract cases i n the context of a general restitutionary framework. 28 The case law suggests that a rationalisation along the following lines may be correct. If one requests that another perform services and that other does indeed perform services, then the benefit to the person requesting consists;-.in the actual performance by that other; the benefit presumed to have been conferred i s the cost to the p l a i n t i f f of these services, and, conceptually, i t is this which the law forces the recipient to disgorge, i t being immaterial what advantage, i f any, the services have been to him i n an economic sense, i f he should now 29 break off his relationship with the other party. ' If we adopt this wider meaning of benefit, then i t becomes possible to eliminate any associations which that term has with pecuniary gain, and a rationalisation of the pre-contract and Planche •? Frickett type 30 cases can be made i n the context of an unjust enrichment theory. The measure of the p l a i n t i f f ' s recovery w i l l be the reasonable cost of the services to him. This figure i s presumed to be the benefit 28 See, for example, cases cited at note (26) 29 It i s most interesting to note that this i s the approach taken i n the American Restatement of Restitution (1937); "A person confers a benefit upon another i f he .performs services beneficial to or at the request of the other" (S(l), Comm (b)). The theory i s that "the defendant must have attributed "value" to the services i f he requested them, even i f they resulted i n no increment i n his estate.", Dobbs, The Law of Remedies, (1973) at. p 956. 30 cf., Goff'and Jones (supra), at chapter 23 , which i s devoted to "Anticipated Contracts Which Do Not Materialise." However, given the desirability of such a rationalisation i n that i t opens the way to a conceptual unification of the law of restitution, occasional dissenters are s t i l l to be found. Thus, i n the most recent Australian case arising from abortive negotiations, Sheppard J., in the New South Wales Supreme Court, said that i n the case before him the defendant had obtained "no "benefit", arid that i t therefore was not a case of unjust enrichment. (Sabemo P/L v North Sydney M C, [l977j 2 N S W L R 880) 8 acquired by the defendant. The mere conferment of a benefit i s , of course, not per se enough to permit the p l a i n t i f f recovery i n the situations about to be discussed, and much of.this paper w i l l be devoted to a study of these 32 -various limitations. The distinction between the question of whether there has been a benefit conferred upon a party, on the one hand, and the question of whether that benefit i s recoverable, on the other, must always be kept i n mind. Otherwise, any analysis of the issues relevant to recoverability i s i n danger of becoming clouded. 31 See?, for example, William Eacey (supra); Brewer Street Investments (supra); Brewer v Chrysler Canada Ltd, [1977] 3 WWR 69; Planche v Colburn, (183D 8 Blng. 14; Prickett v Badger, (1855) 1. CBNS 296 ; . H i l l v Kitching, (1846) 3 CB 299; Lockwood v_Levick, ( i 8 6 0 ) 8 . CBNS 603; Jnchbald v Western Coffee Co., (1864) 17 CBNS 733; cf. Sinclair v Logan, I 9 6 I SLT (Sh Ct) lO(Scotland). 32 See, for example, Construction .Design & Management Ltd v New  Brunswick Housing Corp.'' et a l . , p.973] 36 DLR (3d) 458; Jennings  and Chapman Ltd v Woodman Matthews & Co, [1952] 2 TLR 409; Italian Village Restaurant Ltd v Van Ostrand et a l . [1970] 9 DLR (3d) 512; cf. Von Laun & Co v Neilson Reid & Co, (1904) 6F 644 (Scotland); Microwave Systems (Scotland) Ltd v Electro-Physiological  Instruments Ltd., 1971 SLT^ (NOTES) 38 (Scotland); Site Preparations  Ltd v Secretary of State f o r Scotland, 1975 SLT - (NOTES) 41. 9 (b) The attenuation of the notion of "benefit" i n the American i 1 r r — 1 —«-> rrr Law of Restitution: A brief comment. Finally, before going on to discuss the pre-contract cases i n detail, i t i s instructive to compare what has been said i n the previous section re the expansive and often attenuated meaning given the notion of benefit i n the Anglo-Canadian law of restitution with 33 34 the parallel American position. Many cases can be found i n the American law reports to vouch for the proposition that a "benefit" may be conferred upon a defendant, regardless of whether the p l a i n t i f f ' s 35 performance results i n an objective gain to him, or proves to be of any value to him. In Minsky's Follies of Florida v Serines,^ parties entered into an oral, and therefore unenforceable, agreement for the lease of certain premise's. The prospective tenant instructed the owner to employ.a watchman and obtain a liquor license for the premises. The prospective tenant, relying on the Statute of Frauds, refused to go ahead with the agreement. The landlord sucessfully raised an action to recover his wasted expenditures. The defendant had never even 33 See note (29) supra, and see generally, Dobbs, The Law of Remedies, (1973); Dawson and Palmer, Cases on Restitution, (2nd Ed., 1969). 34 eg. Minsky's Follies of Florida v Sennes, 206 F 2d 1 ( 5 t h Cir 1953); Kearns v Andree, 107 Conn. 181, 139 A. 695 (1928); Coleman Engineering  Co y North American Aviation, Inc., 65 Cal. 2d 396, 420 P 2d 713 ( I 9 6 6 ) ; Peoples Nat. Bank of Orlando v MagruderT" 77 Fla. 235, 81 SO. 440 (1919). \ 35 As, for example, i n Estok, (supra): "Any inquiry into the definition of benefit must account for those cases ostensibly decided on quasi-contractual; grounds that permit recovery without requiring a finding of gain" - Sullivan, "The Concept of Benefit i n the Law of Quasi-Contract , " : x ( l975) 64 Georgetown Law Journal, 1 at p 12. 36 206 F. 2d 1, ( 5 t h Cir. 1953). 10 entered upon the premises, and the p l a i n t i f f ' s performance of these various requested acts cannot, therefore, be said to have monetarily 37 benefited him. The court remarked that: "The lease i s unenforceable because of the Statute of Frauds, but that fact does not relieve the defendant of the implied obligation cast upon him by law, independently of the lease, to reimburse the p l a i n t i f f for moneys expended at defendant's request [and for his benefit"]" -v. 39 In the same vein i s Kearns v Andree , where parties had entered into an oral agreement for-the sale of land. The defendant requested the plaintiff-vendor to make certain alterations to the property. These were duly executed. The defendant refused to proceed with the purchase. The p l a i n t i f f recovered i n restitution for the expenditures incurred i n complying with the defendant's requests. Benefit, for the purposes of the law of restitution, can thus be divorced from the question of financial gain. Thus, services rendered to a defendant upon request can be treated as a legal benefit, whether or not these ultimately prove to be of any personal value to 37 i d at p 4 38 Emphasis mine 39 107 Conn. 181, 139 A 695 (1928) 40 Of, Jeanblanc, (I950) 26 Ind. LJ. 1 11 him. These, and other numerous American authorities yielding similar results, provide unequivocal support for the view that present day restitutionary theory i n the United States favours the adoption of an expansive concept of benefit. 4 l C f F u l l e r and Perdue's classic a r t i c l e on'contract damages; "The Reliance Interest i n Contract Damages," (1936) 46 Yale LJ 52 . The writers, noticing that the reliance interest i n contract had long been protected i n the guise of restitutionary awards, remark that the p l a i n t i f f ' s "recovery is measured not by the defendant's enrichment, but by his own detriment. If the purpose of restitution i s indeed to compel the defendant "to return to the p l a i n t i f f the value of any performance that he has received," i t seems odd that this value should be measured at the point of departure instead of at the point of arrival" (at p 3 9 4 ) . As w i l l be seen, this observation i s appropriate also to restitutionary awards emerging from abortive contract negotiations. . 12 (c) The "Risk-Assumption" Factor In Contract-Negotiations. I t - i s clear that not every p l a i n t i f f who has incurred expenditure i n anticipation of a contract being entered into at some later date should be able to recover these expenses from his co-negotiator i f , at the end of the day, no contract i s i n fact entered into. Much of the time the aggrieved negotiator w i l l be taking one of the•"risks of the game", thus standing to lose the expenditure made i f the negotiations should f a i l . A few practical illustrations might c l a r i f y the picture. X, the owner of a television set, approaches an e l e c t r i c a l engineer with a view to finding out what i s the matter with the set, and how much i t would cost to repair the defect. X considers the price quoted to be too high. He takes the television set to another engineer, a competitor of the f i r s t one, or just dumps i t , thinking i t not to be worth repairing. The engineer's wasted time and trouble in this case represents one of the business risks inherent i n his trade. Essentially similar considerations obtain when one takes his 42 car to a garage, contemplating getting repairs done to i t . The vehicle owner has a change of mind, the faults located i n the car being considered either too t r i v i a l or too major to be worth repairing, or because the estimate quoted i s thought to be excessive. Again, the garage has taken the risk of what has happened. A wasted afternoon of one of i t ' s employeestime is entered»>as one of the over-heads involved i n running the business. 42 As w i l l be seen, however, the position would i n a l l likelihood be different i f i t could be shown that the owner of the vehicle did not "seriously contemplate" getting the repairs done when he took the car to the garage. See page 127 post. 13 Or one may go to a car dealer to inquire about some rare continental model. You are told that none are i n stock i n the meantime. The dealer, i n anticipation of business, says that he w i l l make a phone c a l l to the manufacturers i n Italy, instructing them to send a model to Vancouver as soon as possible. The model arrives i n due course, but, owing to the fact that i t does not match your idiosyncratic tastes, you decide not to purchase i t . Or you decide not to purchase i t for "no good reason at a l l " . Recovery for the money and time expended i n getting the model to Vancouver would again appear to be 43 excluded on the basis that the dealer "was taking a chance". The archetypal example of pre-contract risk-taking must be the i n i t i a l negotiating, and tendering stages of construction and engineering contracts. There i s , for example, no merit i n the argument that a builder tendering for certain works, along with several other builders, should be able to recover the costs of preparing his tender from the employer, i f he should be one of the unsuccessful bidders. In the nature of things, only one of them could have obtained the eventual contract, and each tenderer i s f u l l y aware of this. Saddling the employer with multiple l i a b i l i t i e s i n such a case would discourage competitive contract negotiation, might foster "unnegotiated" contracts, or weaken the " u t i l i t y of contract as an instrument of 1.44 self-government." The builder, i n preparing his bid, takes the "risk" of future employment, and of his expenditures going uncompensated. 43 Qf. Saleilles, (1907), 6 Revue Trimestrielle De Droit C i v i l , 697: "De l a responsabilite precontractuelle." 44 This phrase was used by Kessler and Fine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract: A Comparative Study," (1964) 77 Harv. L. Rev. 401 at 412. 14 He does not expect to be remunerated for the work done, and the 45 employer i s aware of this. As Barry J. puts i t i n the William Lacey case; "If a builder i s invited to tender for certain work, either in competition or otherwise, these i s no implication that he w i l l be paid for the work - sometimes the very considerable amount of work - involved i n arriving at his price: he undertakes this work as a gamble, and i t s cost i s part of the overhead expenses of his business which he hopes w i l l be met out of the profits of such contracts as are made as a result of tenders which prove to be successful" A builder i n this situation may, i n restitutionary language, be regarded as a "volunteer", not i n the sense that the work done by him was unrequested, but i n the sense that the risk-factor associated with the work done negates any expectation that payment i s to be 47 made i f he should be an unsuccessful tenderer. 45 [1957] 1 WLR 932 46 i d at p 934. Much the same was said i n an early Ontario case: "It would be a startling proposition that a builder, who, at the request of one who contemplates building a house, makes a sketch of the building and an estimate of the cost, with a view to his getting the contract to build i t , i s entitled, i f he does not suceed i n getting the contract, to be paid for the work which he had to do i n order to submit his sketch and estimate," per Meredith, GJO i n Yates v Wright & Co., ( 1920) , 18 OWN 305 at 306. 47 Similarly, with the television engineer and the car dealer instanced above. The protracted course of negotiation, and the confident anticipation of eventual agreement, present i n cases like William Lacey (discussed i n detail at p 37 et seq., post), i s absent. The p l a i n t i f f s i n those illustrations probably encounter such customers many times a day or week. However, when a l l other competitors have been e l i m i n a t e d , and p a r t i e s begin n e g o t i a t i o n s on a one-to-one b a s i s , there comes a time when the p a r t y doing the work should no longer take the r i s k of the other a r b i t r a r i l y breaking o f f t h e i r r e l a t i o n s h i p . Indeed, the a v a i l a b l e case law does e s t a b l i s h t h a t the defendant's freedom of a c t i o n becomes c u r t a i l e d when n e g o t i a t i o n s reach an advanced 48 stage. As was s a i d i n a recent Canadian case: "the s e r v i c e s were rendered i n the e x p e c t a t i o n of both p a r t i e s t h a t the p l a i n t i f f would be compensated by being granted a d e a l e r s h i p . This d i d not come about but t h a t f a c t does not "wipe out" the circumstance t h a t the p l a i n t i f f was t o be compensated. I f i t was not to be done by awarding him a c o n t r a c t , i t must s u r e l y be done 4Q otherwise " I t i s d i f f i c u l t to say when, i n a p a r t i c u l a r case, the p l a i n t i f f i s no longer c a r r y i n g out the work at h i s own r i s k . Much appears t o depend upon the s t r e n g t h of the p l a i n t i f f ' s e x p e c t a t i o n t h a t a c o n t r a c t w i l l e v e n t u a l l y be entered i n t o , and t h a t compensation f o r h i s e f f o r t s w i l l come out of the p r o f i t s made thereunder."^ I n other words, i f i t i s found t h a t the p l a i n t i f f d i d not have an " u n q u a l i f i e d understanding" t h a t the defendant would c o n t r a c t w i t h him, then, and f o r so long as t h i s i s the case, i t i s more l i k e l y t h a t 48 For example, see, Brewer v C h r y s l e r Canada L t d [1977J 3 WWR 69 c f S i t e Preparations L t d v S e c r e t a r y of State f o r Scotland 1975 SLT (NOTES) 41 (SCOTLAND). A d e t a i l e d a n a l y s i s of the Anglo-Canadian pre-contract a u t h o r i t i e s i s found i n s e c t i o n ( e ) . 49 per H J MacDonald J i n Brewer (supra) at p 79. See a l s o W i l l i a m  Lacev fHounslow) L t d v Davis. [1957] 1 WLR 932, and Sabemo P/L v North Sydney M C [1977] 2 NSvJLR 880. 50 . See, f o r example, W i l l i a m Lacev (supra): Brewer v C h r y s l e r Canada, (supra): Sabemo P/L (supra.) 16 he was taking the risk of his efforts going, uncompensated.^' An analysis along these lines would distinguish the tender cases, and 52 cases where the work done i s merely preliminary of preparatory, co eh, 55 from the Brewer v Chrysler^ and William Lacey^ type situation. ^ 51 See, for example,' Construction Design and Management Ltd v Mew  Brunswick Housing Corporation et a l , ]19731 36 DLR (3d) 458 (NBSC)i City of Moncton v Stephen, (1956), 5 DLR (2d) 722 (NBCA): Morton Construction Co Ltd v City of Hamilton, ( I 9 6 2 ) , 31 DLR (2d) 323, [1962:1 OR 15+ (Ont CA/. 52 As i n Yates v Wright & Co (supra). • 53 [1977] 3 WWR 69. 54 [1957J 1 WLR 932. A detailed discussion of this-and the other important pre-contract authorities comes at p 22 et seq_, post. 55 Cf. The' Construction Design and Management Ltd case (discussed at p 6 l et seq. post) which distinguished William Lacey on this ground. 17 (d) Some Specific Case Illustrations of the Risk-Factor Defeating  Restitutionary Recovery. Some recent Canadian cases throw some light on the nature of risk-taking i n contract negotiations. Having devoted the previous section to a discussion of this concept, what follows here w i l l tend to be only i l l u s t r a t i v e of points already made. Consider the New Brunswick Court of Appeal decision i n City of  Moncton v Stephen. A paving contractor had resurfaced certain streets under a contract with the City of Moncton. The new surface on some of the streets began to flake away. The contractor, without specific request by the City, proceeded to repair these streets, thinking that this extra work would ensure that further paving contracts, proposed to be l e t by the City during the following year, would go to him. When these contracts were awarded to other contractors, Stephen asked to be paid for the repairs carried out by him. The City refused to pay. Stephen's restitutionary claim was unsuccessful. CO Stephen had done the repair work voluntarily. He did i t because he thought i t would maximise his chances of obtaining contracts proposed to be let by the City at a future date, and the circumstances did not give rise to the inference that i t was to be paid for i f these 56 ,Eg. Maron Properties v New Brunswick Liquor Corporation, [ l977 l 18 NBR (2d) 472; Hotel Holdings Limited v Canadian National  Railway Co., 4 N & PEIR 458, affirmed 8 N & PEIR 301; City"of  Moncton v Stephen, (1956) 5 DLR (2d) 722 (NBCA); Italian Village  Restaurant Ltd v Van Ostrand et a l , [1970] 9 DLR (3d) 512. 57 (1956) 5 DLR (2d) 722 (NBCA). 58 There was even evidence before the Court to the effect that the City had told Stephen that i t did not want the streets to be repaired. See further, Angus, "Restitution i n Canada since the Deglman case", (1964) 42 Can B Rev 529. 18 contracts should not be awarded to him. 7 Ritchie J quoted with approval from the American Restatement of The Law of Restitution at Section (57), which deals with "Gifts Made In Anticipation Of Gratuities Or Contracts." That section reads: "A person who has conferred a benefit upon another, manifesting that he does not expect compensation therefor, is not entitled to restitution merely because his expec-tation that•the other w i l l make a g i f t to him or enter into a contract with him i s not realized." The "expectation of receiving something later because of the favourable impression created"^ by the rendering of services w i l l not, per se, suffice to found restitutionary l i a b i l i t y . The i l l u s t r a t i o n given i n the comment to Section (57) of the Restatement may be compared with the situation i n the Moncton case: "A, an insurance broker, effects a f i r e insurance policy for B and i s paid by B for his services. A f i r e occurs and A performs services in connection with the loss, 59 However, had the City requested Stephen to do the work, the restitutionary claim might well have succeeded. Stephen might then have been able to argue that the request deprived the work of i t s voluntary character and i f i t was not to be compensated for by the award of the said proposed contracts, i t would have "to be done otherwise, namely, by an award for his services." cf. Morton Construction Company Ltd. v City of Hamilton (1962) 31 DLR (2d) 323 [19627 OR 154. For seemingly sound criticism of this case, see Angus (supra) at pp 5^2-5^5, where the author suggests that the Ontario court may have erred i n i t s reasoning. 60 Restatement; section (57)» Comm. (a) at p 224. 19 expecting t h a t B w i l l employ him t o o b t a i n the insurance t o be w r i t t e n upon the b u i l d i n g r e p l a c i n g the one destroyed. B, however, employs another broker f o r t h i s purpose. A i s 6 l not e n t i t l e d t o compensation f o r h i s s e r v i c e s . " Another way of l o o k i n g at the Moncton case might be t o say t h a t the work done there was not work of a k i n d which was necessary t o put the p a r t i e s i n t o a p o s i t i o n to c o n t r a c t , and i s i n t h i s sense u n l i k e 62 the o r d i n a r y pre-contract case. T h i s being so, there i s not the same " u n q u a l i f i e d understanding" between the p a r t i e s t h a t a c o n t r a c t i s t o be entered i n t o i n the f u t u r e , so t h a t the p l a i n t i f f i s taken t o have "run the r i s k " , both of f u t u r e employment and of g e t t i n g no r e t u r n f o r h i s expenditures. The p l a i n t i f f i n the Moncton case was t h e r e f o r e l i k e a common tenderer; both a c t as v o l u n t e e r s . The case of I t a l i a n V i l l a g e Restaurant L t d v Van Ostrand et a l . provides a f u r t h e r i l l u s t r a t i o n of an aggrieved n e g o t i a t o r being unable to recover h i s expenditures on the d i s s o l u t i o n of n e g o t i a t i o n s because the o b j e c t i o n t h a t he was t a k i n g the r i s k was s u s t a i n e d . In t h i s case the p l a i n t i f f l e s s e e entered i n t o n e g o t i a t i o n s w i t h the defendant l e s s o r s f o r an extension of the c u r r e n t l e a s e . The current lease s t i l l had some time t o run. During the n e g o t i a t i o n s the p l a i n t i f f renovated the demised premises which were being used as a r e s t a u r a n t . These improvements l e f t the p l a i n t i f f 7,000 d o l l a r s out of pocket. 61 62 63 Comm. (b ) ; i l l u s t r a t i o n (2). , p 225. Discussed i n s e c t i o n ( e ) , post. [1970] 9 DLR (3d) 512. 20 The parties were unable to agree on certain of the terms of the proposed lease, and the defendant sold the premises. The Supreme Court of Alberta found that: "the renovations effected by the p l a i n t i f f were not effected as a result of any representations, encouragement or inducement extended to the p l a i n t i f f by the defendants, but were effected after the p l a i n t i f f had been advised that a sale of the subject premises was contemplated 64 at the r i s k of the p l a i n t i f f . " . • In these circumstances, therefore, the p l a i n t i f f could have no firm expectation that the extension lease would be granted. It knowingly and rather unwisely "jumped the contractual gun", having f u l l awareness of the contemplated sale. In other words, i t commenced the alterations at " i t s own risk". The above cases are plainly distinguishable from the line of cases represented by authorities such as William Lacey and Brewer  v Chrysler»which do permit restitutionary recovery for expenses incurred during abortive negotiations. The strong expectation of obtaining the desired contract i s absent; the defendant does not hold himself out as being ready and willing to contract, and the negotiations have not acquired the degree of "seriousness" where i t can be said that the awarding of the contract to the p l a i n t i f f was a "matter of ra t i f i c a t i o n , rather than a matter of selection". One of the distinctive features of the above cases, however, is that the services rendered by the p l a i n t i f f were unrequested by 64 i d at p 518. 21 the defendant, the expenditures, being incurred on an operation i n 66 suo. In the City of Moncton case the services were rendered not because of the strength of the p l a i n t i f f ' s expectation that particular contracts would be forthcoming, and only on that basis, ' but merely because he thought that services rendered i n the meantime would put him i n an advantageous position as regards future contracts the I defendant may be l e t t i n g . ^ It was only when the p l a i n t i f f found his belief to be mistaken, some four or five 'months later, that he asked for payment. In the Italian Village Restaurant case the court explained that "the renovations effected by the p l a i n t i f f resulted from the p l a i n t i f f ' s own profit motive". This presumably means that the reason for the p l a i n t i f f ' s meliorations was that he hoped to add to his gains for the period remaining of the current lease through increased turnover made possible by the building of more spacious 69 premises. • 65 The absence of a specific request, of course, is not, and should not be, controlling of the question of restitutionary l i a b i l i t y . See generally, Goff and Jones, The Law-'-of Restitution, (2nd ed., 1978), at chapter 1; Birks, "Restitution for Services", (1974) 27 CLP 13. 66 For reasoning along similar lines i n other recent Canadian "near-contract" cases, see Maron Properties et a l v New Brunswick Liquor  Corporation, [1977] 18 NBR (2d) 472, and Hotel Holdings Ltd v  Canadian National Railway Co., 4 N &.PEIR 458, affirmed 6 N & PEIR 301. 67 As they are i n a l l the cases'to be considered i n the next following' section. 68 Cf. Section ( 5 7 ) , Restatement, quoted, ante, at p 18. 69 Cf. discussion i n Goff and Jones (supra), chapter 1, especially PP 33-36. 22 (e) Analysis of the Anglo-Canadian Fre-Contract Authorities; The "Fault-Risk" Hypothesis: In the following pages an attempt w i l l be made to show that 70 the not uncommon view that contract negotiators are free to break off negotiations at any time, and for any reason, before the f i n a l consummation of agreement, i s in need of serious qualification i n present day Anglo-Canadian law. I f there are cases to be found i n the law reports, as indeed there are, allowing disappointed negotiators to recover i n restitution for their wasted pre-contract expenditures, then clearly the law does place-restrictions upon the conduct of 71 parties during the negotiation process. An examination of these 70 Eg, Kessler and Fine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract: A Comparative Study", (1964) 77 Harv L Rev 401, especially at pp 412-420: cf Sheppard J in the recent New South Wales case of Sabemo Pty Ltd v North Sydney  Municipal Council. [1977] 2 NSWLR 880. His Lordship stated the view that: "It has long been the law \_of England] that each ^negotiator] i s at liberty, no matter how capricious his reason, to break off the negotiations at any time." (at p 900) The accuracy of this statement may be seriously questioned i n the light of the authorities. Incidentally, i t is most interesting to note that Sheppard J went on to give the p l a i n t i f f the desired r e l i e f , following contrary English authority. 71 The view that a negotiator incurring expenditures prior to the entering into of a contract i s subject to the arbitrary w i l l of the other party may be partly due to an overrigid subscription by many lawyers to the notion that i f an attempted contract f a i l s to eventuate then, seeing no contractual remedy i s available, nor is any form-of r e l i e f . (But, cf note ( 7 2 ) ) . Abortive negotiations are consequently often seen as "remediless". 23 , 72 v a r i o u s r e s t r i c t i o n s i s conducted i n the f o l l o w i n g pages. The previous s e c t i o n s have d e a l t w i t h " r i s k - t a k i n g " as an i n t e g r a l p a r t of the c o n t r a c t n e g o t i a t i o n process. A n e g o t i a t i n g p l a i n t i f f who i s t a k i n g the r i s k of the n e g o t i a t i o n s f a i l i n g has no recourse a g a i n s t h i s co-negotiator f o r h i s wasted expenditure i n the event of the d e s i r e d c o n t r a c t being w i t h h e l d . We have s a i d that-, i n r e s t i t u t i o n a r y phraseology, such a p l a i n t i f f i s a "volunteer", the s e r v i c e s rendered being rendered g r a t u i t o u s l y without e x p e c t a t i o n 73 of compensation. The p e r t i n e n t question a t t h i s stage th e r e f o r e i s ; when w i l l a n e g o t i a t o r be taken to be no longer a c t i n g a t h i s own r i s k so as to f i x the other p a r t y w i t h r e s t i t u t i o n a r y l i a b i l i t y i n the event of h i s u n i l a t e r a l and unexpected withdrawal from n e g o t i a t i o n s ? Only gen e r a l c r i t e r i a can be o f f e r e d i n answer to t h i s question, i f only because f a c t s i t u a t i o n s never p r e c i s e l y d u p l i c a t e themselves. Some of these 74 c r i t e r i a have al r e a d y r e c e i v e d cursory mention. Included amongst . them i s ' the s t r e n g t h of the p l a i n t i f f ' s e x p e c t a t i o n t h a t a c o n t r a c t w i l l be entered i n t o . Had the n e g o t i a t i o n s acquired the degree of "seriousness" where i t could be s a i d t h a t the awarding of the c o n t r a c t . to the p l a i n t i f f was considered "a matter of r a t i f i c a t i o n , r a t h e r than 72 The law of r e s t i t u t i o n i s but one medium through which such r e s t r i c t i o n s may be imposed. There are i n d i c a t i o n s t h a t an aggrieved n e g o t i a t o r might, i n c e r t a i n l i m i t e d circumstances (discussed post a t p 127: ), s u c c e s s f u l l y b r i n g h i s c l a i m i n t o r t . Again, although r e l i e f on the b a s i s of a c o n t r a c t u a l theory , i s prima f a c i e excluded i n a b o r t i v e n e g o t i a t i o n cases, the f i n d i n g of an i m p l i e d - i n - f a c t c o n t r a c t f o r the payment of reasonable-remuneration i n the event of the p r o j e c t e d c o n t r a c t being w i t h h e l d , may-be a p o s s i b i l i t y , and the p l e a has on occasion been successful; Western Asphalt Go v V a l l e . 171 P 2d 159 (1946). See p 121 post.' Moreover, i n recent years the d o c t r i n e of promissory estoppel has been u t i l i z e d and expanded by American courts to p r o t e c t the ' e c o m a i c i n t e r e s t s of aggrieved n e g o t i a t i n g p a r t i e s . See p 90 post. Thus, c o n t r a c t d o c t r i n e and ideas- remain at l e a s t of l i m i t e d relevance i n the p r e - c o n t r a c t arena. 73 & ?4 , please see next page. 24 a matter of s e l e c t i o n " i s a question u s u a l l y asked by courts 75 a d j u d i c a t i n g claims by p l a i n t i f f n e g o t i a t o r s . An important r e l a t e d i s s u e which the c o u r t endeavours to r e s o l v e i s whether the p l a i n t i f f would have c a r r i e d on rendering the s e r v i c e s i n question had he suspected t h a t the defendant might abandon the p r o j e c t or otherwise withhold the c o n t r a c t . An a f f i r m a t i v e response would seem to defeat"the r e s t i t u t i o n a r y c l a i m , f o r here the defendant's argument t h a t the p l a i n t i f f was t a k i n g a business r i s k i s very appealing. On';the other hand, the s o r t of answer given 76 by an A u s t r a l i a n ' judge i n " a recent New South Wales case (Sabemo Pty  L t d v North Sydney M u n i c i p a l C o u n c i l ) . goes a long way towards ensuring the success of the p l a i n t i f f ' s c l a i m . There, Sheppard J responded as f o l l o w s ; -" I t seems to me to be unthinkable t h a t the p l a i n t i f f : ' would have been prepared to do what i t d i d , i f i t had thought t h a t the defendant might change i t s mind about proceeding w i t h the p r o p o s a l . " Another r e l a t e d f a c t o r a i d i n g the r e s o l u t i o n of the question of who was t a k i n g the r i s k i s whether the amount and type of work done 73 See s e c t i o n s (c) and ( d ) , ante. 74 See s e c t i o n ( c ) , ante. These w i l l emergesmore c l e a r l y i n the course of the c a s e - a n a l y s i s conducted i n t h i s s e c t i o n . 75 Eg Brewer v C h r y s l e r Canada (supra). 76 Sheppard 'J. 77 [1977] 2 NSW LR 880. 78 i d a t p 901 . . . . . - -25 . f e l l o u t s i d e t h a t w h i c h i s n o r m a l l y done i n o r d e r t o p u t t h e p a r t i e s 79 m a p o s i t i o n t o c o n t r a c t . These, then, a r e the p r i n c i p a l i s s u e s w h i c h c o u r t s , c o n f r o n t e d w i t h c l a i m s by a g g r i e v e d n e g o t i a t o r s , seek t o r e s o l v e i n a r r i v i n g a t t h e i r d e t e r m i n a . t i o n o f whether t h e p l a i n t i f f was " t a k i n g a chance", and r i s k i n g l o s i n g the e x p e n d i t u r e s i n c u r r e d by him i n t h e c o u r s e o f n e g o t i a t i o n s . ' I f i t i s shown t h a t the p l a i n t i f f was n o t a " v o l u n t e e r " and p e r f o r m i n g t h e p r e - c o n t r a c t u a l s e r v i c e s " g r a t u i t o u s l y " , t h e f i r s t h u r d l e i n t h e way o f r e s t i t u t i o n a r y r e c o v e r y i s c l e a r e d . The d e f e n d a n t , and n o t t h e p l a i n t i f f , may now be t h o u g h t o f as t a k i n g t h e r i s k o f 80 the n e g o t i a t i o n s f a i l i n g . I n a s e n s e , t h e r e has been a " p a s s i n g " o f the r i s k i n v o l v e d i n the n e g o t i a t i o n s as t h e y have p r o g r e s s e d f r o m t h e i r v e r y e a r l y t o t h e i r l a t t e r s t a g e s . I t r e m a i n s t o be s e e n how f a r , - i f a t a l l , t h i s change may be a t t r i b u t a b l e .to an " i m p l i e d a g r e e m e n t " ^ a by t h e n e g o t i a t i n g p a r t i e s ( i n f e r r e d from, o r m a n i f e s t e d by, t h e i r c o n d u c t and t h e f a c t s o f the p a r t i c u l a r c a s e ) t h a t t h e d e f e n d a n t s h o u l d b e a r the l e g a l consequences 79 T h i s w i l l o b v i o u s l y v a r y w i t h t h e n a t u r e o f t h e p a r t i c u l a r c o n t r a c t which i s p r o p o s e d . F o r a j u d i c i a l view on what i s o r d i n a r i l y done g r a t u i t o u s l y by b u i l d e r s t e n d e r i n g f o r c o n s t r u c t i o n c o n t r a c t s , see B a r r y J i n W i l l i a m L a c e y ( s u p r a ) . 80 But n o t , o f c o u r s e , i n e v e r y e v e n t , and u s u a l l y o n l y i f t h e y go o f f t h r o u g h h i s own f a u l t . T h i s p o i n t w i l l emerge more c l e a r l y i n the c o u r s e o f d i s c u s s i o n . . ' 80a See C h i t t y on C o n t r a c t s , ( 2 4 t h e d . ) , pp 9-10. C f B i r k s , " R e s t i t u t i o n f o r S e r v i c e s " , (1974) 27 CLP 13. T h a t w r i t e r warns o f the f u t i l i t i e s and t h e dangers o f b e i n g t o o r e a d y t o draw the c o n t r a c t u a l i n f e r e n c e • i n p r e f e r e n c e t o p u r s u i n g a r e s t i t u t i o n a r y a n a l y s i s , s a y i n g t h a t "no p u r p o s e i s s e r v e d by t o r t u r i n g i l l u s o r y c o n t r a c t s o u t o f b o r d e r l i n e s i t u a t i o n s . " , ' i d a t p 15. 26 . of a possible termination, or'whether.liability i n a pre-contract situation i s always imposed by law without reference to the intention of p a r t i e s . ^ This analysis, although important to a discussion of the potential role which contractual' theory (via the implied-in-fact contract .. • device), might play i n the pre-contract arena, has been seen to be Do inessential to our examination of restitutionary theory. It i s now generally accepted that l i a b i l i t y i s imposed i n restitution "irrespective of the actual views or intentions of the parties at the • ' 84 time when the work was done or the services rendered." This development i s the salutary consequence of widespread judicial recognition, both in England and i n Canada,^ of - the fictitious-.;-nature of the "implied 81 Viz., a l i a b i l i t y to reimburse the p l a i n t i f f for his wasted expenditures. It may tentatively be said, however, that this approach finds l i t t l e support i n contemporary jurisprudence. The p i t f a l l i n the way of a contractual analysis i s the common expectation-of contract and the belief that the p l a i n t i f f ' s recompense w i l l come out of the contract profits. This circumstance usually'defeats the argument that the parties impliedly agreed that the pre-contract services should be paid for i n some other way. On this point, see p 113 et seq, post.. 82 Eg. as in William Lacey (Hounslow) 'Ltd v Davis. [1957] 1 WLR 932; cf Craven-Ellis v Canons Ltd. [1936] 2 KB 403, Deglman v  Guaranty Trust Co of Canada and Constantinea.u. [1954] 3 DLR 785, Goff and Jones,•(supra), at chapter,1, Birks, "Restitution for Services",'(1974) 27 CLP 13. 83 See Pegl'mari. (supra) discussed at p 2,..et\seq, ante'. Cf Goff and. Jones, (supra), at chapter IT' ' 84 Per Barry J i n William Lacey. (supra), at p 936. Cf. Greer L.J at p 27, post, and Goff and Jones, (supra), at Chapter 1. "Thus., restitutionary r e l i e f may be had for services rendered under a supposedly va,lid contract which turns out to be void for want of authority, notwithstanding the impossibility of implying a contract for payment i n such a situation. 85 Eg., see the Deglman case, discussed ante at p 2„et seq, where . the Canadian Supreme Court unequivocally rejected as unsound the • association of restitutionary claims with "implied contract", and propounded the doctrine of unjust enrichment as.the underlying principle of the law of. restitution. • 27 86 contract theory", and i t s rejection as the basis of.restitutionary l i a b i l i t y . Thus, i n the landmark English case of Craven-Ellis Ltd v Canons,' Greer L J , having accepted the argument that no contract could be implied from the facts before the court, went on to-say that: "In my judgment, the obligation to pay reasonable; • . remuneration for work done when there i s no binding contract between the parties is- imposed by a rule of • • law, and not by an inference of fact arising from the acceptance of services or g o o d s . • The p l a i n t i f f in that case-recovered upon a quantum meruit for services rendered to the defendant company under a supposed contract which was void because-the directors who had caused the company's seal to be affixed t o - i t were not qualified so to act, We have already seen that in the majority of cases where a defendant breaks off negotiations, he w i l l have made no gain out of " the aborted relationship. One might therefore expect that his "conduct" causing the breakdown.would be an influential factor in. determining his l i a b i l i t y to make recompense to the other party. The case law lends i t s e l f to' such an analysis, and the courts u t i l i z e what may'be called a "fault" concept as a means of determining whether • l i a b i l i t y should attach to the defendant. 86 Goff and Jones, i n their well-known book, on restitution, castigate the "concept of implied contract" i n the context of the law of restitution as a "meaningless,, irrelevant and misleading -anachronism." (2nd ed, at p 9). '• ' 87 [.1936] 2 KB 403 88 i d at p 412; In the same vein i s the following statement by Barry J in William Lacey (supra), one-;of the most important English pre-contract authorities. His,Lordship said that: • . "When the beliefs of the parties were f a l s i f i e d , the law , implied an obligation•- and, in this case, I think-the law should imply an'obligation - to pay-a.reasonable price for the services.which had been, obtained." (at p 939). 89 Eg. Sabemoi Ptv Ltd (supra); William Lacey (supra): Brewer v Chrysler  Canada (supra). ' " , ' . 28 The overall picture which emerges i s something as follows; i f i t i s established that the p l a i n t i f f i s no longer "taking a chance", and that the defendant now bears the risk of having to make the p l a i n t i f f whole i f he should take i t upon himself to resile from the negotiations, the conditions precedent to restitutionary recovery are satisfied. The event i n which the risk i s so borne i s usually only i f there i s "fault", the latter being implicit i n a unilateral 90 withdrawal for reasons unrelated to the negotiations. The above provides an adequate framework for analysis of the available case law. 91 I n Jennings and Chapman Ltd v Woodman Matthews & Co., the p l a i n t i f f builders were lessees of shop premises. The p l a i n t i f f s proposed to let part of the premises to the defendant, a so l i c i t o r , and, i n the course of the negotiations for the sub-lease, proceeded, on his instructions, to alter them into offices. This work was completed, but the p l a i n t i f f s were unable to grant the proposed lease, owing to a clause i n the lease they held from their landlords which, inter a l i a , forbade alterations of the type which had been made. The defendant, i t should be noted, was at a l l times willing, and indeed eager, to enter into the proposed lease. The facts i n Jennings are thus plainly distinguishable from the facts usually encountered when negotiations go off. Typically, 90 But not always only i f there i s fault. There i s authority for saying that a defendant may, i n certain limited circumstances, be liable to reimburse the p l a i n t i f f for his wasted expenditures even i n the absence of fault on his part, (eg where negotiations terminate as a result of mutual disagreement); see Denning L J in Brewer Street Investments (discussed, post, at p 33 et seq). 91 [19521 2 TLR 409.. 29 i t i s the defendant who puts an end to n e g o t i a t i o n s , not the p l a i n t i f f , and i n t h i s sense Jennings i s a r e v e r s a l of the s i t u a t i o n which i s our prime concern. However, the observations of the Court of Appeal i n t h i s case are i n v a l u a b l e to our purpose, as the concept of " f a u l t " was employed and,operated to d i s a l l o w the p l a i n t i f f s 92 recompense. Given those f a c t s , and e s p e c i a l l y t h a t i t was the p l a i n t i f f s ' l a n d l o r d s who prevented consummation of'the l e a s e , i t i s somewhat s u r p r i s i n g that the p l a i n t i f f s sought r e s t i t u t i o n a r y recovery f o r t h e i r p r e - c o n t r a c t expenditures i n the f i r s t p l ace. But there apparently was an agreement between the p a r t i e s t h a t the defendant would pay f o r the work he had i n s t r u c t e d to be done, e i t h e r on i t s completion or when he obtained possession, the p r e c i s e time being uncertain.. This agreement, however, was h e l d by the whole court t o be i n a p p l i c a b l e on i t emerging t h a t the p l a i n t i f f s were unable to go ahead with the proposed t r a n s a c t i o n . I t was considered to be no more than a step i n the n e g o t i a t i o n s towards the proposed sublease, and was ignored by the Court i n a r r i v i n g at i t s d e c i s i o n not to give the p l a i n t i f f r e s t i t u t i o n a r y r e l i e f . Somervell L J remarfo'ed t h a t i t : • ' "was an i n c i d e n t i n the n e g o t i a t i o n s f o r a sublease and 93 had no p o i n t unless that sublease was granted." 92 Eg. see Denning L J at pp 414-415 93 at p 413. I n the same v e i n was Denning L J who s a i d t h a t i t was: "no use l o o k i n g a t the words of the c o n t r a c t because there are no words here covering the s i t u a t i o n which has emerged." (a t p 414). 30 On the notions of "risk" and "fault", Denning. L J, as he then was, had this to say. His Lordship asked himself: "On whom, in a l l the circumstances of the case, should the risk f a l l ? It seems to me that i t should f a l l on the p l a i n t i f f s . They knew a l l the conditions which had to he f u l f i l l e d before they could grant a sublease. The s o l i c i t o r did not know of those conditions u n t i l the work was half done The/-underlease f e l l through without any fault on the solicitorfe part The position might have been different i f i t had been the solicitors fault that the negotiations f e l l 94 through, as, for instance, i f the head landlord was willing to give his consent but the s o l i c i t o r refused to go on."9-5 However, given that the defendant had given an undertaking as to the cost of the alterations, i t may be that i f knowledge of the terms under which the p l a i n t i f f s held the main lease had been conveyed to the defendant, he would have been taking the risk of the landlord's 96 consent being refused, and "the chance" that i t would be forthcoming. 94 The position certainly i s different i n that situation. See the English Court of Appeal decision in the Brewer Street Investments case (supra), decided some two years after Jennings, and by the same bench of judges. 95 at pp 4.14-415. 96 An undertaking of the kind given by the Jennings defendant (although the parties there, at the time of i t s entering into, did not consider the possibility of negotiations f a i l i n g , and made no provision for this contingency) would appear to f a c i l i t a t e the imposition of risk on the party giving i t , and therefore,\ the imposition of restitutionary l i a b i l i t y . But, as Jennings i t s e l f shows, i t i s by no means conclusive of the issue, and i s only one of a number of factors to be taken into account. 31 The fact that both parties would then have knowledge of the facts relevant to the landlord's consent would seem to preclude a finding of "fault" on the part of either, so long, of course, as •both remained eager throughout to go ahead with the proposed transaction. The dispute could be decided on the basis of the inquiry "who. was 97 taking the risk of the landlord preventing consummation of the lease?" If we are to apply the notion of "fault" to the rather special fact situation in Jennings. we must say that "fault" lay with the pla i n t i f f s on the failure of the negotiations, because only they.knew of the particular risk inherent i n the proposed transaction. As far as the defendant was aware the only inherent, ris.k of the transaction f a i l i n g lay i n a possible refusal by the p l a i n t i f f s themselves to -'. _.' 99 " carry i t through. . . 97 Eg. See Denning L J in the Brewer Street Investments case (supra) • and cf section .(f), post, dealing with the topic of mutual breakdown of negotiations. Quid iu'ris, when a party has spent much • time and money negotiating for a contract, and.before i t i s concluded '• an unforeseen legislative measure frustrates the venture, or taints i t with i l l e g a l i t y ? ' No reported case raises the. point., Cf.pp 51-60" post. 98 Viz, the necessity of obtaining the landlord's consent. Somervell L J had this to say: . . ..,.-'' " having regard to the fact that the p l a i n t i f f s were f i r s t of a l l holding themselves out as i n a position- •" to grant a sublease, and that they gave no indication that there' was. any obstacle to that ...... they must be • .: taken to have'known that consents were required . • which ought most certainly to have been obtained' • before they ever started on this work, because they had -: no right to do i t u n t i l that consent had been obtained. -In those circumstances, I think they took the risk (at p 413). 99 It is suggested, however, that the. term "fault" should be confined to describing those situations i n which i t i s either the p l a i n t i f f ' or the defendant, almost invariably the latter, who i s responsible for the negotiations f a l l i n g through. It cannot comfortably be applied to cases where neither party wishes to terminate the negotiations. ' . . . " • . 32 However, where there i s no extraneous risk element involved in the negotiations such as the landlord's consent in Jennings ."^^ the question of which party was at "fault" assumes v i t a l importance, and is usually determinative of the issue of restitutionary liability.^ 0"'" If the p l a i n t i f f i s held to be responsible for the failure of the 102 negotiations, he w i l l usually be without' a remedy. If the defendant is held to be responsible, this i s a strong factor operating in 103 104 favour of the p l a i n t i f f . In a recent case, the New South Wales Supreme Court used the following words to stress this point: where two parties proceed upon the joint assumption that a contract w i l l be entered into between • them, and one does work beneficia.1 for the project, and thus in the interests of the two parties, which work he would not be expected, in other circumstances, to do gratuitously, he w i l l be entitled to compensation or restitution, i f the other party unilaterally decides to abandon the project, not for any reason associated with 100 Or i f there i s , i f i t i s not i t which prevents consummation of the agreement. 101 See, for example, Brewer v Chrysler Canada (supra); Brewer Street  Investments (supra); William Lacey (supra); Sabemo P/L (supra). 102 For example, Construction Design (supra). Apart from anything else, i t would be hard to see the justice of a rule which would make a defendant, who has obtained no pecuniary advantage from the abortive negotiations, recompense a p l a i n t i f f whose fault prevented the deal going through. 103 See cases cited at note ( 101) . 104 ' Sabemo p/L v North Sydney M C \l97?] 2 NSWLR 880. 33 bona f i d e disagreement concerning the terms of the c o n t r a c t to be en t e r e d . i n t o , but f o r reasons which, however v a l i d , p e r t a i n only to h i s own p o s i t i o n and do not r e l a t e a t a l l to t h a t of the other party. ""'"^  Several cases i l l u s t r a t e more c l e a r l y t h i s " f a u l t " limb of r e s t i t u t i o n a r y . recovery i n c o n t r a c t n e g o t i a t i o n s . Brewer S t r e e t Investments Ltd v Barclays Woollen Go Ltd i s such a case. There, the defendants were prospective tenants of c e r t a i n premises, and i n n e g o t i a t i o n w i t h the p l a i n t i f f s , who were the owners, as to the terms of the contemplated le a s e . The p l a i n t i f f s , a t the defendants request, began to make c e r t a i n a l t e r a t i o n s to the premises and the l a t t e r 107 accepted r e s p o n s i b i l i t y f o r t h e i r c o s t . A f t e r much of t h i s work had been done, n e g o t i a t i o n s broke down, the p a r t i e s being unable to agree on a term concerning the p o s s i b i l i t y of a f u t u r e s a l e of the premises to the defendants. The n e g o t i a t i o n s had proceeded to such an extent,; and w i t h such success, t h a t both p a r t i e s assumed t h a t the lease would s h o r t l y be entered i n t o . Hence, the a l t e r a t i o n s c a r r i e d out by the p l a i n t i f f s a t the defendants^ request. I n due course, i t emerged th a t the defendants would not enter i n t o a lease on terms acceptable to the p l a i n t i f f s . I t had been made c l e a r by the p l a i n t i f f s from the very outset that they would only l e t 105 i d , at pp 902-903 per Sheppard J. Sabemo, i t should be noted, marks a sharp departure from e a r l i e r A u s t r a l i a n and New Zealand a u t h o r i t y on ab o r t i v e c o n t r a c t n e g o t i a t i o n s , and r e f l e c t s the i n c r e a s i n g j u d i c i a l r e j e c t i o n of former notions c l o s e l y - a s s o c i a t i n g the law of r e s t i t u t i o n w i t h i m p l i e d c o n t r a c t . 106 [1954] 1 Q B 428. 107 The undertaking as to the cost of the a l t e r a t i o n s , though very r e l e v a n t to the question of which party was t a k i n g the r i s k of the n e g o t i a t i o n s f a i l i n g , was not the s o l e , or the most important, b a s i s of d e c i s i o n . See p 34 post. The Court's reasoning vV.~ was based upon the concepts of " r i s k " and " f a u l t " . 34 on the condition that the lease include the term they were pressing, and not the one being urged by the defendants. Until the latter stages of negotiation, both parties probably assumed that the other would concede. But neither did. The majority of the Court of Appeal held that i t was through the prospective tenants' fault that the negotiations went off, because: "right up to the end they insisted on getting that which they had been told already the p l a i n t i f f s were unwilling , . ,,108 to give. As regards the undertaking given by the defendants as to the cost of the alterations, several things ought to be said. The p l a i n t i f f s could not sue upon i t , for they did not complete the work. Nor could they sue for damages for breach of contract, for the defendants were at no point in breach of their undertaking. Only a limited importance, therefore, can be attached to the fact that the defendants had given this undertaking, as i t was held to be inapplicable to the situation 109 which had emerged. Denning L J, as he then was, rejecting the contractual analysis, was clear on i t . His Lordship, referring to the manner in which the p l a i n t i f f s had stated their c l a i m , r e m a r k e d that; 108 per Romer L J at p 438. Somervell L J's comments were to the same effect: "It i s plain that the matter went off because of the & defendants' own course of conduct i n adhering to the condition that they should get an option when i t had been made clear to them that the p l a i n t i f f s were not willing to grant an option" at p 434. 109 Cf. the undertaking given by the defendant i n Jennings which the Court of Appeal ignored i n arriving at i t s decision not to give the p l a i n t i f f recompense. 110 As one for the recovery of money paid on request to the contractors who had done the work. ,,111 35 "[the d e f e n d a n t s ' J request, i f any, was to pay on completion of the work, and i t was not completed. I n these circumstances, the proper way to formulate the cl a i m i s on a request i m p l i e d i n law, or, as I would p r e f e r to put i t i n these days, on a c l a i m i n r e s t i t u t i o n . 112 Although the other two members of the Court placed more emphasis on the f a c t t h a t the defendants had gi v e n t h i s undertaking, the f i n d i n g t h a t the n e g o t i a t i o n s had gone o f f because of the defendants ' 113 f a u l t was c e n t r a l to the d e c i s i o n s reached by the i n d i v i d u a l judges. Fur t h e r , the whole Court appeared to hol d the view that i f i t had been the p l a i n t i f f s ' f a u l t t h a t had brought the n e g o t i a t i o n s to an end, 114 they would have been without remedy, notwithstanding the undertaking. I t i s apposite to quote a t length here from the judgment of Denning L J . His Lordship asked h i m s e l f ; "What was the reason f o r the n e g o t i a t i o n s breaking down? I f i t was the l a n d l o r d s ' f a u l t , as, f o r i n s t a n c e , i f they refused to go on with the lease f o r no reason a t a l l , or 111 a t p 435-^36; His Lordship f u r t h e r r e f u t e d any argument t h a t the defendants' l i a b i l i t y arose from the undertaking given by saying th a t ; "The question i s : on whom i s the loss{ito f a l l ? The p a r t i e s themselves d i d not envisage the s i t u a t i o n which has emerged and d i d not provide f o r i t ; and we do not know what they would have provided i f they had envisaged i t . Only the law can r e s o l v e t h e i r r i g h t s and l i a b i l i t i e s i n the new s i t u a t i o n by asking on whom should the r i s k f a l l . " a t p 436. 112 Somervell L J and Romer L J . 113 Cf. Minsky's F o l l i e s of F l o r i d a (supra), where the p l a i n t i f f recovered when the defendants (prospective tenants) refused,:.to complete an o r a l agreement f o r a l e a s e . 114 T h i s , o f course, i s the r a t i o n a l e u n d e r l y i n g the d e c i s i o n i n Jennings (supra). 36 because they demanded a higher rent than that which had been already agreed, then they should not be allowed to recover any part of the cost of the alterations. Even i f the landlords derived no benefit from the work, they should not be allowed to recover the cost from the prospective tenants,^seeing that i t was by their fault 115 that the prospective tenants were deprived of i t . " "On the other hand, i f i t was the prospective tneants' fault that the negotiations broke down, as, for instance, i f they sought a lower rent than that which had been agreed upon, then the prospective tenants ought to pay the costs of the alterations up to the time they were stopped. It was further held by a l l the members of the court that the defendants had "taken a chance", that i t was they, and not the p l a i n t i f f s , who had borne the risk of the expenditures incurred i f the projected lease should not materialise from a cause other than 117 the landlords fault. ' Romer L J used the following words; "Taking the whole of the circumstances, the dates, the 115 In similar language, Morris L J, the f i r s t instance judge, said that the defendants' l i a b i l i t y to reimburse the p l a i n t i f f s for the cost of the alterations was dependent upon: ./"the p l a i n t i f f s remaining of the same mind as they had revealed before the promise to pay for items of work was made." quoted i n [l954J i p 428, at p 433. 116 at p 436. 117 The undertaking given f o r t i f i e d this conclusion, and i s one relevant item of evidence which may go to establish that one or other of the parties was taking the risk, along with such other matters as the strength of the mutual understanding that the contract would eventuate, the amount of work done, and so forth. 37 urgency of the matter I have no doubt t h a t i n common phraseology they were 'taking the r i s k ' f o r t h e i r own purposes i n the hope t h a t they would get the b e n e f i t o f i t i f , as they hoped and thought, a lease 118 was f i n a l l y agreed " This circumstance, coupled w i t h the defendants' f a u l t i n b r i n g i n g the n e g o t i a t i o n s to an end, went to make them l i a b l e f o r the expenses to which they had put the l a n d l o r d s . Brewer S t r e e t i l l u s t r a t e s t h a t the c o u r t s , when confronted w i t h n e g o t i a t i o n problems, work w i t h i n a " f a u l t - r i s k " framework, and t h a t the "requester" i n the n e g o t i a t i o n s may be s a i d to be c a r r y i n g the " r i s k " o f having to reimburse the party doing the work f o r h i s expenditures, i f the 119 c o n t r a c t should f a i l t o eventuate. Our task here i s to e x p l a i n and c l a r i f y t h i s p o s i t i o n : a t what p o i n t does the party doing the work and spending the money no longer do so a t h i s own r i s k , so that h i s a c t i n g s shed t h e i r " v o luntary" character, the r i s k having been " t r a n s f e r r e d " to the other party? One of the most important E n g l i s h p r e - c o n t r a c t a u t h o r i t i e s i s 120 W i l l i a m Lacey (Hounslow) Ltd v Davis. I t has o f t e n been c i t e d i n 121 Canadian c o u r t s i n recent years, although i t has never been squarely 122 a p p l i e d to the pre - c o n t r a c t s i t u a t i o n here. I t formed the ba s i s o f 118 at p 438. 119 U s u a l l y only i f i t i s through h i s f a u l t , though. But, cf Denning L J i n Brewer S t r e e t (supra) who took the view t h a t n e i t h e r partywas a t f a u l t i n t h a t case. 120 • [19573 1 WLR 932 121 Eg, Cons t r u c t i o n Design and Management L t d v New Brunswick  Housing Corpn., [1973H 36 DLR (3d) 458; Mar on Proper t i e s T t a l  v New Brunswick Li q u o r Corpn., [1977J 18 NBR (2dJ 472. 122 As d i d Brewer S t r e e t and Jennings, both supra. 38 of the recent New South Wales Supreme Court decision i n Sabemo Pty Ltd 123 v North Sydney Municipal Council. The principle expounded in Lacey may thus be said to have found expression i n authoritative court decisions throughout the Commonwealth. The facts i n Lacey were as follows: the defendant owned certain premises which had been damaged during the war and which he proposed to rebuild. The p l a i n t i f f builders submitted an estimate for the work. In due course they formed the belief that they would obtain the contract. At the defendant's request the p l a i n t i f f s prepared calculations for timber and steel requirements, and prepared an estimate for a notional reconstruction of the premises for negotiating a "permissible amount" with the War Damage Commission. The p l a i n t i f f s also submitted a revised estimate i n accordance with fresh specifications for which they prepared their own b i l l s of quantities. The p l a i n t i f f s later prepared and submitted a new estimate following amendments made to the plans by the defendant, and varied this estimate from time to time as further alterations were proposed by the defendant. When the defendant later sold the premises without warning, instead of proceeding with the intended reconstruction, the p l a i n t i f f s successfully sued for remuneration on a quantum meruit for the work 124 they had done towards the proposed contract. 125 The ratio i n Craven-Ellis v .Canons Ltd was held to govern the situation. The two earlier Court of Appeal decisions i n Jennings 123 [1977] 2 NSWLR 880 124 The p l a i n t i f f s recovered a l l their expenditures bar the cost of preparing the original tender. 125 [1936] 2 KB 403; see p 27 ante. 39 126 127 and Chapman and Brewer Street Investments do not appear to have been brought to the attention of the court but, on analysis, Lacey was decided on essentially similar principles. There was the "fault" of the defendant i n selling the premises, rather than renovating them as he had made out to the p l a i n t i f f s he 128 was going to do. The "risk" of having to reimburse the p l a i n t i f f s for the substantial expenditures made lay with the defendant, i n the 129 event of the. latter unilaterally terminating the negotiations. At least two considerations led Barry J to this conclusion: the amount and the cost of the work which the p l a i n t i f f s had done, and the strength of their expectation that they would get the contract 130 generated i n them by the defendant's course of conduct. J As to the former i t was said that; "the whole of the work covered by the schedule f e l l right outside the normal work which a builder, by custom or usage, normally performs gratuitously when invited to 131 tender for the erection of a building" J 126 [1952] 2 TLR 409 127 [19543 1 QB 428 128 "I find i t d i f f i c u l t to think that any injustice w i l l result i f building owners, who obtain the benefit of a l l these services upon the understanding that a .. contract i s to be given, should be required to make some payment for them, i f they subsequently decide that the contract should be withheld." per Barry J at p 9^0. The latter part of this dictum clearly emphasises the "fault" element, consisting i n the defendant's frustration of the expectation of payment by means of a confidently anticipated contract. 129 The opposite holding would, of course, be inconsistent with allowing the p l a i n t i f f recovery. See Barry J, at p 14, et seq, ante, for the situation i n which a p l a i n t i f f builder does take the risk. 130 Cf. Sheppard J i n the Sabemo P/L case, at p 24 ante. 131 [1957] 1 WLR 932,. 935-40 And.as to the latter, his Lordship, after discussing the ratio 132 i n Craven-Ellis v Canons Ltd. said that he; "was unable to see any valid distinction between work done which was to be paid for under the terms of a contract erroneously believed to be i n existence, and work done which was to be paid for out of the proceeds of a contract which both parties erroneously believed was about to be made. In neither case was the work to be done gratuitously, and i n both cases the party from whom payment was sought requested the work and obtained the benefit of i t the proper inference from the facts proved ....... i s not that this work was done in the hope that this building 133 might possibly be reconstructed and that the p l a i n t i f f 133 company might obtain the contract, but that i t was done under a mutual belief and understanding that the building was being reconstructed and that the p l a i n t i f f 134 company was obtaining the contract." It would appear that had the p l a i n t i f f s only thought that they might be given the contract, they would have been taken to have been 132 [1936] 2 KB 403 133 Emphasis mine. 134 [1957] 1 WLR 932, 939- It was further said that: " [the defendant}.could hardly expect the builders to go on giving free estimates when a state of reality was at last approached" (at p 934) acting at their own risk. 41 135 In the circumstances which arose the Lacey defendant was "taking the risk". It may well have been otherwise had the negotiations gone off because of failure to agree on some essential term of the proposed contract, or i f some extraneous factor prevented i t being 137 entered into. The importance of Lacey, and the other cases just considered, l i e s i n the fact that we can think and speak i n terms of concepts such as "risk" and "fault" i n the context of the law of restitution, the use of these terms f a c i l i t a t i n g i t s application to abortive negotiation situations. When the circumstances of a particular case warrant the making of recompense, restitution can be invoked i n order to prevent a denial of justice to an aggrieved negotiator. 135 The Appellate Division of the New Brunswick Supreme Court distinguished Lacey on this basis i n the Construction Design case (supra). The court said that i n the case before i t there was no "unqualified understanding of both parties" that the p l a i n t i f f was to be given the contract, as i t was aware throughout that approval of the project by a third party was a condition precedent to i t s getting the contract. 136 Cf Sheppard J in Sabemo P/L (supra) at p 901; "I do not think i t right to say that the risk should be borne [by the p l a i n t i f f J , when one party has taken i t upon i t s e l f to change i t s mind about the entirety of the proposal." A mere change of mind about the "entirety of the proposal" would not, of course, be per se enough to support restitutionary recovery. The p l a i n t i f f must, i n addition, not have been a volunteer. He must establish that the risk inherent i n the negotiations has passed from him to the defendant i n accordance with the c r i t e r i a outlined earlier. See pp 23 - 25 ante. For a case i n which the p l a i n t i f f failed on this point, see Yates v Wright & Co, (1920) 18 OWN 305. 137 Cf. the observations made by Sheppard J i n the Sabemo p/L case (supra), quoted at p 56, -post and more generally on the topic of"mutual breakdown", see section ( f ) , post. 138 please see next page. 42 The Canadian Courts have a f f o r d e d an aggrieved n e g o t i a t o r r e l i e f on s e v e r a l occasions i n the l a s t few years. The s i n g l e most important a u t h o r i t y i s probably Brewer v C h r y s l e r Canada L t d , " ^ a d e c i s i o n of the A l b e r t a Supreme Court. The Brewer p l a i n t i f f was approached by one of the defendant's employees to see i f he was i n t e r e s t e d i n s e t t i n g up a new car d e a l e r s h i p . He was. Thereafter he obtained the f i n a n c i n g necessary f o r the venture, and a p p l i e d f o r the d e a l e r s h i p . With the defendant's encouragement and approval he bought inventory, rented storage space, h i r e d s a l e s s t a f f , and d i d other things c o n s i s t e n t w i t h e s t a b l i s h i n g the proposed d e a l e r s h i p . The p l a i n t i f f was n o t i f i e d t h a t he had been recommended to the defendant's head o f f i c e f o r the p o s i t i o n . He was "given to understand that [ h i s appointment as d e a l e r 3 would f o l l o w as a matter of course and t h a t he 'was m business* . The p l a i n t i f f was encouraged by the defendant to do f u r t h e r preparatory work f o r the a n t i c i p a t e d d e a l e r s h i p , and the p l a i n t i f f , t h i n k i n g h i s acceptance to be a "matter of r a t i f i c a t i o n r a t h e r than 138 Cf. Goff and Jones (supra) a t Chapter 1 and at pp 393-396; and see, f o r example, Brewer S t r e e t Investments (supra); Brewer v C h r y s l e r Canada (supra); Maclver v American Motors  (Canada) L t d . (1976) 70 DLR (3d) 4 7 3 . . Although the court does not e x p l i c i t l y speak i n terms of " r i s k " and " f a u l t " i n the l a t t e r two cases, the p a r a l l e l between these and Brewer S t r e e t Investments e t c , i s unmistakable. The same general f a c t o r s form the b a s i s of the j u d i c i a l motive which ordered the making of recompense. For an American a p p l i c a t i o n of the d o c t r i n e of u n j u s t enrichment to a b o r t i v e c o n t r a c t n e g o t i a t i o n s , see H i l l v Waxberg, 237 F. 2d 936 ( 9 t h c i r . 1956) . 139 [1977] 3 WWR 69 . 140 per H J MacDbnald J a t p 75-43 141 a matter of s e l e c t i o n " , duly d i d t h i s work. Soon, the p l a i n t i f f had to s t a r t using h i s business c a p i t a l f o r l i v i n g expenses. A f t e r being i n n e g o t i a t i o n f o r some s i x months, the defendant refused the p l a i n t i f f the d e a l e r s h i p . The reason o f f e r e d was t h a t he could no 142 longer produce the r e q u s i t e c a p i t a l . The p l a i n t i f f s u c c e s s f u l l y sued on a quantum muruit f o r the value of h i s work and expenditures. There was the " f a u l t " of the defendant, then, i n s e v e r i n g i t s r e l a t i o n s h i p w i t h the p l a i n t i f f when he had done t h i s s u b s t a n t i a l amount of work i n the expectation t h a t he would be accepted f o r the d e a l e r s h i p : "During the months of November, December and January, to use a c o l l o q u i a l i s m , the p l a i n t i f f was "kept on a s t r i n g " . The defendant knew or should have known that the p l a i n t i f f had no income and t h a t he would have to l i v e on the c a p i t a l resources he had a t the end of October. The defendant knew the p l a i n t i f f was l a y i n g out not only h i s time but a l s o money, which would be to the u l t i m a t e advantage of the d e a l e r s h i p i t must be i n f e r r e d that [the defendant] d i d not expect to reap the b e n e f i t s of the e f f o r t s and outlays of the p l a i n t i f f without some reasonable compensation. Under the circumstances an award by way of e i t h e r u n j u s t enrichment or quantum 143 meruit would only be e q u i t a b l e . " 141 a t p 76. 142 As some of the c a p i t a l he intended to i n v e s t w i t h the defendant had to go to meet h i s own and h i s f a m i l y ' s l i v i n g expenses. 143 per H J MacDonald J a t p 78. 44 Brewer i s a somewhat unusual pre-contract case- in. that the defendant company did in fact reap a clear financial gain from the abortive negotiations. The dealership i n question was eventually set up under the management of another party. The staff the p l a i n t i f f had recruited were used when the dealership f i n a l l y got under way. -The importance of this circumstance is that i t then becomes much easier to refute an argument that the services, were rendered "voluntarily 1 and to find that the were not gratuitously rendered so that they were' to be paid for in some way. Such gain, i n other words, seem to aid 144 the "transference" of risk from p l a i n t i f f to defendant.. , Given the expanded definition ,-of benefit propounded earlier in this paper, however, the question of whether or not a pecuniary gain " - 145 has been made by the defendant is not the important question. Indeed, i t cannot be, i f present day negotiating parties are to be 46 shielded from the potential "whims" of their co-negotiators.' ' The injustice done a p l a i n t i f f i s not lessened by virtue of the fact that l47 the defendant i s not-monetarily enriched. The motive underlying 144 This may account for the'fact that Brewer was decided on a straight application of the ratio-in Graven-Ellis, (supra), without the necessity of resort to the fault-risk formulation upon which cases like Brewer Street Investmentsf Sabemo P/L. and William Lacev were decided. (All being cases where the defendant was monetarily enriched). But, cf note (138) supra. 145 See p 4 - 1 1 ante. 146 Cf.' Summers, "'Good Faith' in General Contract Law and the Sales Provisions of -the Uniform Commercial Code", (1968) 5^ Va L Rev 195. 147 Eg., had the p l a i n t i f f i n the Sabemo P/L case (supra) been denied, recompense, i t would have stood to lose the sum of 426,000 dollars following on-a unilateral abandonment by the defendant of a development project which-the. plaintiff• had assiduously worked towards for a period'of some t n r e e years. Cf. Hoffman v Red Owl  Stores. Inc./133 NW 267.(1965), and Barry J at note (284). 45 the ordering of reimbursement i n the cases we have considered does not consist so much i n a desire to make the defendant disgorge a benefit received at the p l a i n t i f f ' s expense. It is more a desire to make the 148 plaxntiff whole. The vehicle most commonly used i n Anglo-Canadian law for giving a practical effect to this desire has been the law of restitution. It does not matter that the end i s achieved by adoption of an expansive, almost f i c t i o n a l , definition of benefit. Cases which, 14Q m effect, prevent the "unjust impoorment" of a negotiating p l a i n t i f f reconcile with the more familiar unjust enrichment d o c t r i n e , s o that l i p service i s paid to legal theory, and l i a b i l i t i e s attached 151 when the dictates of justice and fairness demand this course. 152 In America, more than forty years ago, Fuller and Perdue noticed this expansion i n the scope of restitution and remarked that: "when the benefit received by the defendant has become as attenuated as i t i s i n some of the cases cited, and when this benefit i s "measured" by the p l a i n t i f f ' s 148 Cf. Sheppard J i n Sabemo p/L (supra) at p 902. 149 The phrase "unjust impoorment" i s suggested by Summers i n his article entitled "'Good Faith' i n General Contract Law and the Sales Provisions of the Uniform Commercial Code", ( I 9 6 8 ) a j 4 Va L Rev 195 at p 259. 150 Cf. Goff and Jones (supra) at Chapter 24. 151 Some writers have characterised this increase i n the scope of restitution as a step i n the direction of "indemnification sounding i n tort." Note, (1931) 44 Harv. L. Rev. 623, 627. 152 Fuller and Perdue, "The Reliance Interest i n Contract Damages", (1936) 46 Yale L J 52. 46 detriment, can i t be supposed t h a t a d e s i r e to make the defendant disgorge i s r e a l l y a s i g n i f i c a n t p a r t of j u d i c i a l motivation? When i t becomes impossible to b e l i e v e t h i s , then the courts are a c t u a l l y p r o t e c t i n g the r e l i a n c e i n t e r e s t , i n whatever form t h e i r i n t e r v e n t i o n may be c l o t h e d " 1 5 3 Although t h i s a r t i c l e i s s e t i n a predominantly c o n t r a c t u a l context, the " a t t e n u a t i o n " of b e n e f i t n o t i o n put forward there i s 154 a p p l i c a b l e to the law of r e s t i t u t i o n g e n e r a l l y . The w r i t e r s concentrated a t t e n t i o n on the recovery of expenses i n c u r r e d i n r e l i a n c e on e x i s t i n g c o n t r a c t s , a n d i n the process exposed the f a l l a c i e s of t r a d i t i o n a l contract-damage theory i n the l i g h t of the case law. Our concern, on the other hand, i s centered around the question of recovery of expenditures i n c u r r e d i n r e l i a n c e on "imminent" c o n t r a c t s . Here, i t i s seen t h a t r e s t i t u t i o n a r y theory, w i t h i t s expansive d e f i n i t i o n of b e n e f i t , allows disappointed n e g o t i a t o r s to c l a i m f o r costs and expenditures i n c u r r e d a t the defendant's request i n r e l i a n c e upon the prospect of an a n t i c i p a t e d c o n t r a c t m a t e r i a l i s i n g . The courts work on the theory that the defendant has obtained a b e n e f i t i f he gets the p l a i n t i f f to perform p r e - c o n t r a c t s e r v i c e s 157 f o r him. ^  The c o n s i d e r a t i o n t h a t the defendant has not been monetarily b e n e f i t t e d i s r e l e g a t e d to a very secondary p o s i t i o n as i n a question 153 i d , a t p 394. 1.54 Cf. Pl a n c h ! v Golburn; W i l l i a m Lacey; Brewer S t r e e t Investments; Sabemo P/L; ( a l l supra). See s e c t i o n ( a ) ante. 155 A l b e i t o f t e n unenforceable f o r want of f o r m a l i t y , c e r t a i n t y , e t c . 157 Cf, p 4 et seq., ante. 47 with the plaintiff's, claim. It is the defendant's "hard luck" that, by his own unilateral decision, he has effectively abandoned the opportunity of turning the services given to date to his own profit at some future time. But the question of financial gain does acquire a degree of. importance when one comes to consider whether such benefit is recover-159 ' able. It w i l l often become'easier to show that the "services were rendered in circumstances which disclose an intention that they should be paid for", 1^<"> regardless of whether a contract is eventually given, i f such gain i s present."^ 1 It may be viewed as a catalyst operating in the p l a i n t i f f ' s favour. Consider the recent Canadian case of Maclver v American Motors 1 /To (Canada) Ltd. The facts of this case are somewhat complex, and particular d i f f i c u l t y i s caused by the fact that the p l a i n t i f f was a franchise dealer of the defendant. The franchise agreement was nearing 158 Assuming, of course, that the contract would have turned out to •be a gaining proposition for him. 159 Brewer v Chrysler i t s e l f i llustrates this; Cf. Maclver v American  Motors (supra). 160 This phrase is from Goff and Jones' book, "The Law of Restitution" •(I966) at p 270. -161 Cf. Peter Lind & Co Ltd v Mersey Docks and Harbour Board.. fl972] 2 Lloyd's Rep. 2 3 4 . I n other words, i f the defendant has been pecuniarily benefitted, i t i s more lik e l y that the risk-factor issue in contract-negotiations w i l l be resolved i n the p l a i n t i f f ' s favour. I63 (1976) 63 DLR (3d) 154, affirmed [1976] 5 WWR 217. (Manitoba Court of Appeal). • 48 the end of i t s term, and p a r t i e s were i n n e g o t i a t i o n f o r a renewal of the agreement. A s h o r t time before the n e g o t i a t i o n s were f o r m a l l y terminated by the defendant, the p l a i n t i f f became i n s o l v e n t . I t was not the p l a i n t i f f ' s i n s o l v e n t condition-, however, t h a t brought the n e g o t i a t i o n s 164 to a head. There was evidence before the court to show th a t the p l a i n t i f f would not, i n any event, have been given an extension of the f r a n c h i s e . There was documentary evidence a v a i l a b l e s u f f i c i e n t to e s t a b l i s h an i n t e n t i o n on the p a r t of the defendant " to e l i m i n a t e Maclver from any p a r t i c i p a t i o n i n the new f a c i l i t y " , and i t would seem t h a t the n e g o t i a t i o n s had to a l l i n t e n t s and purposes broken down some time before the emergence of the p l a i n t i f f ' s i n s o l v e n c y . 1 ^ 5 The l a t t e r merely provided the defendant w i t h a t i m e l y excuse to do what i t was going to do i n any event. l 6 6 As was the case i n Brewer v C h r y s l e r Canada Lt d the defendant i n Maclver had obtained a c l e a r pecuniary g a i n from the a b o r t i v e 164 The t r i a l judge (Solomon j ) makes no reference to the p l a i n t i f f ' s i n s olvency i n h i s d e s c r i p t i o n of-the events l e a d i n g up to the d i s s o l u t i o n of the n e g o t i a t i o n s . See (1976) 63 DLR (3d) 1.54 a t p 159. His Lordship appeared to be of the view t h a t the n e g o t i a t i o n s were a t an end i n any event, even though the defendant d i d , as i t was c o n t r a c t u a l l y e n t i t l e d to do, send a formal t e r m i n a t i o n n o t i c e to the p l a i n t i f f s p e c i f y i n g t h a t i t had brought the present f r a n c h i s e to an end on the basis of h i s i n s o l v e n c y . No " f a u l t " could, of course, be a t t r i b u t e d to the defendant i f t h i s had been the s o l e reason f o r the breakdown of the r e l a t i o n s h i p . I t would then have been t r u l y p r o t e c t i n g its-dwn economic i n t e r e s t s by g e t t i n g r i d of a f i n a n c i a l l y insecure d e a l e r , and the p l a i n t i f f s ' c l a i m would lo s e much of i t s appeal. 165 The p l a i n t i f f s p r e c a r i o u s f i n a n c i a l p o s i t i o n was, i n p a r t a t l e a s t , due to-the l o s s of p r o f i t r e s u l t i n g from the defendant's delay i n making new premises a v a i l a b l e to him. The defendant d i d i n f a c t make a promise, which i t l a t e r ignored, t h a t i t would "take care" of these i n t e r i m l o s s e s . This was h e l d to be c o n t r a c t -u a l l y b i n d i n g ; the p l a i n t i f f ' s r e s t i t u t i o n a r y claims were e n t i r e l y d i s t i n c t from t h i s head of c l a i m . 166 [1977] 3 WWR 6 9 . 49 n e g o t i a t i o n s , and the court found l i t t l e d i f f i c u l t y i n holding t h a t i t had been u n j u s t l y enriched."*"^ The p l a i n t i f f had, i n t e r a l i a , helped to develop new premises on land belonging to the defendant i n conf i d e n t a n t i c i p a t i o n of se c u r i n g an extension of the present f r a n c h i s e aggreement"*"^^ and when i t f a i l e d to m a t e r i a l i s e he could not, of course, get the b e n e f i t of the work he had done. The t r i a l judge (Solomon j ) summed up the s i t u a t i o n by saying: "Defendant was l e f t w i t h a v i a b l e d i s t r i b u t i o n agency i n the new f a c i l i t y patterned on the general b a s i s envisaged i n the d i s c u s s i o n s between p l a i n t i f f and defendant, and p l a i n t i f f and ^ p l a i n t i f f ' s company] were l e f t without any business or f a c i l i t y i n which they could operate t h e i r b u s i n e s s " ^ 9 The f o r e g o i n g suggests t h a t an a n a l y s i s of a b o r t i v e n e g o t i a t i o n cases i n terms of " f a u l t " and " r i s k " f a c t o r s i s sound. An attempt i s made i n the pages which f o l l o w to s t a t e the l e g a l consequences of breakdown r e s u l t i n g from "mutual disagreement", and from the p l a i n t i f f ' s 167 As the headnote to the case puts i t : "the f a l s e sense of s e c u r i t y which had been given to the p l a i n t i f f by the defendant [as a r e s u l t of the l a t t e r h o l d i n g i t s e l f out as w i l l i n g to grant the fr a n c h i s e } created a s i t u a t i o n where the court found an unjus t enrichment had taken p l a c e . " 168 The proposed new f r a n c h i s e was to be l o c a t e d here, the o l d premises having now become "obsolete". 169 (1976) 63 DLR (3d) 154 a t p 159. 50 own f a u l t . This w i l l f u r t h e r c l a r i f y the " f a u l t - r i s k " framework w i t h i n which courts operate when r e s o l v i n g d i s p u t e s a r i s i n g out of a b o r t i v e c o n t r a c t n e g o t i a t i o n s . 51 (f) Breakdown of Negotiations Through Mutual Disagreement: Where negotiations go off, not as the result of. a unilateral . decision by the defendant not to carry on, but because of a disagreement by the parties on. some material term of the-projected agreement, the ,'• pl a i n t i f f ' s case for recovery'of his wasted expenditures becomes less . 170 • appealing. Without "fault" on the part of the defendant, the . "justice" of the p l a i n t i f f ' s claim appears to be less compelling than the defendant's plea that, i n the absence of-financial gain, he should 171 - • not be liable to pay compensation. . ., No authority has been found which affirmatively supports this • view, but this i s not really surprising, given the paucity of cases appearing in the reports where suit has been brought against defendants' 172 who unilaterally terminate negotiations. . . . In the absence of' relevant authority,- much of what 'will be said on the problem of mutual breakdown w i l l remain "speculative", and w i l l be made by analogy with the results.'reached i n fact situations which are. only superficially similar. The analogy with the legal consequences following upon the frustration of a contract might be persuasive. Here, Anglo-Canadian courts generally accept that-a p l a i n t i f f i s entitled to compensation 170 At least, i f the defendant-has not reaped a pecuniary.benefit from the abortive negotiations. 171 This view i s on a l l fours with the one just espoused that "fault" on the part of the defendant i s , at least i n the absence of some special circumstance (cf. Denning L J i n Brewer Street  Investments (supra)), a prerequisite of recovery i n pre-contract situations. 17? And most of these appear i n the law reports of the last'two decades, ' • • 52 173 only i f the defendant has obtained a "financially valuable benefit" from his performance. Several eminent writers have expressed their 174 dissatisfaction with this position i n recent years. Indeed, these academic views found favour with the Law Reform Commission of British Columbia when i t conducted i t s study on frustrated contracts legislation some eight years ago. The Commission took the somewhat novel view that: "Entitlement to restitution should be based on what has been done by the performing party in the fulfilment of his contractual obligations, rather than on benefits 175 received or obtained by the other party." J 173 Eg. Parsons Bros., Ltd y Shea, (19&5) 53 DLR (2d) 86; Appleby v  Myers, (1867). LR 2 CP 651; cf. the English Law Reform (Frustrated  Contracts) Act, 1943> which states (section 1(3)) that a "valuable benefit" obtained by reason of the other side "s contractual performance is recoverable "as the court considers just, having regard to a l l the circumstances of the case and, i n particular-s e c t i o n 1 (3) (b)) the effect, i n relation to the said benefit, of the circumstances giving rise to the frustration of the contract". The requirement of "valuable benefit" i n the English Act i s thought to be particularly restrictive of the rights of parties doing -work when the frustrating event renders i t of no value to the party for whom i t was being done. See Chitty on Contracts, 24th ed., p 69O-69I; Anson's Law of Contract, 24th ed., p 501-502; Goff and Jones, The Law of Restitution (I966) at pp 32> 339; and see the Appendix to the second edition of that work. Cf. discussion i n the Law Reform Commission of British Columbia Report on the need for Frustrated Contracts Legislation i n British Columbia, (1971) at p 24. 174 Eg. Glanville Williams, Law Reform (Frustrated Contracts) Act, 1943 (19^4); Goff and Jones, The Law of Restitution '(1966), at pp 334-335. 175 Law Reform Commission of British Columbia; Report on The Need for Frustrated Contracts Legislation in British Columbia (Project No 8, 1971), at p 32. This isanexcellent report, being a very thorough and comprehensive treatment of the topic of frustration. 53 The Commission's recommendations are>now enacted i n the 176 B r i t i s h Columbia F r u s t r a t e d Contracts Act of 1974, which, i n t e r a l i a , provides t h a t : "(3) Where the circumstances g i v i n g r i s e to the f r u s t r a t i o n or avoidance cause a t o t a l or p a r t i a l l o s s i n value of a b e n e f i t to a p a r t y r e q u i r e d to make r e s t i t u t i o n t h a t l o s s s h a l l be apportioned e q u a l l y between the p a r t y r e q u i r e d to make r e s t i t u t i o n -and the p a r t y to whom such 177 r e s t i t u t i o n i s r e q u i r e d to be made." "(4) I n t h i s s e c t i o n , a " b e n e f i t " means something done i n the f u l f i l m e n t of c o n t r a c t u a l o b l i g a t i o n s whether or not the person f o r whose b e n e f i t i t was done r e c e i v e d the b e n e f i t " . 1 7 8 The general p o l i c y i s s u e f i n d i n g expression i n these p r o v i s i o n s i s t h a t a l o s s f o r which n e i t h e r party to a c o n t r a c t i s r e s p o n s i b l e should be d i s t r i b u t e d e q u a l l y between them, and not be made to l i e where i t f a l l s , or t r a n s f e r r e d i n t o t o "to the shoulders of the other 179 p a r t y who would otherwise not have borne i t . " I n other words, i t i s thought t h a t the " f a i r e s t " or the most " j u s t " formula f o r a d j u s t i n g the p o s i t i o n of p a r t i e s upon a f r u s t r a t i n g event d i c t a t e s t h a t both should o r d i n a r i l y be taken to have e q u a l l y borne the r i s k 176 C 37. 177 S e c t i o n 5(3). 178 S e c t i o n 5(4). Cf. S e c t i o n ( a ), ante. 179 per G l a n v i l l e W i l l i a m s (supra), p 35. I t i s added th a t to s h i f t the whole l o s s to the other p a r t y would "be as o b j e c t i o n a b l e as s h i f t i n g none" (at p 36). 180 of t h i s e v e n t u a l i t y . Of what relevance might l e g i s l a t i v e measures such as the B r i t i s h Columbia F r u s t r a t e d Contracts Act be to con t r a c t n e g o t i a t i o n s 1 Rl which go o f f without " f a u l t " on the p a r t of e i t h e r n e g o t i a t o r ? Two s o l u t i o n s might be canvassed, although the choice between them i s not easy. The f i r s t i s simply to argue t h a t where a p r o j e c t e d agree-ment goes o f f " i n the ordinary course of n e g o t i a t i o n s and misunder-182 standings," the p l a i n t i f f should be l e f t to absorb h i s wasted expenditures. S i m i l a r l y , i f p a r t i e s , having been i n n e g o t i a t i o n f o r some time, are prevented from e n t e r i n g i n t o t h e i r c o n t r a c t by, say, an unforeseen l e g i s l a t i v e measure. I n other words, the p l a i n t i f f should be taken to have been a c t i n g at h i s own r i s k i n s o f a r as . n e g o t i a t i o n s break down from a cause other than the defendant's f a u l t . 1 8 3 The a l t e r n a t i v e argument i s by way of analogy w i t h the general p o l i c y behind the B r i t i s h Columbia l e g i s l a t i o n . One might urge t h a t expenditures or l o s s e s i n c u r r e d i n the course of n e g o t i a t i o n s which 180 Goff and Jones are of the view t h a t t h i s formula i s "more i n accordance with business e t h i c s and commercial expectations" ( F i r s t e d i t i o n a t p 333). 181 The i n s t a n t d i s c u s s i o n , i t should be mentioned, i s confined to those s i t u a t i o n s i n which the p l a i n t i f f ' s wasted p r e - c o n t r a c t e f f o r t s do not r e s u l t i n pecuniary g a i n to the defendant. 182 per Somervell L J i n Brewer S t r e e t Investments (supra) a t p kjk. 183 But, c f Denning L J i n the Brewer S t r e e t Investments case (supra His Lordship took the view t h a t n e i t h e r p a r t y was a t f a u l t f o r the breakdown, but h e l d t h a t the defendants were t a k i n g the r i s k of the n e g o t i a t i o n s f a i l i n g so that they were l i a b l e t o reimburs the p l a i n t i f f s . f o r the expenses to which they had been put. 55 go o f f because of a f a i l u r e to agree should not be made to l i e s o l e l y w i t h the p a r t y expending the time and money, but should be shared e q u a l l y by the n e g o t i a t i n g p a r t i e s . There are, however, some d i f f i c u l t i e s w i t h the l a t t e r approach. I n the f i r s t p l a c e , the analogy w i t h the l e g a l consequences of f r u s t r a t i o n i s only m i l d l y persausive. Care should always be e x e r c i s e d to avoid p u t t i n g one's arguments s o l e l y on the grounds of analogy with the r e s u l t s a r r i v e d a t i n s i t u a t i o n s which, although i n a 184 sense s i m i l a r , are q u i t e d i f f e r e n t . I n the con t r a c t f r u s t r a t i o n s i t u a t i o n the extent o f the r e s p e c t i v e r i g h t s and du t i e s of p a r t i e s i s s e t by agreement, and the agreement may, without too much d i f f i c u l t y , be regarded "as a j o i n t adventure which has f a i l e d without fault"."'" 8- 5 Hence, the appeal of the argument t h a t p a r t i e s should share the r i s k of a f r u s t r a t i n g event. Furthermore, the r e l a t i o n s h i p of p a r t i e s who are merely i n n e g o t i a t i o n f o r a c o n t r a c t i s q u i t e d i f f e r e n t . Quite apart from the f a c t t h a t the communings of p a r t i e s have not y e t c r y s t a l l i z e d i n t o any s o r t of agreement, i t i s probably more e a s i l y understood i n n e g o t i a t i n g s i t u a t i o n s t h a t the r i s k o f l o s i n g expenditures should be borne by the p a r t y doing the work, i n the event of the p r o j e c t e d t r a n s a c t i o n going o f f because of a f a i l u r e to a g r e e . " ^ The o b i t e r views of Sheppard J i n the recent 184 In much the same way, one o f t e n hears judges warn of the dangers of d e c i d i n g cases "by way of analogy". 185 Goff and Jones, The Law of R e s t i t u t i o n , ( I 9 6 6 ) , at p 333. 186 E s p e c i a l l y i n view of the c h a r a c t e r i s t i c i n s i s t e n c e by courts on there being " f a u l t " on the p a r t of the defendant n e g o t i a t o r before h o l d i n g him l i a b l e i n r e s t i t u t i o n . But c f . Denning L J i n the Brewer S t r e e t Investments case, and the d i s c u s s i o n at note (183), supra. I t should, however, be pointed out t h a t h i s Lordship's c o n c l u s i o n that the defendants were t a k i n g the r i s k was i n large measure i n f l u e n c e d by the undertaking which they had g i v e n . 56 New South Wales case of Sabemo P/L are deserving of mention i n t h i s context. His Lordship s a i d that: " i f the t r a n s a c t i o n had gone o f f because the p a r t i e s were unable to agree, then I t h i n k i t would be c o r r e c t to say t h a t each p a r t y had taken a r i s k , i n i n c u r r i n g the expenditure which i t d i d , t h a t the t r a n s a c t i o n might go o f f because of a bona f i d e f a i l u r e to reach agreement on some p o i n t of substance i s such a complex transaction.""'" 8 8 Another s a l i e n t d i f f e r e n c e between c o n t r a c t f r u s t r a t i o n and the breakdown of n e g o t i a t i o n s i s t h a t i n the former the event making f u r t h e r performance impossible i s i n v a r i a b l y beyond the c o n t r o l of the p a r t i e s , and i s u s u a l l y unexpected and unforeseeable, whereas t h i s i s not so i n the l a t t e r case. There i s always the very r e a l p o s s i b i l i t y that n e g o t i a t o r s might f i n d themselves a t odds on some m a t e r i a l term of a proposed t r a n s a c t i o n , and i t may be argued t h a t the breakdown i s not r e a l l y "beyond the c o n t r o l " of the p l a i n t i f f , i n the sense that the power to keep the n e g o t i a t i o n s a l i v e u l t i m a t e l y r e s i d e s w i t h him. For i t i s always open to him to s h i f t h i s ground, and 190 give the defendant the leeway he d e s i r e s . The proper c o n c l u s i o n to draw, t h e r e f o r e , might be that a 187 [19773 2 N S W L R 8 8 0 • 188 i d , a t p 901 . 189 But c f . the p o s s i b i l i t y of incomplete c o n t r a c t n e g o t i a t i o n s becoming " f r u s t r a t e d " . See p 54 , ante. 190 The defendant, however, should remain cautious, f o r i f he pushes h i s demands too s t r o n g l y , i t i s p o s s i b l e t h a t he might be taken to be at f a u l t . See p 58 , post. 57 p l a i n t i f f i n c u r r i n g expenditure i n the course of contract negotiations should be taken to have run the r i s k of t h e i r f a i l i n g through mutual disagreement, at l e a s t i n the absence of h i s wasted e f f o r t s having conferred a pecuniary benefit upon the defendant. Assuming that the foregoing view i s sound, i t i s plausible to make the inference that, so long as the defendant has made no gain, he i s given a degree of leeway which he might use to negotiate an advantageous contract, because a future breakdown, as a r e s u l t of the p l a i n t i f f r efusing to accede to h i s demands, i s l i k e l y to be la b e l l e d a "mutual breakdown" without f a u l t on the part of ei t h e r . A r e s t i t u t i o n a r y remedy w i l l then not u s u a l l y be a v a i l a b l e to the p l a i n t i f f . 1 9 1 On the p l a i n t i f f ' s side, the moral might be that he ought to give i n , or at l e a s t be highly s e n s i t i v e and responsive, to the defendant's demands, so that the l a t t e r might be thought of as occupying a superior bargaining p o s i t i o n . The defendant, however, must also be wary, f o r without h i s being conscious of i t , h i s conduct i n attempting to secure the most b e n e f i c i a l contract might creep i n t o the " f a u l t " category. I f he presses h i s demands too hard he i s at 191 An exception might be where negotiating parties have had the prescience (which is very seldom) to agree on the allocation of pre-contract costs, as i n Brewer Street (supra). But the "optimism" of businessmen i s reflected even i n those rare cases where this course i s taken, for no case was found i n which parties had contemplated the failure of negotiations, and made conventional provision therefor, cf. Macaulay "Non-Contractual Relations i n Business", (1963) 28 AM Soc Rev 55, where some of the reasons for the avoidance of contractual commitments are discussed. The result i s that such pre-contractual agreements as are made are held to be inapplicable and only marginally relevant to the resolution of legal disputes arising out of the breakdown of negotiations. 58 . 192 f a u l t , and therefore l i a b l e to reimburse the p l a i n t i f f f o r the expenses i n c u r r e d i n r e l i a n c e on the prospect of the de a l coming o f f . An American w r i t e r has expressed the view t h a t t h i s n e g o t i a t i o n t a c t i c may be commonplace: " I t may be a common ploy f o r a p a r t y who wishes to break o f f to introduce a new and h i g h l y unreasonable c o n d i t i o n i n t o the n e g o t i a t i o n s , hoping thereby to 193 induce the other to walk away". Much the same would appear to apply to a defendant who has gi v e n an undertaking as to pr e - c o n t r a c t expenses, the prima f a c i e e f f e c t of which i s to a l l o c a t e the r i s k of a mutual breakdown to him. The p l a i n t i f f i n t h i s type of case would s i m i l a r l y be able to exert 194 a degree of pressure on the defendant. But again there i s the danger to him t h a t i f he presses too hard, h i s conduct may f a l l i n t o the " f a u l t " category. As we s h a l l see, the law does not show much 195 sympathy f o r the "delinquent" p l a i n t i f f n e g o t i a t o r . Does i t make a d i f f e r e n c e to the l e g a l consequences of a mutual breakdown that the defendant has c l e a r l y been monetarily 192 Cf. Hoffman v Red Owl Stores, Inc., (supra). 193 Summers (supra) a t p 224. This s t r a t e g y i s c o n s t r u c t i v e l y a u n i l a t e r a l t e r m i n a t i o n , there being l i t t l e d i f f e r e n c e between i t and a s t r a i g h t withdrawal. 194 This would appear to f o l l o w from the d e c i s i o n of Denning L J i n Brewer S t r e e t (supra). His d e c i s i o n i n favour of the p l a i n t i f f s i n t hat case, and h i s c o n c l u s i o n t h a t n e i t h e r p a r t y was a t f a u l t f o r the breakdown, suggests t h a t i t i s but prudent f o r the defendant to give some ground. But i n d i c a t i o n s are th a t p l a i n t i f f s i n such cases can do l i t t l e more than hold t h e i r o r i g i n a l ground-, In Brewer S t r e e t , the p l a i n t i f f ' s p o s i t i o n was make c l e a r to the defendant a t the i n c e p t i o n of n e g o t i a t i o n s . 195 See, f o r example, C o n s t r u c t i o n Design & Management Ltd (supra); Jennings & Chapman (supra). 59 advantaged? This circumstance would prima f a c i e appear to add to the " j u s t i c e " of a p l a i n t i f f ' s c l a i m , and to sub t r a c t from the " j u s t i c e " of the defendant's p l e a t h a t he should not be l i a b l e to make recompense i n the absence of f a u l t on h i s p a r t . 1 9 ^ And the analogy w i t h the f r u s t r a t i o n cases a l l o w i n g r e s t i t u t i o n f o r b e n e f i t s conferred f u r t h e r adds to the persuasiveness of the p l a i n t i f f ' s n • 197 c l a i m . Ordering the defendant to make recompense i n such a s i t u a t i o n would not so much have the e f f e c t of s a d d l i n g him w i t h l i a b i l i t y f o r the p l a i n t i f f ' s l o s s e s or expenditures (or a p r o p o r t i o n of th e s e ^ but would r a t h e r r e s u l t i n h i s being f o r c e d to disgorge a g a i n emanating from the p l a i n t i f f ' s p r e - c o n t r a c t e f f o r t s . To ensure t h a t a j u d i c i a l award would not have the e f f e c t of s h i f t i n g a p r o p o r t i o n of the 199 p l a i n t i f f ' s n e g o t i a t i o n l o s s e s to the defendant i t would appear s e n s i b l e to r e s t r i c t the quantum of recovery to the defendant's a c t u a l monetary g a i n and not al l o w the p l a i n t i f f to recover the f u l l , „ , . . 200 value of h i s s e r v i c e s . Put i n r e s t i t u t i o n a r y language, then, the b e n e f i t conferred 196 Cf. the p r i n c i p l e of i n c o n t r o v e r t i b l e b e n e f i t i n the law of r e s t i t u t i o n . See Goff and Jones (supra) a t pp 16-17. 197 See note (173), supra. Brewer v C h r y s l e r Canada and Maclver v  American Motors would seem to show t h a t courts are l e s s i n s i s t e n t on the p l a i n t i f f s a t i s f y i n g the " f a u l t - r i s k " requirement where the defendant has obtained a c l e a r pecuniary b e n e f i t from a b o r t i v e n e g o t i a t i o n s . See p 81 , post. 198 See d i s c u s s i o n on t h i s p o i n t a t pp 52 - 55 , ante. 199 This accords w i t h our e a r l i e r c o n c l u s i o n that the p l a i n t i f f o r d i n a r i l y takes the r i s k of l o s i n g the expenditures to which he has been put i f n e g o t i a t i o n s f a i l because of mutual disagreement. See p ,55 , ante. 200 However, i f the defendant's gain exceeds t h i s f i g u r e , i t i s p o s s i b l e t h a t the cost of the s e r v i c e s to the p l a i n t i f f should operate as a c e i l i n g on the measure of recovery. 60 on the defendant ( c o n s i s t i n g i n the p l a i n t i f f ' s performance of 201 requested s e r v i c e s ) should be recoverable to the .extent to which i t has r e s u l t e d i n monetary g a i n to him. 201 See pp L - 11 , ante. 61 (g) R e s t i t u t i o n a r y R e l i e f and The P l a i n t i f f Who Refuses To Go On: The p l a i n t i f f ' s c laim has obviously the l e a s t m e r i t i n a case where he h i m s e l f has put an end to the n e g o t i a t i o n s . Consequently, there i s l i t t l e to be s a i d f o r a r u l e which would h o l d an innocent defendant l i a b l e to pay pre - c o n t r a c t expenses to such a p l a i n t i f f , a t l e a s t i n the absence of a b e n e f i t to him i n a f i n a n c i a l sense. And even then, the p l a i n t i f f ' s c l a i m i s l e s s appealing than i n any of the s i t u a t i o n s heretofore considered. There i s some a u t h o r i t y to support t h i s view, and persuasive 202 analogies are e a s i e r to come by here than i n the preceding s e c t i o n . The case of C o n s t r u c t i o n Design and Management Ltd v New Brunswick 203 Housing Corporation i s i n p o i n t . The p l a i n t i f f b u i l d e r r a i s e d an a c t i o n f o r the recovery of a sum of n e a r l y $25,000, being the costs and expenses i n c u r r e d by i t i n p r eparing engineering and design plans f o r the defendant's contemplated housing p r o j e c t . The p l a i n t i f f ' s b i d , having been the lowest of the seven r e c e i v e d , was looked upon favourably. The p a r t i e s were soon i n " s e r i o u s " n e g o t i a t i o n . The defendant (NBHC) hoped to r a i s e the necessary finance from C e n t r a l Mortgage and Housing Corporation (CM.HC). 202 The p l a i n t i f f vendee who r e f u s e s to go on with an o r a l c o n t r a c t f o r the s a l e of heritage i s i n v a r i a b l y denied recompense f o r expenditures i n c u r r e d by him on the property before h i s d e f a u l t . S i m i l a r l y , w i t h the p l a i n t i f f vendor who refuses or i s unable to complete. The innocent vendee here w i l l not be l i a b l e f o r the vendor's expenditures, even i f they have been requested by him. Cf Corbin, Contracts, S 1122 et seq. This i n a b i l i t y to complete was determinative of the dispute i n Jennings and Chapman (supra). 203 (1973) 36 DLR (3d) 458. .62 204 The intended financing method was by way of a mortgage loan. CMHG o f f i c i a l s were not happy with certain features of the pla i n t i f f ' s plans and designs. CMHG suggested that those be redesigned and resubmitted. The p l a i n t i f f did as i t was told. When plans and designs were again submitted, GMHC gave a similar response. Over a .period of six or seven months the p l a i n t i f f repeatedly revised and resubmitted i t s plans; they were never approved by CMHC. The negotiations came to a head when the defendant (NB HC) refused to accept the p l a i n t i f f ' s demand that there be a ten per cent increase i n the contract price, which change was necessitated by the 205 delay i n the award'of the contract and by rising prices. This demand that the price be increased was held to constitute a withdrawal of the p l a i n t i f f ' s original proposal, and a withdrawal by the p l a i n t i f f from the negotiations. Within our analysis, therefore, the p l a i n t i f f was clearly at "fault" and consequently unable to obtain restitutionary r e l i e f for i t s wasted expenditures.^^ Hugher CJNB, delivering the judgment of the court, said that the: "... expectation [that a contract would be entered into} 204 This procedure i s la i d down by statute, see the National Housing  Act. 1953-5^, (Can), C23, [RSC 1970, CN - lo]. CMHC's approval of the proposal for the construction had to be obtained. 205 The project was l e t to another contractor some two months later. 206 Another factor going'to defeat the p l a i n t i f f ' s claim was the holding by the court (the Appellate Division of the New Brunswick Supreme Court) that there was "no unqualified understanding" between the p l a i n t i f f and NBHC that the building contract would be given, the qualification consisting i n the awareness of parties that the prior approval, of GMHC was essential to the project going ahead. The court, however, may have placed too much weight on this circumstance. Had the p l a i n t i f f not firmly thought that the contract would be given to i t , i t i s most unlikely that i t would have expended the time and money i t did in attempting to finalise i t . 63 was f r u s t r a t e d by the p l a i n t i f f ' s a c t i n withdrawing from the n e g o t i a t i o n s before the approval of CMHC was obtained. I n such circumstances I am unable to see why the law should imply a promise on the part of NBHC to pay f o r the p l a i n t i f f ' s work as i t would be tantamount to g i v i n g a person performing work on one understanding to e l e c t to be paid f o r such work notwithstanding h i s un w i l l i n g n e s s t o c a r r y out h i s p a r t o f the understanding" As i t stands t h i s dictum i s without f l a w . I t i s true t h a t i t was the p l a i n t i f f who chose to make the f i n a l move and put an end t o the n e g o t i a t i o n s . The p l a i n t i f f has o n l y i t s e l f to blame f o r the f a i l u r e of i t s r e s t i t u t i o n a r y c l a i m . I t cannot, i n such circumstances reasonably expect the defendant to pay the costs of s e r v i c e s which 208 have r e s u l t e d i n no g a i n to i t . A n a l y s i s of the f a c t s i n Co n s t r u c t i o n Design, however, i s not t h i s simple. I t i s submitted t h a t i t might have been open to the p l a i n t i f f to argue that the n e g o t i a t i o n s d i d not go o f f by i t s " f a u l t " and t h a t the f a i l u r e of the n e g o t i a t i o n s was the r e s u l t of a "mutual 209 breakdown" I n t h e i r l a t t e r stages, there was such d i l a t o r i n e s s on 207 (1973) 36 DLR (3d) 458, at p 464 - 465. 208 This same general reasoning u n d e r l i e s the E n g l i s h Court of Appeal d e c i s i o n i n Jennings and Chapman (supra). 209 Given the " l a c k of sympathy" shown the p l a i n t i f f by the New Brunswick Court, however, i t i s u n l i k e l y that t h i s argument would have got very f a r before t h a t c o u r t . And, even i f i t d i d , i t i s very d o u b t f u l whether the p l a i n t i f f would have been any b e t t e r o f f a t the end of the day. See s e c t i o n ( f ) , ante, on mutual breakdown. 64 the p a r t of NBHC and GMHG i n responding to any of the p l a i n t i f f ' s p roposals, and such responses as were g i v e n were negative i n nature, that the p l a i n t i f f might w e l l have formed the impression that the p r o j e c t would not be l e t t o i t i n any event, no matter how hard i t 210 persevered. The increased p r i c e asked f o r by the p l a i n t i f f was made necessary by t h i s delay: the f i g u r e o r i g i n a l l y quoted was, i n the l i g h t of the unexpectedly l o n g p e r i o d of n e g o t i a t i o n , too low 211 to make the contemplated p r o j e c t a p r o f i t a b l e e n t e r p r i s e . What the above suggests i s that the c r i t e r i a employed i n d e t e r -mining which, i f any, of the p a r t i e s was at " f a u l t " f o r the f a i l u r e of the n e g o t i a t i o n s must c o n t a i n a degree of f l e x i b i l i t y . I t i s not the p a r t y who ta.kes the f i n a l and d e c i s i v e step who i s always at f a u l t . The r e a l motive, f o r the withdrawal of the C o n s t r u c t i o n Design p l a i n t i f f might have been t h a t , i n the circumstances, i t saw t h i s to be the most s e n s i b l e s t r a t e g y f o r the p r o t e c t i o n of i t s economic i n t e r e s t s . I n other words, i t d i d not want to i n v o l v e i t s e l f i n f u r t h e r expense a t a time when i t had become c l e a r t h a t i t was u n l i k e l y 212 to be given the c o n t r a c t anyway. Such a p l a i n t i f f should not be taken to be at f a u l t merely because i t was he who took the i n i t i a t i v e i n the end of the day and broke o f f the p a r t i e s r e l a t i o n s h i p . Were he not to do i t , chances are t h a t the defendant would do i t sooner or l a t e r . 210 Up u n t i l t h i s time, of course, the f i r m b e l i e f of the p l a i n t i f f was that i t was going to get the c o n t r a c t . 211 The r e s u l t might have been d i f f e r e n t , however, had the p l a i n t i f f stuck to i t s o r i g i n a l p r i c e , and had NBHC and CMHC c a r r i e d on r e j e c t i n g i t s plans ad i n f i n i t u m without i t ever appearing t h a t they would be approved. The defendant should then be taken to be a t f a u l t . 212 Cf. Maclver v American Motors (supra). 65 Again, the defendant who walks away from n e g o t i a t i o n s at a l a t e stage should not n e c e s s a r i l y be taken to be the p a r t y a t f a u l t . A h y p o t h e t i c a l i l l u s t r a t i o n might c l a r i f y the p o i n t . Suppose the defendant i s a s e l l e r of "trendy" c l o t h e s . Fashions are w e l l known to change from year to year, and even from season t o ' season. This i s i n l a r g e p a r t due to a v a r y i n g and changing p u b l i c demand, which p r e f e r s the new and more modern gear to the o l d . The defendant's p r a c t i c e i s to i s s u e a catalogue to a l l i t s customers at the end of every s i x month p e r i o d . The catalogue i l l u s t r a t e s the l a t e s t f a s h i o n s , and g i v e s the p r i c e of each garment, and so f o r t h . The o f f i c i a l s of the defendant company b e l i e v e t h a t i t s high p r o f i t s are a t t r i b u t a b l e to the i n v a r i a b l y timeous i s s u e of i t s catalogue, and to i t s undoubted q u a l i t y . The p l a i n t i f f i s a catalogue p r i n t e r without much experience i n the f i e l d . However, as h i s business i s l o c a t e d on the same s t r e e t as the o f f i c e s of the defendant company, the l a t t e r requests t h a t he prepare the p r i n t s f o r the next catalogue. The number of copies of the proposed new catalogue which are needed, and the costs of the production, and so f o r t h , are i s s u e s which i n the p r i n t i n g trade are g e n e r a l l y not agreed upon u n t i l a l l the p r e l i m i n a r y work has been done. There i s thus no contract f o r the production of catalogues u n t i l a l a t e stage. P r e c i s i o n i n . o o l o u r , tone, and dimensions i s a l l important to the success of the catalogue. I f any of these are i n any way d e f e c t i v e the o f f i c i a l s of the defendant company s t r o n g l y b e l i e v e that there w i l l be a sharp d e c l i n e i n p r o f i t s . With summer coming up, the catalogue must be -.made a v a i l a b l e t o the p u b l i c i n two months. Time i s t h e r e f o r e of "the essence". At h i s f i r s t attempt, the p l a i n t i f f 66 i s not q u i t e able t o get the c o l o u r s to match, and the dimensions are / He i s asked t o remedy the d e f e c t s . somewhat incongruous. ' At h i s next attempt, he exl'ects a s i g n i f i c a n t improvement. The defendant i s so p a r t i c u l a r i n t a s t e , however, th a t i t suggests f u r t h e r m o d i f i c a t i o n s . The p l a i n t i f f does as he i s i n s t r u c t e d . The defendant i s happy w i t h h i s work t h i s time, apart from some d i s s a t i s f a c t i o n w i t h the standard of colour employed. The two months i s now f a s t running out. The defendant fe a r s t h a t i f i t leaves the matter i n the p l a i n t i f f ' s hands the catalogue w i l l be l a t e in-.coming out. And i t does not want to d i s t r i b u t e a catalogue i n which the c o l o u r i s not q u i t e r i g h t . The defendant takes the matter out of the p l a i n t i f f ' s hands, and places i t i n the hands of an e s t a b l i s h e d p r i n t e r who has a r e p u t a t i o n f o r g e t t i n g jobs done i n e x t r a quick time. There was no c o n t r a c t between the p l a i n t i f f and the defendant f o r p r o d u c t i o n of the catalogue. A l l t h a t was done was done as a matter of n e g o t i a t i o n . . For the purposes of r e s t i t u t i o n a r y recovery the p l a i n t i f f had a s u f f i c i e n t l y strong e x p e c t a t i o n o f o b t a i n i n g the c o n t r a c t . His b e l i e f was that compensation f o r the time spent and expenditure i n c u r r e d by him would come from the c o n t r a c t entered i n t o when the defendant placed a d e f i n i t e order f o r the catalogue. Almost two months of h i s time were devoted s o l e l y to the defendant's catalogue. Much work had been done, and more than was normal f o r p r i n t e r s i n ' s i m i l a r circumstances t o do; any axgument t h a t he was a c t i n g without expectation of compensation, or completely a t h i s own r i s k , must 213 t h e r e f o r e f a i l . O r d i n a r i l y , t h e r e f o r e , i f the defendant a r b i t r a r i l y 213 See, f o r example, F i l l a n s & Wilson v G a s t l e c a r y F i r e c l a y Go Ltd 1931 SLT 532 ( S c o t l a n d ) . T h i s case i s unequivocal a u t h o r i t y f o r the p o i n t . There, the p l a i n t i f f p r i n t e r was held e n t i t l e d to recover h i s wasted expenditures on the defendant breaking n e g o t i a t i o n s o f f f o r what was described as a " c a p r i c i o u s " reason. I t found a p r i n t e r who would do the work f o r l e s s c o s t , and i t took the job out of the p l a i n t i f f ' s hands a f t e r having i n v o l v e d him i n s u b s t a n t i a l expense. 67 breaks off negotiations in this situation, i t i s easy to see the justice of the •plaintiff's case, and the case for imposing l i a b i l i t y 214 for his negotiation expenditures upon the defendant. However, accepting the necessity of reserving certain measures of self-protection for negotiating defendants, the case for holding the present defendant liable loses much of i t s appeal. I f i t genuinely appeared to the defendant that the p l a i n t i f f would be unable to eradicate a l l the defects i n the prints i n sufficient time, and to produce a catalogue of a quality conformable with that issued to customers i n previous years, then i t would be harsh on the defendant i f i t were held at "fault", and therefore l i a b l e for the p l a i n t i f f ' s negotiation expenditures. It was the defendant, no doubt, who took the decisive step and brought the negotiations to an end, but that per se should not be determinative of the issue of fault or l i a b i l i t y . If the matter had been l e f t i n the hands of the p l a i n t i f f , there might have been financially detrimental consequences to the defendant by reason of reduced sales. To twist the facts a bit, assume that time was not of the essence, and that the defendant was a seller, not of clothes, but of electrical goods for which the public demand does not oscillate, but remains f a i r l y constant from year to year. The reason for the defendant taking the production of the catalogue out of the p l a i n t i f f ' s hands the possibility of reduced sales, but because he finds a third party whom he believes w i l l do the job at a lower cost. The defendant i s for' consequences to himself by virtue of 214 Cf, William Lacey, Brewer v Chrysler, and Sabemo P/L,(all supra). 68 215 clearly at fault here.' The p l a i n t i f f should be able to recover 2l6 his pre-contract expenditures i n a restitutionary claim. In determining the issue of "fault" in contract negotiations, therefore, we must adopt a wide concept of relevancy. The conduct of both parties from the inception of the negotiations u n t i l they failed must be considered, as must a l l the circumstances surrounding 217 the proposed transaction. Only then can the issue of fault be properly decided. 218 Present case law, therefore, w i l l deny a p l a i n t i f f who i s himself at fault for the breakdown of negotiations recovery for his 219 wasted expenditures. His unwillingness to proceed i s inconsistent with an expectation on his part that payment i s to be made for the services rendered. Although he was not taking the risk of getting no return for what had been done i n the event of the defendant unilaterally resiling, and possibly i n the event of a mutual breakdown, he was taking the risk of losing the expenditure to which he had been put i f i t was by his own "fault" that the expected contract was i n fact not concluded. He has, by his own act, deprived himself of the opportunity to get recompense for his expenditures out of the 215 Having been put to so much expense, the defendants ought to give the p l a i n t i f f s every chance of bringing the catalogue prints up to the required degree of precision. 216 Cf. Pillans & Wilson (supra). 217 Such as, for example',. time being of the essence i n the il l u s t r a t i o n just given. 218 Eg., Construction Design(supra); cf the views of Denning L J i n Brewer Street Investments (supra), quoted at p 35 , ante. 219 Cf Jones, (supra), at pp 279 - 280, for the legal position of a purchaser under an unenforceable contract for the sale of land who effects improvements on the vendor's land in anticipation of the contract later being reduced to writing. If the purchaser later changes his mind about the sale his claim for the return of his expenditures in unlikely to get very far. That writer concludes that his "prospects [of success] are indeed bleak." 220 See section ( f ) , ante. 69 proceeds of the anticipated contract. And, having frustrated this common expectation of contract, the courts w i l l not entertain his claim "to elect to be paid for his work notwithstanding his unwilling-221 ness to carry out his part of the understanding." Even i f the defendant obtains a pecuniary benefit from the abortive negotiations, the chances of the p l a i n t i f f ' s claim having 222 any success s t i l l remain very slim. No authority has been found which i s directly in point, but i f the analogy with the case of the purchaser who, under an oral and therefore unenforceable contract for the sale of heritage, improves another's land and then refuses to complete the purchase i s sound, the p l a i n t i f f ' s claim w i l l almost certainly f a i l . Further, the characteristic insistence of the Common Law i n denying restitutionary r e l i e f to a person in breach of an.entire 223 contract points i n the same direction. 221 per Hughes CJNB i n Construction Design (supra) at p 465. 222 Certainly slimmer than in the case of breakdown through mutual disagreement. 223 Cf, Goff and Jones (supra), at p 386 et seq, and Jones (supra) at p 278 et seq. 70 (h) A Brief Comparison with the Legal Position of an Estate Agent  whose Principal "Refuses to Complete": One frequently encounters situations i n commercial l i f e where businessmen consensually make payment conditional upon the occurrence of a certain event, say, the sale of company shares by their owner 224 to a purchaser to be located by the efforts of another party. The agreements entered into by estate agents and literary agents with their principals provide us with good examples of this practice. A look at the position of such an agent when his principal refuses to complete may be instructive i n our understanding of the risks commonly assumed by commercial men i n their dealings with each other. Like the contract negotiator-who assiduously works towards a proposed contract, the agent may do much work and as a result of his efforts might find, say, a prospective purchaser for his principal's property. At the last minute, the latter has a change of mind and refuses to 225 s e l l . Quid iuris? In view of the House of Lords decision i n Luxor (Eastbourne)  Ltd y Cooper, i t now seems that, as a, general rule, i f the p l a i n t i f f (the agent in the above example) does not earn his remuneration i n accordance with the provisions of the agreement between himself and 224 Eg., Luxor (Eastbourne) Ltd v Cooper, [l94l] 1 ALL ER 33; Prickett v Badger, (1856), 1 CBNS 296; Inchbald v Western Coffee Co., (1864), 17 CBNS 733. 225 Assume the agreement makes sale one of the conditions of payment, not the mere location of a purchaser, and that the principal does not contractually bind himself to s e l l to a purchaser found by the agent. 226 [l94l] 1 ALL ER 33. 71 the defendant (the principal i n the above example), he w i l l be entitled to nothing for his efforts i f the defendant should have a change of 227 mind. The p l a i n t i f f has assumed this risk, and unless the terms of the agreement limit the defendant's freedom of action, the law w i l l be loath to imply a term which has this effect: " i t may seem hard that an agent who has introduced a potential purchaser, able and willing to complete, should get nothing for what he has done i f during the negotiations the principal decides not to complete, according to his own pleasure, and without any reason which, quoad the agent, i s a sufficient excuse, but such is the express contract ...... The defendant, by his prevention of the stipulated condition, does not put himself i n breach of his agreement with the p l a i n t i f f . Under the contract he retains to himself the freedom to refuse to deal or negotiate with any willing purchasers found. Such being the case, there i s no room l e f t for allowing a quantum meruit to recover 229 the reasonable value of what has been done. 227 Cf Trollope fGeorge) & Sons v Martyn Bros., [1934] 2 KB 436, and Trollope (George) & Sons v Caplan, p-936] 2 KB 382, contra, and overruled by the House of Lords in Luxor (supra). 228 per Lord Wright i n Luxor (supra), at p 55• 229 "the indispensable condition of succeeding either on a claim for damages or on one of quantum meruit is to establish that the defendant has been guilty of a breach of contract," per Freedman J. A i n Swanson Construction Co v Government of Manitoba. (1963) 40 DLR (2d) 162, at p 166. cf. Peter Kiewit Sons' Company of Canada Ltd v Eakins Construction Ltd [I960] SCR 361, 22 DLR (2d) 465. 72 The point of distinction between this type of case and the line 230 of cases represented by Prickett v Badger, and Inchbald v Western 231 Coffee Go (where the- restitutionary claims did succeed), seems to be that i n the latter the defendant was i n breach of a stipulation in 232 the contract, which allowed the p l a i n t i f f to rescind and bring 233 an action on a quantum meruit. A l l that i s needed to make the principal's action in refusing to s e l l an actionable breach of contract 234 i s merely astute draftsmanship. For example, i f the contract i n Luxor had bound the defendant to s e l l his property to "any willing purchaser" found by the p l a i n t i f f , and the defendant refused to s e l l , the p l a i n t i f f could have treated this as a repudiation, and raised an action to recover for the reasonable value of his services on a quantum meruit. This i s so, notwithstanding the fact that the contract may have prescribed that a condition precedent to.remuneration was a sale of the property. The restitutionary claim operates to give the p l a i n t i f f just compensation for his wasted efforts, even although the agreement stipulated for 235 payment only i n the event of a condition which never materialised. The Luxor type case (where the defendant does not contractually r e s t r i c t himself as to what he can do i n the future) is useful to us 230 ( I 8 5 6 ) , 1 CBNS 296 (defendant's refusal to s e l l shares to a willing purchaser found by the p l a i n t i f f agent; the defendant, i t seems, had bound himself to s e l l i f such a purchaser were located, although commission was stipulated to be -payable only on completion of the sale). 231 (1864) 17 CBNS 733. 232 Cf Lord Wright's speech in Luxor (supra) at pp 58 - 59« 233 In other words, the distinction to be drawn i s between cases where the defendant's non-performance in preventing the requisite condition arising amounts to a breach of contract (as appears to have been the case i n Prickett and Inchbald (supra), for example), and cases where this i s not so: eg, Luxor (Eastbourne) (supra). Only i n the former does i t appear that the p l a i n t i f f can obtain r e l i e f i n restitution. In the latter the p l a i n t i f f has agreed to take the risk of the defendant changing his mind. 234 [l94l] 1 ALL ER 33-235 Eg Prickett (supra). Cf Lord Wright at note (233), supra. 73 in that i t illustrates the risks frequently undertaken by businessmen in their dealings with each other. Substantial work may be done in the hope that i t w i l l eventually be remenerated by, say, the defendant effecting a sale of property. The latter may, however, like the -prospective car purchaser and the landowner spoken of earlier, frustrate this expectation -without being held liable to an accounting for the p l a i n t i f f ' s expenses. That is the general rule. There are, however, exceptions to i t : " i t is necessary to reserve certain eventualities in which an agent may be entitled to damages where there is a failure to complete even under a contract like the one i n this case I f the negotiations between the vendor and the purchaser have been duly concluded and a. binding executory agreement has .been achieved, different considerations may arise I f he refused to complete he would be guilty of a breach of agreement vis-a-vis the purchaser. I think that i t ought then to be held that he i s also in breach of his contract with the 237 commission agent." Thus, i t seems that the court may, in such a situation, overlook the ex-oressed intention of the parties and compensate the p l a i n t i f f for the-work he has done, notwithstanding that the sale has not been 236 In section (c), ante. 237 Per Lord '•  right i n Luxor (supra) at pp 55 - 56. 74 233 c a r r i e d t h r o u g h t o c o m p l e t i o n . L e t us compare the above w i t h a s l i g h t l y d i f f e r e n t f a c t s i t u a t i o n . Assume t h e r e i s a n agreement between, say, a n a r c h i t e c t and a n employer (an owner o f l a n d ) f o r the d o i n g o f p r e l i m i n a r y work f o r a c o n t e m p l a t e d p r o j e c t . I t p r o v i d e s t h a t t h e employer i s n o t o b l i g a t e d t o make any payment f o r t h i s work u n l e s s i t can o b t a i n t h e f u n d s n e c e s s a r y t o f i n a n c e t h e p r o j e c t . F o r some r e a s o n , t h e employer does n o t endeavour t o r a i s e t h e n e c e s s a r y f i n a n c i n g , and abandons t h e p r o j e c t . Can the a r c h i t e c t r e c o v e r f o r h i s wasted e x p e n d i t u r e s ? I n the U n i t e d S t a t e s , a t l e a s t , i t would appear t h a t h i s p r o s p e c t s o f s u c c e s s a r e q u i t e b r i g h t . The C o u r t o f A p p e a l s o f Kentucky was r e c e n t l y c a l l e d upon t o a d j u d i c a t e on t h e above f a c t s i n the c a s e o f C a r r o l l F i s c a l C o u r t v 239 r c C l o r e y . The a r c h i t e c t was h e l d e n t i t l e d t o r e c o v e r f o r t h e c o s t s i n c u r r e d by him i n d o i n g t h e work. The C o u r t e n d o r s e d the view t h a t where i t c a n be shown t h a t : " t h e p a r t y o b l i g a t e d [ t o make t h e payment] has p r e v e n t e d t h e c r e a t i o n o f the c o n d i t i o n s under w h i c h the payment 233 Eg., see H o w e l l & H o w e l l v Kenton A g e n c i e s L t d . . £1953] OUN 243; F e n n e l l v ' S m i t h , 10 WWR (NS) 488; F o w l e r v B r a t t , £1950} 2 KB 96; V u l c a n Car Agency v F i a t Motors L t d . , (1915) 32 TLB 73; Lockwood  v L e v i c k , (1860) 3 CBNS 603. 239 455 3V.] 2d 547 (1970). I t i s , o f c o u r s e , a v e r y d i f f e r e n t q u e s t i o n whether an A n g l o - C a n a d i a n c o u r t would r e s o l v e t h i s d i s p u t e i n the a r c h i t e c t ' s f a v o u r . H i s c h a n c e s o f s u c c e s s would a p p e a r t o be v e r y s l i m , A n g l o - C a n a d i a n c o u r t s b e i n g f a r more h e s i t a n t t h a n t h e i r A m e r i c a n c o u n t e r p a r t s t o impose "good f a i t h d u t i e s " upon c o n t r a c t i n g p a r t i e s . See g e n e r a l l y , Summers, "'Good F a i t h ' i n G e n e r a l C o n t r a c t Law 'and The S a l e s P r o v i s i o n s o f The U n i f o r m Commercial Code", (1968) 54 Va L Rev 195. The a r c h i t e c t , l i k e t h e e s t a t e a g e n t who goes i n p u r s u i t o f a p r o s p e c t i v e p u r c h a s e r , would p r o b a b l y be t a k e n t o have assumed t h e r i s k o f t h i s e v e n t u a l i t y , ( v i z . the employer making no att e m p t t o r a i s e t h e n e c e s s a r y f u n d i n g ; . 75 would be due, without fault on the part of the other party, he i s estopped to avail himself of a situation brought about by his own wrong. An obligation of mutual good faith and f a i r dealing i s imposed by law 240 because of the contractual relations of the parties." In other words, the American court appears to have recognised the existence of a good faith duty i n the performance of contractual 24l obligations. The effect of the decision was to render the stipulated financing condition nugatory for the want of good faith on the part of the defendant in his making no effort to comply with .. 242 i t . However, i t i s apparent that only i n very limited and exceptional circumstances w i l l courts be prepared to go beyond the s t r i c t letter of the agreement entered into by the parties and make an award for 243 wasted expenditures. • Practically speaking, persons like estate agents and li t e r a r y agents do take the risk of a future change of mind by their principals, no matter how "arbitrary or capricious" their reasons might be. Although there are reasonable expectations on both sides, or at least on the p l a i n t i f f ' s side, that the condition upon which payment becomes due w i l l be f u l f i l l e d , these expectations 240 455 SW 2d 547 (1970) at p 549. 241 Again, cf. the article by Summers (supra). The McGlorey decision may be an indicator of the accuracy of that writer's prescience. 242 Cf. Odem Realty Co v Dyer, 45 SW 2d 838 (1932). We have already said that i t i s very doubtful whether an Anglo-Canadian court would arrive at the same result. See note (24o), supra. The case of Moon v Witney Union (1837, 3 Bingham's New Cases, 8l4), however, might provide a degree of encouragement i n the other direction. '243 Cf. Lord Wright's view, quoted at p 71 , ante. 76 are subordinated to the terms of the arrangement which the p a r t i e s hav ch ,,245 244 entered i n t o . Moreover, i n the type of business i n which such agreements are employed, i t i s the "common understanding of men" t h a t i t i s q u i t e proper t h a t t h i s r i s k be taken by the agent, i t being considered an i n t e g r a l p a r t of day-to-day business. For i n s t a n c e , i f f i f t e e n out of twenty of an estate agent's p r i n c i p a l s allow him to earn h i s commission every week by s e l l i n g t h e i r property to purchasers l o c a t e d by him, t h a t i s a reasonably e f f i c i e n t way of conducting one's business. And when one considers t h a t i t i s commonplace f o r vendors to i n s t r u c t s e v e r a l agents to f i n d a purchaser w i l l i n g t o buy, i t becomes r i d i c u l o u s to urge t h a t the property-owner, i f he should now change h i s mind and s e l l p r i v a t e l y or not s e l l a t a l l , should recompense a l l the disappointed agents f o r 246 the time and t r o u b l e to which they went. The m u l t i p l e agent s i t u a t i o n j u s t instanced i s comparable to 247 the case of s e v e r a l b u i l d e r s tendering f o r a c o n s t r u c t i o n job. In both cases, the "voluntary" c h a r a c t e r of the work done would preclude a r e s t i t u t i o n a r y c l a i m . Both p a r t i e s have taken what may be c a l l e d "one of the r i s k s of the game". Neither the tenderer nor the 244 Only i f i t denies the defendant the freedom to deal w i t h h i s property, or whatever, i n whichever way he chooses w i l l a quantum meruit recovery go to re p l a c e the ex p e c t a t i o n f r u s t r a t e d by the defendant eg. F r i c k e t t (supra). 245 per Denning L J i n Fowler v B r a t t , [l950] 2 KB 96 a t p 104. 246 "Common sense and o r d i n a r y business understanding c l e a r l y give negative answers" to these questions; per Lord Wright i n Luxor (supra) a t p 54. 247 Cf Yates v Wright & Co., (1920) 18 OWN 305-77 agent have any e x p e c t a t i o n of compensation, i n the event of t h e i r being u n s u c c e s s f u l . Nor do the p a r t i e s they d e a l w i t h i n t e n d to make any payment f o r what has been done. The t e l e v i s i o n engineer and the garage mechanic spoken of 248 e a r l i e r f a l l i n t o the same category. The end sought to be a t t a i n e d i n t h e i r r e s p e c t i v e trades i s the g e t t i n g of a s u f f i c i e n t l y high number of t e l e v i s i o n and car owners to agree to get t h e i r r e p a i r s done, so t h a t each business w i l l show a p r o f i t . Wasted time i s merely considered to be one of the overheads i n v o l v e d i n running the business. 248 I n s e c t i o n ( c ) , ante. 78 ( i ) A Final Comment oh the Meaning of Benefit i n the Law of Restitution: We have already seen that the notion of benefit conferred i s 249 central to the unjust enrichment doctrine. 7 The theory i s that a defendant i s required to disgorge a benefit received by him at the 2^0 p l a i n t i f f ' s expense. In determining whether a defendant has been benefitted i n a particular case, courts seem to work on the theory that the p l a i n t i f f ' s requested performance constitutes a legal benefit 251 i n the hands of the defendant. I t becomes unnecessary to inquire ^-whether the defendant has made a'financial gain from the abortive negotiations. The plaintiff, may, i f the other c r i t e r i a for recovery 2 52 are satisfied, recover on a quantum meruit for the reasonable value of his services, regardless of whether his wasted efforts have 253 resulted i n gain to the defendant. 249 Section (a), ante. 250 Cf. Goff and Jones, The Law of Restitution, (2nd ed., 1978) at Chapter l j Sullivan, "The Concept of Benefit i n the Law of Quasi-Contract", (1975) 64 Geo. L J 1 . 251 See section (e), ante. Cf. the expansive definition of benefit contained i n section 5(4) of the British Columbia Frustrated  Contracts Act, 1974, quoted at p 53 , ante. 252 See generally, Goff and Jones (supra) at Chapters 1 and 24. 253 Cf. ASxthe latest edition of Goff and Jones' work on the law of restitution endorsing (at p 308) the views of an American judge i n a well-known case (Kearns vAndree, 139 A 695 (1928), discussed at p 10 , ante.). In that case Maltbie J said that: "The basis of lithe court *sj implication i s that the services have been requested and have been performed by the p l a i n t i f f i n the known expectation that he would receive compensation, and neither the extent nor the presence of benefit to the defendant from their performance i s of controlling significance" (at p 697) . I t i s d i f f i c u l t , however, to reconcile the giving of restitutionary r e l i e f i n Kearns $>ecause of the "no benefit" finding by his Lordship) with the tenets of the unjust enrichment doctrine. This i s why i t has been f e l t necessary to adopt an expansive definition of benefit i n this paper, i t being urged that the p l a i n t i f f ' s requested performance constitutes a benefit to the defendant. 79 On the other hand, Goff and Jones, i n their well-known book on restitution, would appear to take the view that, i n the case of unrequested services or goods, the defendant i s not benefitted even where i t i s clear that a monetary gain has been made: "In cases of services rendered or goods supplied, the requirement that the defendant must have received a benefit i s particularly restrictive because of the principle that the defendant w i l l not usually be regarded as having been benefited by the receipt of services or goods unless he has accepted them (or, i n the case of goods, retained them) with an opportunity of rejection and with actual or presumed knowledge that 255 they were to be paid for." • J J With respect, i t i s suggested that this dictumftends to confuse the issue of whether a benefit has been conferred with the question of whether the c r i t e r i a essential for i t s recovery are satisfied. The better view, i t i s submitted, i s to accept that the "objective" gain to the defendant i s a benefit to him, and then to admit that i t i s irrecoverable because i t has, for example, been officiously or 256 voluntarily conferred. 254 Cf. the case of Estok v Heguy. [1963] ftO DLR (2d) 88, discussed at p 4 , ante. 255 The Law of Restitution, (1966) at p 3 0 . This view i s somewhat modified i n the second edition of that work. See, at p 15 et seq. 256 However, pre-contract work resulting i n gain to a defendant negotiator and for which the p l a i n t i f f negotiator seeks restitutionary recovery w i l l very rarely be done without the request of knowledge of the former. I t i s possible to imagine such a situation though. Eg. a negotiator anticipates his contractual obligations, enters upon the defendant's land, and proceeds to level i t . The levelling increases the market value of the defendant's land. The expected building contract i s subsequently withheld. A restitutionary claim by the p l a i n t i f f for this item of expenditure would probably f a i l for the want of knowledge on the part of the defendant that i t was being incurred. Cf. Goff and Jones (supra), at p 15 and at p 393. The p l a i n t i f f was taking a "risk" quoad this item of expenditure, and the concept of "voluntariness" w i l l defeat his claim. 80 Then i t can be agreed that cases l i k e Estok v Heguy are correctly decided on the issue of benefit, but err i n allowing i t to be recovered. In the same way, given the correctness of Pollock CB's 258 words i n Taylor v Laird that when "one cleans another's shoes, what can the other do but put them on? , J y i t must be inferred that the owner of the shoes has received a benefit. Its value cannot be recovered because i t was conferred without the owner's knowledge. We thus reach the position where a defendant i s presumed to have obtained a benefit when, i n an objective sense, there has been an increase to his assets, and regardless of whether such benefit was 2^0 requested, and also where he has requested that the p l a i n t i f f do something, and the p l a i n t i f f does i t , regardless of whether a financial gain i s made. Then cases such as Brewer Street Investments and William Lacey may comfortably be viewed as cases preventing unjust enrichment. I t was the "hard luck" of the defendant that, by his own "fault", he put an end to the negotiations, and was, at the end of the 261 day, unable to turn that benefit to his financial advantage. Allowing the p l a i n t i f f to recover does not detract from the benefit principle i n restitution. 257 [1963] 40 DLR (2d) 88. : 258 (I856) 25 L J Exch., 329. 259 i d at 332. 260 Indeed, acceptance of the notion that a benefit may be conferred i n situations where a defendant can not be said to have "freely accepted the p l a i n t i f f ' s services or goods" would appear to be essential to the further development of the so-called principle of incontrovertible benefit i n the law of restitution. See generally, Jones, "Restitutionary Claims for Services Rendered", (1977) 93 LQR 273 at p 284 et seq. 261 Cf. McCamus, "Restitutionary Remedies", Law Society of Upper Canada, Special Lectures, 1975, P 255; "Where the benefit was requested i t should not be a defence that the defendant has not been able to turn i t to account", at note (116). 81 As i n restitutionary actions i n other and more familiar contexts 262 we thus have a benefit received and certain circumstances i n which i t i s recoverable: viz, i f i t can be inferred that the pre-contract services were rendered i n the expectation of compensation i n the event which has arisen (here, the defendant's unilateral termination of negotiations). 2^ However, although the presence of financial gain may i n theory be irrelevant to the operation of the unjust enrichment doctrine, there are indications to be found i n some quarters that such gain does f a c i l i t a t e actual recovery by aggrieved negotiators. 264 Ther! case of Maclver v American Motors. adverted to earlier, may il l u s t r a t e an increased judicial willingness to make restitutionary awards i n cases where financial advantage has resulted from the p l a i n t i f f ' s pre-contractual efforts, even although i n both cases D there i s an equally strong expectation on the part of the p l a i n t i f f that his compensation w i l l come out of the profits of the contract which i t i s hoped w i l l be concluded at some date i n the near future. 266 In the same vein as Maclver i s Brewer v Chrysler Canada. , Both proceed upon broad statements of principle of the law of restitution, 262 For example, Barry J> i n the William Lacey case, drew an analogy with the action for money had and received. 263 U t i l i z a t i o n of the notions of "risk" and "fault" i n contract negotiation settings may thus be viewed as a necessary process for determining whether the c r i t e r i a necessary for restitutionary recovery are satisf i e d . (In particular, whether or not the pre-contractual services have been "voluntarily" or "gratuitously" rendered)! 264 (1976) 63 DLR (3d) 154, affirmed [1976] 5 WWR 217, (Manitoba Court of Appeal). 265 i e . also i n the case where no financial gain results. 266 [1977J 3 WWR 69 82 applying the ratio «in Craven-Ellis v Canons L t d . 2 ^ 7 and also quoting with approval Lord Wright's formulation of the doctrine of unjust enrichment i n England. No explicit reference i s made to the fact that the p l a i n t i f f , and not the defendant, might have been taking the ris k of the negotiations going off. Similarly, no explicit mention i s made of the defendant being at "fault", although i t i s abundantly clear that i n both cases the defendant was at "fault" within the analysis being made here. I t i s as i f this factor i s assumed when a defendant resiles from negotiations having made a pr o f i t . The pl a i n t i f f ' s claim i s at i t s most appealing i n this situation. The intersection of Romer L J i n arguendo i n the Brewer Street 260 Investments case, and the response of Denning L J i s most instructive to the present inquiry. Romer L J posed the following situations "Suppose that, whilst parties were i n negotiation for a lease, the landlords allowed the prospective tenants to go on the land and spend money on i t i n anticipation of a lease. I f the landlords subsequently broke off negotiations for no reason at a l l they could not get the benefit of the work without paying for i t . Equity 270 would give a remedy". Denning L J added that: "Whether equity would do so or not, the common law, nowadays, would give the prospective tenants the right to recover the value of the work done i n an action for r e s t i t u t i o n " . 2 7 1 267 [1936] 2 KB 4 0 3 . 268 See p 2 , ante. 269 [195*0 1 QB 428. 270 i d at p 431. 271 i d at p 431. 83 The increase i n the value of the defendant's assets effected 272 by the improvements, ' coupled with his decision not to proceed "for no reason at a l l " , was considered by their Lordships to be decisive 273 of the question of recovery. J The suggestion that an aggrieved negotiator's claim i s more l i k e l y to be successful i f the defendant has been pecuniarily advantaged may perhaps be rationalized by taking the view that In such circumstances less need i s f e l t to make an inquiry as to "who was taking the ri s k . y or as to "which party was at fault?" of the negotiations failing?",'.both of which operate as l i m i t i n g , ~ factors on recovery i n restitutionary actions arising out of ordinary 274 abortive negotiations. ' Alternatively, i t might be possible to look at the matter from the point of view that the fault and ri s k c r i t e r i a 275 are, at least i n the absence of evidence to the contrary, presumed to be satisfied i f the defendant pulls out having reaped a gain. 272 Assume the defendant used the premises as a dwelling house. The p l a i n t i f f half converts i t into a shop, at which point the defendant resiles. The modified state of the premises i s of no practical use to the defendant, and he proceeds to reconvert them to their original state. The like result would probably be reached here, so that the p l a i n t i f f ' s detriment, and not the defendant's gain,lis the motivating factor prompting the giving of restitutionary r e l i e f . Cf. Goff and Jones (supra) at p 396. 273 Cf. Goff and Jones (supra) at p 396 and note (20) on that page, where i t i s said that equity may give r e l i e f by way of the doctrine of acquiescence i n such a situation. 274 There being no monetary advantage to the defendant. 2 7 5 Eg. evidence going to establish that the p l a i n t i f f had been made aware at the inception of negotiations, and at regular intervals thereafter, that the defendant might eventually decide not to proceed with the contemplated project would be a strong indicator that the p l a i n t i f f was taking the ri s k of the defendant making this decision, notwithstanding that his efforts pecuniarily benefitted the defendant. Cf. Sheppard J at p 24 , ante. I t i s at least true to say that both of these requirements are more easily satisfied i f there i s a financial g a i n . 2 7 ^ I t i s more readily understood that the p l a i n t i f f i s taking the risk of the negotiations f a i l i n g * i f , and for so long as, his performance does not monetarily benefit the defendant. And, i n the abstract, the conduct of a defendant who has gained such an advantage and then resiles i s more reprehensible than the conduct of one who resiles having made no such gain. Thus, the fault requirement also comes to be more easily satisfied. Although i n both instances the defendant i s legally benefitted by the mere performance on request, the c r i t e r i a for recovery are more stringent i n operation i n cases where he has made no financial gain. Thus the prerequisite that the defendant has been at "fault" i n putting an end to the negotiations i s usually much more firmly L this 278 277 insisted on i n such cases. " I f the p l a i n t i f f f a i l s to establish this fact then he i s usually without remedy, no matter how heavy his losses. The underlying premise would appear to be that, i n the abstract, i t i s prima facie more "just or equitable" to order a defendant to pay for the cost of the p l a i n t i f f ' s services i n a case where such cost i s more or less commensurate with a monetary gain to him, than 27Q i t i s i n a case where there has been no resultant monetary gain. 7 Z?6 Cf. the suggestion made earlier that there might be a case for arguing that a defendant who has gained a monetary benefit from negotiations which f a i l because of mutual desagreement should return the amount of that benefit to the p l a i n t i f f . See p 59 , ante. 277 Eg., see Sabemo p/L and Brewer Street Investments, both supra. 278 Eg., Construction Design and Jennings and Chapman, both supra. 279 Cf. the view of Goff and Jones, who say that* "The combination of unjust impoverishment and unjust gain presents the strongest case for judicial intervention and r e l i e f " . (The Law of Restitution, 2nd ed., (1978), at p 13) . 85 Therefore, the Ian insists on something more than a mere request and performance i n such cases, and, on occasion, the need f e l t to compensate the p l a i n t i f f takes precedence over the defendant's plea that he should not be made to pay for services which have not resulted i n gain to him. 86 (j) Summary and Conclusion It i s a not uncommon view that incomplete contract negotiations 280 are insufficient as a basis for legal rights} the assumption i s therefore often made that a negotiator can break off negotiations at any time, and for any reason, no matter how "capricious", without incurring a l i a b i l i t y to recompense the other party for his wasted expenditures. The cases we have been considering, which i n certain circumstances allow aggrieved negotiators to recover for expenditures incurred i n reliance upon the prospect of obtaining a contract at a future date, show that legal rights and duties may indeed emanate from abortive contract negotiations, so that i t i s not universally correct to say that i t remains the right of everyone to r e s i l e from 28l negotiations before the f i n a l exchange of consents. If such were the rule, and parties had an absolute and unfettered power to put an end to negotiations at any time before the f i n a l exchange of consents, contract negotiators would have to tolerate gross injustices, being subject to the "arbitrary whim" of the party for whom the work was being done, who could res i l e from advanced negotiations without exposing himself to any l i a b i l i t y for the 280 Eg. Kessler and Fine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract! A Comparative Study", 77 Harv. L Rev 401, at p 412 cf note (70 ) supra. 281 Academic writing has tended to concentrate on "negotiation wrongs" only when parties'* relations have come to be regulated by a contract, (eg. the doctrine.of precontractual misrepresentation, the duty to make f u l l disclosure i n contracts of insurance, and so forth). The legal aspects of abortive negotiations have received only the most perfunctory recognition i n the literature. C i v i l i a n writers, however, have been more cognizant: See S a l e i l l e s , "De La Responsabilite Precontractuelle", 6 Revue Trimestrielle De Droit C i v i l 697 (1907). 87 expenditures to which he has put the other party. The courts, particularly i n the last twenty five years or so, have thus deemed i t necessary that certain qualifications be introduced to the "freedom of negotiation" principle, so as to avoid or reduce the rigours and hardships attendant on i t s unmitigated application. Restrictions are placed upon the conduct of contract negotiators, and actions which contravene these restrictions (eg the introduction of an unexpected 282 and highly unreasonable term into negotiations at a late stage) w i l l result i n the imposition of restitutionary l i a b i l i t y . The overall effect of the judicial decisions i s a placing of minimal standards of "fair-play" upon negotiating parties. A negotiator who breaches them becomes lia b l e to reimburse the p l a i n t i f f for his wasted expenditures. Restitutionary theory achieves this result primarily by the adoption of an expansive definition of benefit, and also by a ju d i c i a l willingness to c l a r i f y and to operate the dual notions of "risk" and "fault" i n the contract negotiation process to effect a sound balance between the economic interests of the negotiating p l a i n t i f f , and those of the negotiating defendant. 2^ The extensive meaning given to the notion of benefit means that lip-service i s being paid to the doctrine of unjust enrichment when courts make restitutionary awards 282 See p 57 , ante. 283 In the Brewer v Chrysler Canada case (where negotiations for a car dealership were abandoned by the defendant) the Alberta Supreme Court said thatj " ..... i t must be inferred that Lthe defendant] did not expect to reap the benefits of the efforts and outlays of the p l a i n t i f f without some reasonable compensation" per H J MacDonald J at p 78. 88 to parties suffering losses when their co-negotiators unilaterally p u l l out of contract negotiations. The application of the doctrine to the negotiating process appears to be triggered by a j u d i c i a l desire to avoid the serious hardships occasioned i f disappointed p l a i n t i f f s were l e f t to absorb substantial expenditures incurred by 284 them during the abortive negotiations. The notion of "risk", and the j u e i c i a l determination of whether i t l i e s with the p l a i n t i f f , or has been "transferred" to the defendant, i s a convenient way of ascertaining whether the concept of "voluntariness" defeats the restitutionary claim.2®~* When we say that a p l a i n t i f f i s acting at his "own r i s k " (for instance, a builder lodging his i n i t i a l tender, or an estate-agent going i n pursuit of a prospective purchaser), a l l we are essentially saying i s that the p l a i n t i f f does not expect compensation i n the event of the other party making a decision to terminate their relationship, or not to s e l l his property, 286 or whatever. The p l a i n t i f f was taking ajpurely business r i s k . In this situation, the doctrine of "voluntariness" w i l l go to defeat a later restitutionary claim. 2® 7 Similarly, when we say that i t i s not the p l a i n t i f f , but the defendant who i s taking the risk, a l l we are essentially saying i s 284 Cf. Barry J i n the William Lacey case (supra). His Lordship said that i t would "amount to a denial of justice to the p l a i n t i f f " i f he were not permitted to recover compensation for the work he had done. 285 Thus, enabling the courts to strike a balance between the respective economic interests of negotiating;; parties. Requiring the p l a i n t i f f to satisfy the fault-risk formula ensures that the defendant's economic interests receive adequate protection. 286 Or, i t may be more accurate to say that a "reasonable negotiator" placed i n the position of the p l a i n t i f f would not expect compen-sation i n such an event. 287 Cf. Yates v Wright & Co.. (1920) 18 OWN 305. 89 that services of such a kind, and of such a quantity, have been-rendered that the p l a i n t i f f i s no longer acting voluntarily, and expects 288 compensation for what has been done i n the form of a later contract. The defendant, throughout the entire negotiation period, evinced a willingness to enter into a contract at a later date. A l l along, therefore, the p l a i n t i f f ' s services were rendered i n the confident anticipation that the contract would eventuate. I f he had suspected that the defendant might withhold i t , he would not have expended a 289 fraction of the amount of money which he now seeks to recover. The p l a i n t i f f was prepared to go to trouble and expense i n the meantime, expecting his reimbursement and profit to come from the proceeds of the "imminent" contract. When the defendant's private decision frustrates this expectation, the law of restitution w i l l come to the p l a i n t i f f ' s aid and provide an alternative medium of recompense. The work was done to meet the defendant's request and he cannot now deny his l i a b i l i t y to pay for i t . 288MHad the contract been successfully concluded, payment for the pre-contract work would have come out of the profits made thereunder. 289 Cf. Sheppard J at p 24 , ante. The inference of gratuity i s weakened as more and more work i s done, and as confidence increases i n the prospect of f i n a l egreement being reached. 90 2 THE REGENT APPLICATION OF THE DOCTRINE OF PROMISSORY ESTOPPEL TO ABORTIVE CONTRACT NEGOTIATIONS IN THE UNITED STATES, (a) Background and Discussion of the Case Law: Many commentators have noted the expansive application given the doctrine of promissory estoppel i n American courts i n recent 290 decades. The doctrine, embodied i n Section 90 of the Restatement 291 of Contracts, 7 has been applied to new and varying fact situations i n order to give a measure of protection to parties who have detrimentally relied upon "promises", unenforceable under traditional contract 292 rules because unsupported by consideration. For instance, the literature and the case law of thir t y years ago l a i d down that the theory of promissory estoppel had application only to donative or 293 gratuitous promises (ie promises of g i f t s ) . Nowadays, "the usual setting out of which a Section 90 promise emerges i s 294 commercial, hot benevolent". Two cases i l l u s t r a t i n g the change 290 Eg. Henderson, "Promissory Estoppel and Traditional Contract Doctrine", (I969) 78 tele L J 343; Sutton, Consideration Reconsidered, (1st ed., 1974); cf Boyer, "Promissory Estoppel: Principle From Precedents", .(1952) 50 Mich L Rev 639, and 873. The doctrine, however, i s much less developed i n Anglo-Canadian law. See Central London Property Trust, Ltd. v High Trees  House Ltd.. C1947J KB 130: Combe v Combe. £19513 2 KB 215; John Burrows Ltd. v Subsurface Surveys Ltd. (1968) 68 DLR (2d) 345, and more generally Anson's Law of Contract, (24th ed. 1 9 7 5 ) » at p 113 et seq; Chitty on Contracts, (24th ed, 1977)f p 91 et seq. 291 Restatement Of Contracts, Section 9 0 , (1932); Restatement (Second) of Contracts, Section 90, ( I 9 6 5 ) . See p 94 , post. 292 No attempt w i l l be made here to analyse these recent developments i n any d e t a i l . A thorough treatment of the present American position may be found i n Henderson and Sutton, both supra. Our attention w i l l be more or less confined to the role of the doctrine i n abortive contract negotiation situations. 293 % • Boyer, "Promissory Estoppel: Requirements and Limitations of the Doctring", (1950) 98 Un Pa L R 459; Shattuck, "Gratuitous Promises - A New Writ?", (1937) 35 Mich L R 908, Williston, Contracts, (1st ed.), p 307, Sec 139. James Baird Co. v Gimbel. (1933) 64 F (2d) 344, (Cir Ct App). 294 Henderson, (supra), at p 344. 91 might briefly be contrasted here. In 1933» the Federal Circuit Court of Appeals, i n the case of James Baird Co v Gimbel, 2^ held that the doctrine of promissory estoppel did not apply to the situation of a tender submitted on the fa i t h of a supplier's bid which was later revoked, as i t was applicable only to donative promises. The p l a i n t i f f contractor, relying on the defendant sub-contractor's offer to supply linoleum at a certain fixed price, tendered for a public construction job. He obtained the contract. The defendant withdrew his offer when he discovered that an error had been made i n arriving at the price (which was far below what i t should have been). The p l a i n t i f f was l e f t without remedy. 2^ Later courts expressed their disapproval of the restrictions 297 imposed by the Baird decision, concluding that the doctrine did indeed have application to "promises" i n commercial settings (eg. offers for bi l a t e r a l contracts such as the sub-contractor's bid i n the construction industry). The culmination of this retreat from 295 (1933) 64 F (2d) 344, (Cir Ct App). 296 This case i s discussed i n Kessler and Fine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract: A Comparative Study", (1964), 77 Harv L Rev 401, at p 422, et seq.. 297 Eg. Northwestern Engineering Co v Ellerman, (1943) 10 NW (2d) 879» Robert Gordon Inc v Ingersoll-Rand Co.. (I94l) 117 F (2d) 654. The Ellerman court said that: " i t would [be3 unjust and unfair, after appellant was declared the successful bidder and imposed with a l l the obligations of such, to allow respondents to then retract their promise and permit the effect of such retraction to f a l l upon the appellant". (10 N W (2d) 879 at p 883). Cf N Li t t e r i o and Co v Glassman Construction Co., (1963) 319 F (2d) 736: Chrysler Corp v Quimby (1958) 51 Del 264, 144 A (2d) 123. 92 298 Baird i s represented by Drennan v Star Paving Go., 7 a decision of the Supreme Gourt of California. On facts very similar to those i n the Baird case, i t was held that a contractor's reliance upon a paving sub-contractor's bid had the effect of making the bid "irrevocable 299 u n t i l the offeree has had a reasonable opportunity to accept". The court found i n the offer an "implied subsidiary promise" not to revoke, based upon the promisee's "foreseeable prejudicial change 300 of position" i n reliance upon the offer. What i s of particular importance to the present study, however, i s the recent extension of the benefits of the doctrine to contract negotiators who have relied to their detriment upon assurances of eventual bargain held out by their co-negotiators. The case of 301 Hoffman v Red Owl Stores Inc., a decision of the Supreme Court of Wisconsin, i s probably the single most important authority. 298 (1958) 333 P (2d) 757. The Drennan ratio, invoking the doctrine of promissory estoppel i n construction bidding situations, has been widely accepted i n the United States. See, eg, Debron  Corporation v National Homes Construction Corporation. 493 F C'V ') (2d) 352 (8th Cir I974)i Solway Decorating Co. v Merando. Inc.. 240 A (2d) 361, (D C Dist Ct App 1968)t Constructors Supply Co  v BostronrSheet Metal Works. Inc., 291 Minn 113, 190 N W (2d) 71. (I971)t Saliba-Kringlen Corp v Allen Engineering Co.. 15 Cal App (3d) 9 5 , 92 Cal Rptr 799, U971)t E A Coronis Associates  y M Gordon Construction Co.. 90 N J Super 6 9 , 216 A (2d) 246, (1966)} Reynolds v Texarkana Construction Co.. 237 Ark 583, 37^ S W (2d) 818. (1964)} Norcross v Winters. 209 Gal App (2d) 207, (19O2)| Air Conditioning Co of Hawaii v Richards Construction  Company. 200 F Supp 167, affirmed, 318 F (2d) 410, (9th Cir. I 9 6 3 ) . 299 (1958), 333 P (2d) 757 at p 760. 300 (1958), 333 P (2d) 757 at p 760. 301 ( I 9 6 5 ) , 133 N W (2d) 267. (S Ct Wis). 93 There, Hoffman, the p l a i n t i f f , who owned and operated a bakery i n Wautoma, Wisconsin, was i n negotiation with the defendant, hoping to obtain a franchise for one of i t s supermarkets. During the negotiations, which extended over a period of some two years, an agent of the defendant told the p l a i n t i f f that an outlay of approximately 18,000 dollars would be sufficient for this purpose. At an early stage i n the negotiations, the p l a i n t i f f had become confident that the "deal was on", and that his establishment as a franchisee of the defendant was but a matter of time. This optimism was i n part generated by assurances of eventual bargain made by the agents of the latte r at 302 various stages of the negotiations. Hoffman's expectations thus raised, he sold his existing bakery at a loss and bought a small grocery store to gain experience i n food store management. In addition, he secured an option to purchase land for the proposed supermarket, and rented a home close to the proposed sit e . . The p l a i n t i f f having changed his position thus, the defendant subsequently insisted that the investment required for the proposed franchise would be 34,000 dollars. This figure was almost double that suggested by the defendant at the inception of negotiations. The p l a i n t i f f , not being able to afford this increased sum, resiled from the negotiations. He subsequently raised an action, founded on the theory of promissory estoppel, for the recovery of the losses and expenditures incurred by him i n reliance on the defendant's conduct i n holding i t s e l f out as being willing to take him as franchisee for a capital contribution of 18,000 dollars, and 302 Eg., the defendant told the p l a i n t i f f that he "would have to s e l l £his3 bakery business and bakery building, and that t h i s 3 retaining this property was the only 'hitch' i n the entire plan". 94 on the assurances given to the effect that "there would be no problems i n establishing him" i n the desired business. The p l a i n t i f f was successful, the Supreme Court of Wisconsin affirming the t r i a l court judgment ordering the defendant to recompense him for his wasted losses and expenditures. The court held the doctrine of promissory estoppel as promulgated i n Section 90 of the Restatement of Contracts to be applicable to the parties* relationship. That section provides that i "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance i s binding i f injustice can be avoided only by enforcement of the 303 promise".-' J The above Section 90 has now been modified by the provisions 304 of the Second Restatement of Contracts. The new Section 90 provides that: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance i s binding i f injustice can be avoided only by enforcement of the promise. The remedy  granted for breach may be limited as justice requires". 303 Restatement of Contracts, Section 90, (1932). 304 Restatement (Second) of Contracts, Section 90, ( I 9 6 5 ) . 305 Emphasis mine. This "remedy limitation" i s important, as i t allows the courts added f l e x i b i l i t y i n their application of the doctrine of promissory estoppel. On this point, see K C T Sutton, Consideration Reconsidered, (1974), at p 167 et seq; Discussion i n (I966) 65 Mich L Rev. 351; and see p 100 , et seq., post. 95 The American application of the doctrine of promissory estoppel to the contract negotiation process i s to he welcomed. In view of the endorsement of the ratio&in Hoffman by subsequent American courts, 3 0^ i t now seems that a party making assurances of eventual bargain i n the United States w i l l be liable to recompense his co-negotiator for losses and expendutures incurred on the f a i t h of the contemplated agreement being entered into, i f he should i n the meantime 307 change his mind and back out of advanced negotiations. Once the requirements of Section 90 are satisfied (viz.; ( l ) a promise which the promisor would reasonably expect to induce action or forbearance on the part of the promisee; (2) action by the promisee i n reliance on the promise; (3) the causing of injustice i f the promise were not enforced), promissory estoppel becomes applicable to the contract negotiation process. Notwithstanding the undoubted latitude which Section 90 gives to American courts i n their application of the promissory estoppel theory,-^0® the Hoffman result does represent a somewhat unusual use of the doctrine, and evinces an increased j u d i c i a l preparedness to 309 extend i t s application to new factual settings. 7 Like the construction 310 bidding cases, adverted to earlier, Hoffman marks a departure from 306 The ratio i n Hoffman was unanimously approved, by the United States Circuit Court of Appeals i n Janke Construction Company  Inc.. v Vulcan Materials Company. (1976), 527 F (2d) 772f 777, (a construction bidding case). See also cases reported i n 386 F S 690, (at p 692 - 698), and 242 N W (2d) 180 (at p 183). Cf. Chrysler Corp. v Quimby. (1958) 51 Del 264, 144 A (2d) 123. 307 Cf., p 105 , et seq, post. 308 Cf., the very narrow formulation of the doctrine i n Anglo-Canadian law. See, eg., Anson and Chitty at note (290), supra. 309 Eg., see Henderson, "Promissory Estoppel and Traditional Contract Doctrine", (I969) 78 Yale L J 343. 310 See p 91 , et seq, ante. 96 the "traditional" American use of promissory estoppel as a "substitute 311 for consideration"-^ where a promisee has relied to his detriment 312 on a gratuitous promise. The courts would enforce gratuitous promises on which a p l a i n t i f f had detrimentally relied, the estoppel plea going to prevent the interposition of the defence of lack of 313 consideration. However, unlike the construction bidding cases, the "operative promise" i n the Hoffman case did not constitute an offer by the defendant which would havescontractually bound him on acceptance by 314 the p l a i n t i f f . The negotiations had not been conducted i n sufficient detail for the defendant's proposal to be effective as an offer, the communings between the parties not having gone beyond the "pure negotiation" stage at the date of the breakdown of their relationship. In response to the defendant's plea that this circumstance was f a t a l to the application of the promissory estoppel doctrine, the Wisconsin Supreme Court said that the question of 311 Per Cardozo J i n Allegheny College v National Chautauqua County  Bank, 246 N Y 3 6 9 , 3 7 3 , 159 H E i ? 3 , 1 7 5 (1927). Cf the 1 9 3 6 edition of Williston, where i t i s said that: "Originally the doctrine of promissory estoppel was invoked as a substitute for consideration rendering a gratuitous promise enforceable as a contract." (Williston, Contracts, (1st ed.), p 3 0 7 , sec 139). 312 The application of the doctrine to the formative stages of commercial bargains has, however, long been urged by eminent writers. For instance, i n 1938 Dean Boyer wrote that:: "So long as i t i s applied only when the fact situation f i t s a preconceived pattern, such as a gratuitous promise to give land ..... i t s p o s s i b i l i t i e s w i l l not be completely u t i l i z e d . The restraint of compartmentalization must be overcome i f the courts are to recognize that the doctrine of promissory estoppel i s one of universal application". (Boyer, "Promissory Estoppels Principle From Precedents: I", (1952) 50 Mich L Rev 639, 674). 3 1 3 Cf. Restatement, Contracts, Explanatory Notes, Section 9 0 , (Off. Draft, 1928); 1 A , Corbin, Contracts, 206 - 207, ( I 9 6 3 ) . 314 But cf Burridge v Ace Storm Window Co., 69 Pa D & C 1 8 4 , (C P I949): Chrysler Corp v Quimby. 51 Del 2 6 4 , 1 4 4 A (2d) 123, ( 1 9 5 8 ) ; Goodmanj Dicker^ 1 6 g F | 2 d j ~ 6 8 4 , (D C C i r 1 9 4 8 ) : Morris v Ballard. 97 "whether the promise necessary to sustain a cause of action for promissory estoppel must embrace a l l essential details of a proposed transaction between promisor and promisee so as to be the equivalent of an offer that would result i n a binding contract between 315 the parties i f the promisee were to accept the same" J must be answered i n the negative. An affirmative answer would, of course, have deprived the p l a i n t i f f of any remedy. If the doctrine of promissory estoppel i s to be developed by 317 modern courts into a mechanism aiding^ the imposition of a degree of "fairness" upon the conduct of contract negotiators, and preventing abuses of the power to terminate negotiations before the f i n a l 318 exchange of consents, the stance taken by the court i n Hoffman was, i n the nature of things, necessary. In modern society commercial transactions are so intricately complex that i t w i l l not usually be possible to extract a "promise" which qualifies as a " f u l l y effective offer" from the mass of communings exchanged between the parties u n t i l a very late stage of the negotiations. Negotiations have to be conducted i n vast detail before a clear picture emerges of the respective rights and duties of parties under a proposed transaction. This circumstance should not insulate a party making 315 133 N w (2d) 267, 274 - 5, (1965). 316 But cf. discussion at p 106 , et seq., post. 317 Along with restitutionary theory. 318 Viz., i t s preparedness to invoke the doctrine i n situations where the defendant's promises have not "achieved the level of an operative offer"; Henderson, (supra), at p 359. 98 assurances of eventual bargain from l i a b i l i t y to recompense the other party for the expenditures which he induced him to incur, i f he should go back on his woid1. Hence, the rejection by the Wisconsin Court of the argument that the "promise" founding the cause of action had to be sufficiently definite to constitute an effective offer. Its acceptance would have resulted i n the practical exclusion of the 319 promissory estoppel doctrine from the negotiating process. The promise upon which the court founded was of a much more general nature, and consisted i n the assurances given by the defendant that i t was prepared to grant a franchise on terms derogating not too markedly from i t s original statement that a capital contribution of approximately 18,000 dollars would be a sufficientsoutlay for the 320 projected venture. I t was the expectation of eventual egreement generated by these optimistic assurances, subsequently frustrated by the defendant's heightened capital demands, which was the decisive factor i n the p l a i n t i f f ' s favour. Had i t not been for the series of assurances held out to the p l a i n t i f f by the defendant's representatives, the p l a i n t i f f would not have acted to his detriment by substantially changing his position i n anticipation of the proposed franchise even-tually being concluded. I t was these assurances, and not an offer of a franchise on any definite terms, which constituted the operative "promise" and provided the condition precedent for r e l i e f i n the Hoffman case. One eminent writer on the law of contract has said that: 319 "By freeing the promise which triggers application of ^Section 903 from the context of offer-acceptance rules, Hoffman does away with the bridge commonly used to link promissory estoppel with orthodox consideration doctrine." (Henderson, (supra), at p 359). 320 please see next page. 99 "the court i n Red Owl uses "promise" i n a very loose sense to mean simply optimistic statements respecting the probability of agreement ultimately being reached"."^21 Hoffman, and subsequent American authorities endor£ ing the 322 principle therein enunciated, indicate that American law has begun the process of u t i l i z i n g the promissory estoppel doctrine embodied 323 i n Section 90 of the Restatement of Contracts^ to enable i t to deal more effectively with the complexities inherent i n the negotiation of contracts i n modern society*and i n particular to accord a measure of protection to the ecomomic interests of a party incurring expenditure on the fa i t h of promises of ultimate agreement which are later / development broken. This'is in"part being achieved by a j u d i c i a l preparedness to accept, as a sufficient basis for a promissory estoppel action, words and conduct of the party putting an end to negotiations that f a l l short of " f u l l y effective o f f e r s " , ^ 2 ^ and d i f f e r from the kind 325 of promise more ordinarily encountered^ J when a p l a i n t i f f successfully invokes the doctrine of promissory estoppel. 320 The result might have been different, therefore, had the defendant insisted on a capital contribution of only, say, 19,000 or 20,000 dollars. Had the p l a i n t i f f then resiled from the negotiations, the court might have been persuaded to hold that the defendant had not, i n fact, broken i t s promise, thus denying the p l a i n t i f f recovery. On the actual facts, however, the court could only hold that the defendant had repudiated i t s promise and just wanted to terminate i t s relationship with the p l a i n t i f f . 321 Von Mehren, The C i v U ^  322 See cases cited at note (306)f supra. Cf Drennan v Star Paving Co.. (195S) 333 P (2d) 757, and see also cases cited at note (298). supra. 323 Quoted, ante, at p 94 , et seq. 324 Eg. as i n Drennan v Star Paving Co.. (supra). 325 Eg. gratuitous promises to convey land, promises regarding pensions and bonuses, and so forth. See generally, Boyer, "Promissory Estoppel: Requirements and Limitations of the Doctrine", (I950) 98 Un Pa L R 459. 326 Cf. Von Mehren, (supra), at p 849. 100 Tied up with the application of promissory estoppel to negotiating situations i s a f e l t need to r e s t r i c t the measure of the p l a i n t i f f ' s recovery to the extent of his reliance upon the prospect 327 of the expected contract materialising.-' ' Indeed, were i t not for recognition of the fact that, i n certain circumstances, the damages awarded for breach of promises enforced on the theory of promissory estoppel should be limited to the p l a i n t i f f ' s reliance losses,-^2® the Hoffman court would have been understandably hesitant to enforce 320 Red Owl's promise. Consider the effectssof adherence to a " f u l l contract damages" policy i n Hoffman type situations. Assume for the sake of argument that the p l a i n t i f f was able to establish that had Red Owl honoured i t s promises and granted the said franchise, he would have earned 330 profits of circa 80,000 dollars before the projected expiry date. 327 Cf. Sutton, Consideration Reconsidered, (1974), at p 167, et seq.: Discussion i n (1966) 65 Mich L Rev 351; Fuller and Perdue, "The Reliance Interest i n Contract Damages", (1936 - 37), 46 Yale L J 52, 373; Seavey, "Reliance upon Gratuitous Promises or Other Conduct", (1950, 64 Harv L Rev 913, 926. 328 As opposed to " f u l l contract damages" or "expectancy losses". 329 Cf. Sutton, (supra), quoted at p 101 , post. The tendency of iAmerican courts, when Section 90 was f i r s t promulgated i n 1932, to adhere to a " f u l l contract damages" formula evoked much criticism from eminent academics of the time. Eg. Boyer, "Promissory Estoppel: Requirements and Limitations of the Doctrine", (1950), 98 U Pa L Rev 459, 492 - 496; Fuller and Perdue, "The Reliance Interest i n Contract Damages", (1936), 46 Yale L.J 373, 420. Nowadays, the altered Section 90 (see p 94 , ante) rejects this " a l l or nothing" approach, and recognises the possibility of "partial enforcement" of promises i e . r e l i e f measured by the p l a i n t i f f ' s reliance expenditures. For the phrase "partial enforcement", see Sutton, (supra), at p 167, and (I966) 65 Mich L Rev 351, note (17). 330 please see next page 101 Allowing the p l a i n t i f f to recover his expectation losses would operate 331 harshly on the defendant. J The result would be a l i a b i l i t y on his part to compensate the p l a i n t i f f for losses of around 80,000 332 dollars"^ (the losses actually suffered by Hoffman i n reliance on the defendant's assurances were i n the region of 3,000 dollars). One writer has said that i f the courts, when confronted with Hoffman type claims, were limited to choosing between a l i a b i l i t y for f u l l expectancy damages, or ho l i a b i l i t y at a l l , there would often be a heavy reluctance to invoke the doctrine of promissory estoppel to protect the interests of aggrieved promisees: " i f the value of what has been promised i s out of a l l proportion to the extent of the action taken i n reliance thereon a court w i l l be reluctant to conclude that injustice can be avoided only by the enforcement of the 330 There are, however, obvious practical d i f f i c u l t i e s here; as a matter of proof i t would be extremely hard for the p l a i n t i f f to establish what losses he i n fact suffered by reason of the defendant's failure to f u l f i l i t s promise. Certain material terms of the proposed franchise had not been settled by the parties when the defendant broke off the negotiations, and these would a l l have a bearing on the amount of the said losses. See discussion at p 103, post, on the undesirability of attempting to compensate a Hoffman type p l a i n t i f f for "expectancy losses", and cf discussion i n (1966) 65 Mich. L. Rev. 35L. 331 i t would smack of inequity i f a ^negotiating defendant] who without bad f a i t h had induced 3,000 dollars of reliance losses were held l i a b l e for 20,000 dollars i n f u l l contract damages". (Note, (I966) 65 Mich. L. Rev. 351 at p 356.) ".... protection to the extent of the action taken i n reliance on the promise w i l l usually avoid injustice to the promisee, while at the same time preventing undue hardship to the promisor". (Sutton, (supra), at p 168.) 332 Minus, of course, the p l a i n t i f f ' s expected earnings for the same period i n another vocation. 102 333 promise. ^ J ..... Courts w i l l be reluctant to enforce a promise i n i t s entirety i f to do so w i l l cause hard-ship to the promisor, and w i l l therefore deny any r e l i e f 334 whatsoever, thus working an injustice to the promisee. As a result of increasing judicial recognition, i n the forty seven years since the doctrine of promissory estoppel was f i r s t promulgated i n the Restatement of Contracts, of the inappropriateness, i n many situations, of clinging to a " f u l l contract damages" theory of enforcement, i t now appears to have become widely accepted that damages should on occasion be limited to reimbursement of the 33"5 p l a i n t i f f ' s reliance expenses. J J The Wisconsin Supreme Court, advocating this more flexible approach to the damages problem i n the Hoffman case, pointed out that: "Where damages are awarded i n promissory estoppel instead of specifically enforcing the promisor's promise, they should be only such as i n the opinion of the court are necessary to prevent injustice. Mechanical or rule of 336 thumb approaches to the damage problem should be avoided. 333 As required by Section 90. 334 K C T Sutton, Consideration Reconsidered, (1974), at § 167. 335 ".... the reimbursement of reliance losses alone w i l l l i k e l y develop as the standard damage measure under Section 90."j Henderson, "Promissory Estoppel and Traditional Contract Doctrine", (I969) 78 Yale L J 343, 379. Cf. Fuller and Perdue, "The Reliance Interest i n Contract Damages", (1936), 46 Yale L J 373, 420; Shattuck, "Gratuitous Promises - A New Writ?", (1937) 35 Mich L Rev 9O8, espy, at 9 4 l - 945; Boyer, "Promissory Estoppel: Requirements and Limitations of the Doctrine", (1950) 98 U Pa L Rev 459, espy, at 492-495; Seavey, "Reliance upon Gratuitous Promises or Other Conduct", (1951) 64 Harv L Rev 913, 926; Note (I966) 65 Mich L. Rev 351; Restatement of Contracts (Second), Section 90. 336 133 NW (2d) 267 at p 276. 103 Other considerations too, point i n the direction of restricting the measure of an aggrieved negotiator's recovery to the extent of his detrimental reliance upon the prospect of the assured contract materialising. F i r s t , the indispensable condition of being successful i n an action grounded i n promissory estoppel, and indeed the entire basis of that doctrine, i s reliance by the p l a i n t i f f . Thus, as i s pointed out by one writer, i f Hoffmant "had not undergone a change of position no cause of action would have arisen, despite identical conduct by the defendant". 3 3 7 I t seems sensible, therefore, i n cases where the expectancy measure of recovery i s thought by the court to be inappropriate, to 338 proceed on a reliance theory of damages. A more practical consideration favouring a reliance recovery i n Hoffman type situations would be the extreme d i f f i c u l t y of m estimating, with any degree of exactitude, the p l a i n t i f f ' s expectancy losses, that i s the loss suffered by reason of the defendant's promises not having been f u l f i l l e d . Such matters, for instance, as the size and the terms of construction of the building which was to house the proposed franchise had not been conclusively worked out by the parties when the negotiations broke down. Nor had agreement been reached on the terms of the lease of the said premises (rent, renewal, purchase options, and so forth). A l l these matters, not yet f u l l y worked out by the parties, would have a bearing on the issue. Hence, the d i f f i c u l t y with attempting to compute damages for the purpose of putting Hoffman into the position he would have been 337 Comment, (1966) 65 Mich L Rev 351 At 355 338 Cf. Note (331), supra. 104 i n had Red Owl not broken i t s promise and demanded a capital contribution of 34,000 d o l l a r s . 3 3 9 339 I f , hdwever, the main terms of the projected agreement have been agreed upon by the parties at the time of the breakdown, there, are some indications that the courts might be prepared to base the p l a i n t i f f s damages upon an expectancy measure. In Chrysler  Corp v Quimby ((1958) 51 Del. 264,144 A (2d) 123) the defendant promised to renew the p l a i n t i f f *s automobile franchise for a further term i f the p l a i n t i f f purchased a l l the outstanding stock i n the franchise. The defendant failed to f u l f i l i t s promise. The p l a i n t i f f raised an action based on promissory estoppel and was awarded the profits which would have been made had the defendant f u l f i l l e d i t s promise and renewed the franchise. Calculation of expectancy losses was much less speculative here than i t would be i n a Hoffman type situation. Given that the p l a i n t i f f was presently a franchisee of the defendant, and that the promised renewal was to be on the same terms as the existing franchise, reference could be had to past profits for the purposes of measuring expectancy losses. See p 131,post, however, for the more l i k e l y reason underlying the awarding of expectancy losses i n the Chrysler v Quimby case. 105 (b) A Functional Analysis of the Role of Promissory Estoppel  Theory i n Abortive Contract Negotiations. The use made of the promissory estoppel doctrine i n the Hoffman case provides us with a further i l l u s t r a t i o n of legal l i a b i l i t y 340 emanating from abortive contract negotiations. One writer sums up the effects of extending the benefits of the doctrine to aggrieved contract negotiators by saying that: " i t w i l l no longer be possible for one party to scuttle contract negotiations with impunity when the other has been induced to rely to his detriment on the prospect 34l that the negotiations w i l l succeed." In other words, a contract negotiator who induces prejudicial reliance by promising the other party a contract, and then resiles from negotiations, w i l l be liable to reimburse that party for his negotiation expenditures. As i n the case of the negotiator who i s 342 successful i n his restitutionary claim, the effect of a judicial award i n favour of the party who successfully brings his claim i n promissory estoppel i s to make him whole. He i s returned to his pre-promise position. Whether the award i s based on restitutionary 340 See cases approving the ratio i n Hoffman, cited at note (306), supra. Cf. Chrysler Corp v Quimby. (1958) 51 Del 264, 144 A (2d) 123: Goodman v Dicker. 16QF (2d) 684 (D C Cir, 1948); Burridge v Ace Storm Window Co., 69 Pa D & C 184 (C P I949); Terre Haute Brewing Co v Dugan, 102 F (2d) 425 (8th Cir. 1939). 341 Summers, "'Good Faith* i n General Contract Law and the Sales Provisions of the Uniform Commercial Code", (1968) 54 Va L Rev 195, at p 225. 342 See, eg, William Lacev (Hounslow) Ltd v Davis. [1957]1 WLR 932; Brewer v Chrysler Canada Ltd.. [1977] 3 WWR 69. 106 theory, or takes the form of damages i n promissory estoppel theory, i t essentially reimburses the aggrieved party for the losses and expenditures to which he has been put by the other party during the negotiation period. 3^ 3 An interesting point arising here concerns the potential overlap i n the respective spheres of operation of the two theories. Given the expansive definition of benefit propounded i n an earlier part of this paper, might Hoffman not have been successful had he brought his 344 claim i n restitution, rather than upon promissory estoppel?-'^ I t may be recalled that Hoffman's financially detrimental actions were taken at the urging, or on the advice, of the defendant. The performance of these requested acts, therefore, should constitute a legal benefit i n the hands of the defendant. There was also the "fault" of the defendant, who constructively put an end to the negotiations by demanding a sum, almost double that i n i t i a l l y insisted upon, at a late stage i n the negotiations, knowing that the p l a i n t i f f could not 34'5 afford i t . J Furthermore, the p l a i n t i f f had a sufficiently strong expectation of obtaining the projected franchise on the terms i originally negotiated (viz., his making a capital contribution of circa 18,000 dollars) to displace any inference that what had been 346 done was done "gratuitously" or at " r i s k " . - ^ Apart from anything 343 Cf. Gilmore, The Death of Contract, (1974), at p 89. 344 See p 4 , et seq, ante, and p 22 , et seq, ante. Cf. H i l l  v Waxberg. 237 F (2d) 936, (9th Cir 1956); Minsky's Follies of Florida Inc., v Serines, 206 F (2d) 1; Kearns v Andree. 139 A 695, (1928). 345 The term insisted upon was so clearly unreasonable that i t could not have been advanced with any expectation of acceptance. Cf. p 58 , ante. 346 please see next page. 107 else, Red Owl had expressly assured him that a franchise would be forthcoming i f he would invest this amount of capital, and he subsequently changed his position only because of the strength of his expectation that the transaction would eventually be consummated. The principal elements conducive to recovery i n restitution, therefore, were present i n the Hoffman negotiations. This matter i s not without practical significance, for a p l a i n t i f f negotiator, suing for his wasted pre-contract expenditures i n American courts, might, i n a suitable case, have alternative forms of action. ' Again, where a p l a i n t i f f i s unable to establish that the c r i t e r i a necessary for recovery on the basis of one theory are satisfied, he might be successful i n a claim based on the other theory. The p l a i n t i f f might not, for instance, be able to show that the defendant specifically requested or directed him to incur expen-diture or otherwise act to his detriment (eg. by se l l i n g his existing business or acquiring options to purchase land, i n anticipation of obtaining a projected franchise), as he must usually do i f his 348 restitutionary claim i s to be successful. He might, however, 34;6 Once the inference of "gratuity" or "risk" i s overcome, the doctrine of unjust enrichment w i l l not allow the defendant, with impunity, to frustrate the p l a i n t i f f ' s expectation of obtaining recompense from the proceeds of the expected contract. Cf. Barry J at p 40 , ante. For a discussion of this and the other c r i t e r i a employed by the courts inldetermining which of the parties i s taking the risk of the negotiations f a i l i n g , see p 22 , et seq., ante. 347 The doctrine of promissory estoppel i s not sufficiently evolved i n Anglo-Canadian law to serve as an affirmative basis of r e l i e f for aggrieved contract negotiators. See note (290), supra. But cf. opinion of H J MacDonald J i n Brewer v Chrysler Canada Ltd., D.9773 3 WWR 69 at p 78, and Waddams, The Law of Contracts, (1977), at p 132. 348 Cf. Goff and Jones, The Law of Restitution, (2nd ed, 1978) at pp 15 - 16. 108 s t i l l be able to succeed on the basis of promissory estoppel* No request or inducement on the part of the defendant is necessary here. It is provided in Section 90 of the Second Bestateaent of Contracts that evidence of "a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee" is a sufficient basis for the plaintiff's c l a i m . ^ The "foreaaeability* or the "reasonableness" of the acts done in reliance on the promise, and not whether they have been requested, i s what is important to the operation of Section 90.350 It will, however, be necessary for there to have been a promise given, or assurance* nade, by the defendant that the proposed contract would be forthcoming, before a plaintiff negotiates? can proceed on J51 the basis of promissory estoppel. Thus a plaintiff in a Lace: 352 or a Sabemo type situation oould not avail himself of the doctrine of promissory estoppel because, although there was " a mutual belief that a contract was about to be entered into", no explicit assurance 353 of future bargain was made. It will be recalled that much of our discussion on the operation of the law of restitution in contract negotiation situations was concerned with the issue of "risk". We saw that, in order to be 349 See p 94 , ante. Cf. p 109 , et seq, post, where i t is said that the courts will scrutinise with care the "reasonableness" of unrequested actions in reliance by negotiating parties. 350 Cf. K G T Sutton, Consideration Reconsidered, (197*+), at p 165 et seq. See, p no • post. 351 [1957] 1 WLR 932. 352 [1977] 2 HSWLR 880. 353 Therefore, a plaintiff in such a situation will have to bring his claim in restitution, eg. see H i l l v Waxberg. 237 F (2d) 936, (9th Cir. 1956). 109 successful i n his restitutionary claim, the p l a i n t i f f had to establish that i t was not he, but the defendant, who was taking the risk of the negotiations f a i l i n g . 3 - ^ The notion of risk (and also the notion of fault) provide the courts with handy concepts which f a c i l i t a t e the striking of a balance between the respective economic interests of negotiating parties. The limitations placed upon recovery under Section 90, and the f l e x i b i l i t y i n approach which the Section allows, suggest that American courts, when asked by negotiating parties to invoke the doctrine of promissory estoppel, w i l l similarly take into account the risks inherent i n the negotiation process, and seek to strike a balance between the respective economic interests of negotiating parties. ^ Thus, a p l a i n t i f f might be denied recovery for the detriment caused by certain actions taken during negotiations without the request of the defendant. For instance, a party entering into 354 See p 23 , ante. 355 Eg« Henderson states that: "... the insistence of traditional theory upon clear promises, upon close attention to the reasonableness of conduct i n reliance ..... f u l f i l l a valid purpose and should not be hastily discarded i n the effort to protect every relying promisee ..... I/Whether or not the limitations inherent i n Section 90 w i l l keep the reliance principle within bounds i n the bargain context w i l l ultimately depend upon the degree to which courts recognize the dangers of imposing l i a b i l i t y too readily i n the formative stages of the bargaining process" (Henderson, "Promissory Estoppel and Traditional Contract Doctrine", (I969) 78 Yale L J 3^3 at p 365). 110 "lucrative" sub-contracts on the faith of a promise that the principal contract will soon bo granted, would likely find himself without remedy i f the defendant should withhold the contract. Such reliance would probably be held not to bo "reasonable", and not to have been "foreseeable" by the defendant. 3^ The case of H i l l v Corbott-^ illustrates the point. There, the defendant lessor promised to renew the plaintiff's lease when the present term expired. Relying on this promise, the plaintiff sold the property to which he had intended to move at the expiration of the term. The plaintiff was unsuccessful in his claim on promissory estoppel as the court was not satisfied that the defendant, at the time of the making of the promise, should reasonably have expected the plaintiff to change his position thus. As one writer has said of the doctrine of promissory estoppel in contract negotiation situationst "It may be expected that courts will not allow Section 90 free rein in bargain negotiation contexts. If promissory estoppel i s to provide a standard of fairness by which the conduct of negotiations may be judged, i t is likely that the courts will examine the reasonableness of alleged reliance with some care". 3^ 356 Cf. Henderson, (supra), at p 361. It may be recalled here that Hoffman's detrimental actions were either urged or advised by Red Owl. Such "acquiescence" by the defendant will doubtlessly assist plaintiffs in establishing the "reasonableness" of their reliance for the purposes of satisfying the requirements of the doctrine of promissory estoppel. 357 (19^ ) 2C4 P (2d) 8^5 (S Ct Wash). 358 Henderson, (supra), at pp 360 - 361. I l l Again, where the plaintiff's reliance is held to be both "reasonable'' and "foreseeable", the court retains a discretion as to whether the promise is to be enforced. Relief will only be granted under Section 90 i f the court i s of opinion that enforcement is necessary to avoid in j u s t i c e . 3 5 9 Therefore, a party who has incurred merely preliminary expenditures on the faith of a promise to contract will have l i t t l e chance of being successful in recovering them in an action based on promissory estoppel. 3^ 0 The courts will have regard to the risks commonly undertaken by parties entering into commercial negotiations, and will be extremely reluctant in such a situation to conclude that injustice would result i f the promise were not enforced. On the other hand, i t i s easy to see the injustice occasioned i f the defendant's promises of eventual contract were not enforced in a case where much work had been done on the faith of these promises being ful f i l l e d . Hoffman itself i s a perfect illustration. 359 Eg., see,,K G T Sutton, Consideration Reconsidered, (1974),at p 166, et seq. The Hoffman court said that the final decision to invoke Section 90 in order to prevent injustice i s a "policy decision" for the court. 360 See, section ( l ) , (c). ante. 112 (c) Conclusion, The Hoffman decision opens a new avenue of protection for plaintiffs who have detrimentally relied on promises of contract held out to them by their co-negotiators. like the cases allowing restitutionary relief, the motive underlying the granting of relief in Hoffman is a desire to avoid the injustices occasioned when a negotiating party "abuses the privilege" 3*' 1 to put an end to negotlationsi " injustice would result here i f plaintiffs were not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment". 3 6 2 In recognising that legal rights do indeed inhere in contract negotiations, Hoffman i s further proof that the adage that "a negotiating party i s at liberty to break off negotiations at any time, and for any reason" 3 6 3 is only partially correct. The courts have felt i t necessary to introduce qualifications to i t . 361 This phrase is used in Summers,** Good Faith' in General Contract Law and the Sales Provisions of the Uniform Commercial Code", (1968) 54 Via L Rev 195. 223. 362 133 NW (2d) 267, at p 275. 363 Eg., see, Kessler and Fine, "Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contracts A Comparative Study", (1964), 77 Harv L Rev 401, at p 412. 113 3 ABORTIVE CONTRACT NEGOTIATIONS AND CONTRACT DOCTRINE: THE LIMITS OF THE IMPLIED-IN-FACT CONTRACT DEVICE. (a) Background and Discussion of the Case Law: In this section of the paper, we s h a l l consider the question of whether an aggrieved p l a i n t i f f negotiator might be able to argue that the defendant has impliedly agreed to recompense him for his negotiation expenditures i n the event of the expected contract being withheld. 3 6 4" Confusion has often surrounded the use of the term "implied-contract". In the past the phrase has been used to denote those situations i n which the "law implies an obligation" on the part of a person to make restitution or recompense to another party. Contractual language was therefore being used to describe obligations arising i n cases where i t was clear that there was no semblance of 366 agreement between parties. As i s pointed out by Goff and Jones, i n their well known book on the law of restitution, the vast majority of situations i n which restitution i s granted defy analysis on a 3j64; Cursory mention has already been made of this point. See p 25 et seq, ante, where i t was concluded that an aggrieved negotiator's prospects of succeeding on the basis of an implied agreement argument were very slim. .365 An excellent discussion of the hi s t o r i c a l reasons underlying this unfortunate use of the phrase "implied contract" i s to be found i n Goff and Jones, The Law of Restitution, (2nd ed., 1978) at Chapter 1. 366 An extreme example i s Upton-on-Severn R D C v Powell. £1942] 1 A.L.L.ER 220. CCotton L J once said that: "... the term "implied contract" i s a most unfortunate expression, because there cannot be a contract by a lunatic I t i s asked, can there be an implied contract by a person who cannot himself contract i n express terms? The answer i s , that what the law implies on the part of such a person i s an obligation, which has been improperly termed a contract, to repay money spent i n supplying necessaries. I think that the expression •implied contract? i s erroneous and very unfortunate". (continued on next page). 114 367 on a contractual b a s i s . R e c o g n i t i o n by English and Canadian courts of the substantive principle of unjust enrichment which underlies the law of restitution has now made references to implied 368 contract i n the context of the law of restitution obsolete. However, apart from this "erroneous and very unfortunate" usage of the term implied contract, the concept of implied agreement 370 i s of great importance i n the law of contract. Thus, a leading writer on the law of contract states that: "Express and implied contracts are both contracts i n the true sense of the term, for they both arise from the agreement of the parties, though i n one case the agreement 371 i s manifested i n words and i n the other case by conduct". The point therefore arises of whether an agreement for payment of remuneration for pre-contractual services can be implied i n a contract negotiation situation. The prima facie obstruction i n the way of a contractual analysis i s the common belief i n the imminence 366 (continued) (Re Rhodes. (1890) 44 Ch D 94 at p 105). In a a similar vein, Lord Atkin has more recently castigated "these fantastic resemblances of contracts invented i n order to meet requirements of the law as to forms of action which have now disappeared". (United Australia Ltd v Barclay's Bank Ltd. [l94l] A C I at p 28., quoted i n Goff and Jones, (supra), at p 10). 367 See, Goff and Jones, The Law of Restitution, (2nd ed., 1978) at p 5 . 368 The implied contract f i c t i o n was rejected by the Supreme Court of Canada i n Deglman v Guaranty Trust Co of Canada, D.954J SCR 725, discussed, ante, at p 1 . , and by the English Court of Appeal i n Craven-Ellis v Canons Ltd.. [1936] 2 KB 403, discussed, ante, at p 27 . Cf. Goff and Jones, (supra), at p 10. 369 Per Cotton L J i n Re Rhodes. (I89O) 44 Ch D 94, at p 105. 370 Eg., see Chitty on Contracts, (24th ed. 1977) at p 9; Anson's Law of Contract, (24th ed. 1975) at p 25, et seqj Steven v Bromley  & Son, [19193 2 KB 722; cf Costigan, "Implied-in-Pact Contracts and Mutual Assent", (1920) 33 Harv L Rev 376. 371 Chitty, (supra), at p 10. Steven v Bromley & Son. [1919J2 KB 722, i s a good i l l u s t r a t i o n of the inference of agreement from conduct. 115 of contractual relations. The d i f f i c u l t y i s that this common belief appears to negative the suggestion that the negotiating parties impliedly agreed that the pre-contractual services should be paid for otherwise than out of the profits of the proposed contract. 372 Several Australian and New Zealand cases, decided ear l i e r this century, provide us with illustrations of unsuccessful attempts by aggrieved p l a i n t i f f negotiators to establish implied-in-fact contracts for the payment of reasonable remuneration for work done when their co-negotiators unilaterally abandoned the negotiations. 373 Consider the case of Sincl a i r v Rankin, ^ a decision of the Western Australian Ful l Court. The p l a i n t i f f was an accountant who performed services at the defendant's request on the understanding that heiiwould be remunerated by being made a partner i n the defendant's accountancy business. Parker C J described the facts as followsi " I t L i s ] clear .... that [the p l a i n t i f f j commenced and continued to work for the defendant, and performed a l l the services i n question on the defendant's promise or undertaking that he (the defendant) would take the p l a i n t i f f into partnership i n the defendant's business of an accountant, and that the p l a i n t i f f r e l i e d on the defendant's performance of this promise as a remuneration 374 for such services". The defendant later refused to execute a partnership agreement with the p l a i n t i f f . The p l a i n t i f f sought to recover for the costs of 372 Eg. See Sinclair v Rankin (No. 2), (1908) 10 W A L R 126; Watson  v Watson, [19531 N Z L R 266; Masripilis v Baird. [1924] Q S R 303; Ries v Nlelson. (1912) 14 G L R 449; But cf Perrott v Perrott, (1911) 31 N2Z L R 6. 373 (1908) 10 W A L R 126. 374 i d at p 128. Cf. Hoffman v Red Owl Stores, (I965) 133 NW (2d) 267, which indicates that a party promising a contract i n the United States w i l l be liable to reimburse the other party for his needless expenditures. 116 his services, founding upon ana implied agreement by the defendant to pay reasonably for the said services. The court took the view that the common expectation of partnership stood i n the way of a contractual analysis. The learned Chief Justice said that i s i t was understood that the p l a i n t i f f ' s services were to be compensated: ".... by the [defendant] taking him into partnership, i t i s impossible to imply an agreement to pay for such services i n money, although the defendant refused to carry out his promise to compensate the p l a i n t i f f i n the manner agreed upon. The p l a i n t i f f ... never contemplated a money payment. He relied upon the defendant's promise to take him into partnership as the mode, and the only mode, i n which he was to be remunerated for his services. The fact that the defendant has broken this promise does not, i n my opinion, improve the pl a i n t i f f ' s position i n this action. That fact cannot ....... warrant the Court i n implying a contract which neither party contemplated. To hold the contrary the Court must, i n effect, find that the defendant impliedly agreed to pay i n the usual manner for the p l a i n t i f f ' s services, and the p l a i n t i f f intended to claim the usual payment for such services, and thus set up a contract which i s not only opposed to the facts, but repudiated by both p a r t i e s " . 3 7 5 375 (1908) 10 W A L R 126 at pp 129 - 130. Burnside J was also emphatic i n denying the existence of an implied agreement for payment by the defendant i f he should withhold the expected partnership. His Lordship said that: "Where work i s done i n anticipation of a contract, and such contract i s not entered into, no action can be maintained on a quantum meruit i n respect of the work done [because noj contract, express or implied, can be inferred by the defendant to remunerate the p l a i n t i f f " . 117 An; almost exact parallel i s to be found i n the case of Watson 376 v Watson, a decision of the Supreme Court of New Zealand. The p l a i n t i f f i n this case l e f t his employment i n Wellington and joined his brother, the defendant, i n Taihape, with a view, ultimately, to the erection of a sawmill and i t s conduct by the brothers i n partnership. The p l a i n t i f f went at the defendant's invitation. The latter admitted that i t was understood that the p l a i n t i f f should become a partner when the sawmill was erected. The p l a i n t i f f brought with him certain equipment which he had purchased put of his own moneys. For seven months the brothers did agricultural work and cut firewood. In August I947 work commenced on the erection of the sawmill, and i t was completed towards the end of 1949. Thereafter, both brothers worked i n the m i l l . No wages were at any point paid to the p l a i n t i f f brother for the services rendered by him. The defendant took no steps towards settling the terms of the protected partnership. His explanation for this was that " i t more or less lapsed or d r i f t e d " . 3 7 7 Eventually, i n May 1952, the p l a i n t i f f l e f t Taihape because of the defendant's refusal to consummate the expected partnership agreement. For five years, therefore, the p l a i n t i f f had assiduously worked towards the day when he would be admitted as a partner into the defendant's business. Moreover, a l l his efforts were i n reliance upon the defendant's express assurances that he would be taken into partnership. An action was raised i n which the p l a i n t i f f sought to establish the existence of an implied agreement by the defendant that he would pay 376 [1953] N Z L R 266 cf Ries v Nielsen, (1912) 14 G L R 449. 377 [1953] N Z L R 266 at p 268. 118 reasonably for the services rendered over the five year period. The p l a i n t i f f was p a r t i a l l y successful i n his claim. I t i s well to quote at length here from the judgment of Gresson J. His Lordship took this view of the limits on the use of contractual theory i n contract negotiation situationst for the period up to the commencement of the construction of the m i l l , the p l a i n t i f f gave his services i n anticipation of a partnership later being concluded. These services were given on a basis that excluded any implied contract for remuneration. I think this i s equally true of the period whilst the mi l l was under construction. P l a i n t i f f worked as a prospective partner to further what was intended to become a partnership venture. An implied contract to pay for such services would be quite inconsistent with the basis upon which 378 the work was done". However, very interestingly, Gresson J went on to hold that the contractual inference could be drawn for servicestxendered after this point of time, and that the defendant had impliedly agreed to make a reasonable payment to the p l a i n t i f f for services rendered subsequent to the coming into operation of the m i l l . His Lordship said that: "When the mill came into operation, perhaps i n August, 19^9, perhaps a l i t t l e later, nothing was done to complete the projected partnership Finally 378 i d at p 272 119 p l a i n t i f f , having become - not unreasonably - disgusted at defendant's indifference or dilatoriness, took his departure i n May, 1952. I think the defendant must be treated as having by his conduct repudiated the under-standing. When, subsequently to the completion of the m i l l , the defendant accepted the services of the p l a i n t i f f i n operating i t this I think amounted to an election by the defendant to accept the benefit of the p l a i n t i f f ' s services on a basis implying payment i n the event of no partnership being arrived at. The services were given on the footing that p l a i n t i f f would become a partner but, when eighteen months or thereabouts had passed and no partnership had been completed the defendant must be regarded as having accepted the services not exclusively on the basis of a prospective partnership but on the basis that p l a i n t i f f might become a partner but that, i f he did not, payment for his services would be made. When completion of the understanding was so long delayed as to amount to refusal on defendant's part to implement i t and i n the meantime the defendant continued to accept the benefit of the p l a i n t i f f ' s work, this must be deemed to have raised an inference to pay for such work". "My view i s that, though p l a i n t i f f may not have been entitled to sue on a quantum meruit for work done i n anticipation of the completion of a partnership agreement, nevertheless he did become entitled on a subsequent contract to be implied between the parties when defendant's long-continued unwillingness to complete a partnership 120 379 amounted to a refusal to honour the understanding". 7 The court i n Watson therefore took the view that the finding of an implied-in-fact contract for payment for services rendered during the negotiation period was dependent upon the strength of the expectation of eventual contract. I f the expectation of contract i s weak (as was thought by the Watson court to be the case i n the lat t e r stages of the five year period of negotiation), there i s room for the finding of an implied agreement for payment i n the event of the agreement not being consummated by the defendant, for here, i t i s said, the 380 contractual inference " i s not opposed to the f a c t s " , ^ ^ On the other hand, i f the expectation of contract i s strong this precludes the 381 finding of an implied agreement for remuneration. However, while the implied-in-fact contract argument has been rejected by Australian and New Zealand courts, and also by Anglo-379 i d at p 2?2. 380 Evidence that the pre-contract services were rendered i n the expectation of compensation, quite apart from the poss i b i l i t y ofacontract being entered into, and their acceptance by the other side on this basis, would serve as a basis for the finding of an implied agreement for payment i n the event of the defendant subsequently deciding not to contract. Cf. Bond v Colonial  Investment and Loan Co.. (1908), 11 0 W R 617, at p 620 per Britton J; Tu r r i f f Construction Ltd v Regalia Knitting Mills Ltd [1972J C L Y 461. i 381 Cf., the discussion on the law of restitutions at p23 , et seq, ante, where i t i s said that a strong expectation of contract i s of ten; decisive of the question of restitutionary recovery. Thus* i n the William Lacey case, Barry J., while accepting counsel's argument that the common expectation of contract precluded the finding of an implied agreement for remuneration, went on to hold that the p l a i n t i f f could succeed on the basis of restitutionary theory. 121 Canadian c o u r t s , 3 8 2 the plea has on occasion been successful i n the United States. One case may be mentioned i n this context, i f only to show the limits to which some courts might be prepared to stretch contractual theory i n order to recompense an aggrieved negotiating party. The case i s that of Western Asphalt Co v Valle, a decision of the Supreme Court of Washington. The p l a i n t i f f subcontractor prepared estimates at the request of the defendant, a general contractor. The defendant used the p l a i n t i f f ' s figures and estimates i n preparing his own bid for the main contract. The defendant was awarded the main contract, but gave the sub-contract work for which the p l a i n t i f f had bid to another sub-contractor. The court said that: "The fact that respondent hoped to obtain a subcontract from the general contractor to whom the work might be awarded, and that with this idea i n mind respondent made available to appellant i t s figures and computations concerning that portion of the general contract i n which respondent was interested, i s not necessarily inconsistent with i t s expectation that i t would be entitled to receive m reasonable compensation for the service rendered i f appellant was awarded the construction contract and did not award the respondent the sub-contract which respondent desired. We are not i n accord with the view that such services rendered i n connection with a contemplated contract and with the hope of obtaining a benefit from 382 Eg., see Barry J i n William Lacey (Hounslow) Ltd v Davis, [1957] 1 WLR 932, at pp 935 - 936. Cf. Birks, "Restitution for Services", (1974) 27 CLP 13, espy, at p 27 - 28. 383 (1946) 171 P (2d) 159. 122 from such contract are necessarily not so reriedred i n 384 expectation of compensation." This effort by the Washington court to circumvent the objections to the finding of an implied agreement i n the content of contract 385 negotiations -^ ^ i s not entirely satisfactory. A party performing pre-contract work ordinarily does so on the assumption that he w i l l be rewarded for his present efforts by the profits of the expected 386 contract. Indeed, were i t not for the fact that he confidently believed that he would get the contract and be paid out of i t s proceeds, he would not have been prepared to do the work which he did. 3 8'' According to the Washington court, however, this belief i n the imminence of contractual relations i s "not necessarily inconsistent" with an expectation on the p l a i n t i f f ' s part to receive compensation for his efforts i f the defendant should unilaterally withhold the contract. In much the same way, the court attributes to the defendant a readiness to remunerate the p l a i n t i f f for his pre-contract expenditures, i f he should put an end to negotiations and frustrate the common expectation of contract. 384 For criticism of the Western Asphalt case, see Schultz, '^ Phe Firm Offer Puzzle: A Study of Business Practice i n the Construction Industry", (1952) 19 U Chi L Rev 237; comment i n (1946) Wash L Rev 139; and cf K G T Sutton, Consideration Reconsidered, (1974), at p 174. 385 Eg., see Sincl a i r v Rankin. (1908) 10 WALR 126: Watson v Watson. [1953] NZLR 266: William Lacey (Hounslow) Ltd v Davis. [1957J 1 WLR 932; cf Sabemo Pty Ltd v North Sydney Municipal Council f 1976 2 NSWLR 880. 386 But cf note (380), supra. 387 Eg., see Sheppard J at p 24 , ante. 388 Even i f one were to accept this tortuous explanation i n principle, there i s s t i l l a d i f f i c u l t y i n applying i t to the facts i n Western Asphalt. Surely the understanding between the parties was that the p l a i n t i f f sub-contractor was "taking a chance" i n preparing i t s tender and i n i t i a l estimates. Cf. Barry J at p 14, ante, and see also Schultz, "The Firm Offer Puzzle, A Study of Business Practice i n the Construction Industry", (1952) 19 U Chi L Rev 237. 123 Serious objection may be taken to this method of getting around the limitations of contract theory i n contract negotiation situations. One commentator says of the case that: "there i s a logical reason for not applying the rules for the construction of implied-in-fact contracts to the principal case. The services were performed with the understanding on the part of the parties that they would be compensated for indirectly by an agreement to be made i n the future. Under these circumstances the present intent of the parties was to contract i n the future; therefore, there was no showing of a present intent to contract. Hence there can be no implied-in-389 fact contract for compensation". 7 In a similar vein, one English writer has recently said that i t i s : "dis t i n c t l y a r t i f i c i a l to envisage [contractjcnegotiations going on against a comfortable fall-back p o s i t i o n " . 3 9 0 A comment by the same writer on the case of William Lacey  (Hounslow) Ltd v D a v i s 3 9 1 i l l u s t r a t e s the point: "Thelibuilder did the work i n the confident belief that he would get the contract. And the developer knew i t . At the last minute the developer chose to s e l l rather than develop. The builders successfully sued for their quantum meruit. By the use of conditions i t would have 389 Comment, (1946) Wash L Rev 139 at p 140. As i s pointed out by the commentator, a restitutionary claim would have been preferable. Cf. Birks, "Restitution for Services", (1974) 27 C L P 13, at pp 27 - 28, and see discussion at p 124 , et seq, ante. 390 Birks, "Restitution for Services", (1974) 27 C L P 13 at p 27. 391 £1957] 1 W L R 932 124 been possible to torture that quantum meruit into contractual shape. It could have been said without obvious repugnancy that the developer intended to remunerate the builder by giving the contract or, i f he did not do that, by paying reasonably. But that had not been the real intention, and Barry J refrained from the f u t i l e a r t i f i c i a l i t y and expressly characterised 392 the quantum meruit as quasi-contractual". It i s submittedithat the above objections are f a t a l to the finding of an implied agreement by a defendant negotiator to recompense 393 the other party for his wasted pre-contract expenditures. ^ The court i n the Western Asphalt case attributes "intentions" or "expectations" to the negotiating parties which are not supported, and indeed are seemingly contradicted, by the f a c t s . 3 9 4 " Also, the "torturing of contracts out of borderline s i t u a t i o n s " 3 9 5 has undesirable side effects. Contractual theory might become distorted in the sense that parties are found to have reached agreement on the basis of "expectations" and "intentions" which i t i s not clear that they had. Accordingly, "since there i s no reason to blur the line between imputation and genuine implication, the non-contractual 396 analysis ought to be preferred as the more natural". 7 392 (1974) 27 C L P at p 28. 393 But cf note (38O) supra. 394 See Parker C J at p 116 , ante. Cf. Cartwright J at p 3 , ante. 393 Per Birks, (supra), at p 15. 396 Per Birks, (supra), at p 27. 01. : 125 (b) Summary and Conclusion: We have seen that an aggrieved negotiator who seeks to establish the existence of an implied agreement for payment of his wasted expenditures has l i t t l e prospect of success. In actual practice, however, this i s of l i t t l e consequence. The law of restitution ensures that p l a i n t i f f negotiators are adequately.protected from 397 the potential "whims" of their co-negotiators. J y' The factor 398 f a t a l to the drawing of the contractual inference^ 7 i s one of the main c r i t e r i a used by the courts i n deciding whether to grant the p l a i n t i f f restitutionary r e l i e f . Therefore, while accepting that the decisions i n Sinclair v 399 400 Rankin^aaaahdtWatson v Watson are correct statements of the contractual position, they seemingly err i n denying the p l a i n t i f f s 401 r e l i e f on the basis of restitutionary theory. In both cases i t was assumed by the court that the fact that no contract could be implied 402 was determinative of the question of restitutionary recovery. In other words, i t seems to have been thought that the circumstances i n which a restitutionary claim was appropriate -were coextensive 397 See chapter II ( l ) , supra. 398 Viz., the common expectation of contract, and that payment for the services presently being rendered w i l l come out of the contract profits. 399 (1908) 10 W A L R 126. 400 [19533 N Z L R 266. 401 See, eg,Sheppard J i n Sabemo P/L V North Sydney Municipal Council. [1977J 2 N S W L R 880 at p 8981 William Lacey (Hounslow) Ltd v  Davis. [19573 1 W L R 932; Brewer v Chrysler Canada Ltd:T19777 3 W W R 69; Mason y The State of New South Wales. (1959)' 102 C L R 105, at p 146; Goff and Jones, (supra), at p 10. 402 see next page, please. 126 with those i n which an implied agreement for payment could be inferred. Nowadays, with increasing ju d i c i a l recognition of the doctrine of 403 unjust enrichment which underlies the law of restitution, J the approach to restitutionary theory taken by the Sinclair and Watson 404 courts i s untenable. 402 "CThe cases of Sinclair and Watson 1 were decided upon ordinary contractual principles. No common intention could be presumed Q.r implied; accordingly no recovery was permitted". per Sheppard J i n Sabemo, (supra), at p 898. The court i n Sabemo did not follow the cases of Sinclair and Watson on the question of restitutionary r e l i e f , but accepted that they were correct statements of the contractual position. Sinclair, i t might be noted, was decided at a time when the "implied contract f i c t i o n " held sway i n England. See eg Sinclair v Brougham, Cl914j A C 398. The court i n Watson, while noting Craven-Ellis  v Canons Ltd (£l936J 2 K B 403), did not realise the implications of that decision and distinguished i t on the most slender of grounds, viz., that i t extended only to restitutionary claims for work done under void contracts. This distinction i s not adhered to either i n England or Canada. See cases cited at note (401), supra, and cf Birks, "Restitution for Services", (1974) 27 C L P 13. 403 See p 1 , et seq, ante. 404 Cf. Goff and Jones, The Law of Restitution, (2nd ed. 1978), at Chapter 1. 127 III INITIATING NEGOTIATIONS WITHOUT SERIOUS INTENT TO CONTRACT, (a) A Look at the Available Case Law. A party may enter into negotiations with another party and involve him i n substantial expenditures without having any intention of contracting at the end of the day. Such instances are l i k e l y to be rare, but a party might negotiate i n "pursuance of a scheme 405 never to come to terms" J so as toi " t i e up the other party i n order to s t a l l for time or i n order to keep him from competing i n another venture or deal. He also might be going through the motions of negotiating merely to comply formally with some rule of law that requires him to shop around for the best deal" J*®^ What protection does the law afford the victim of such a scheme? The question has been raised on several occasions before the American Courts. The case of Heyer Products Co. v United States, a decision of the Court of Claims, i s the main authority on the matter. The defendant Government agency invited bids to be lodged for the manufacture of el e c t r i c a l equipment. The p l a i n t i f f alleged that the defendant had rejected i t s bid i n "bad fait h " , having 405 This phrase i s used i n Kessler and Pine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract* A Comparative Study", (1964) 77 Harv L Rev 401 at p 419. 406 Summers, "'Good Faith' i n General Contract Law and the Sales Provisions of the Uniform Commercial Code", (I968) 54 Va L Rev 195 at p 221. 407 (1956) 135 Ct CI 6 3 , 140 F Supp 409. 128 decided to retaliate against i t for testifying against the defendant LQQ at an ear l i e r senate hearing. The p l a i n t i f f claimed expenses of 7,000 dollars incurred by i t i n preparing i t s bid. The Court of Claims held that the p l a i n t i f f was entitled to the r e l i e f sought upon proof of the facts alleged. In the course of judgment, i t was said that: "It was an implied condition of the request for offers that each of them would be honestly considered No person would have bid at a l l i f he had known that •the cards were stacked against him'. vt-No bidder would have put out 7,000 dollars i n preparing i t s bid i f i t had known the /^defendant] had already determined to give the contract to the Weidenhoff Company. I t would not have put i n a bid unless i t thought i t was to be honestly considered. It had a right to think i t would be. JThe defendant] impliedly promised p l a i n t i f f i t would be. This i s what induced i t to spend i t s „409 money 7 The court thus found what was termed an "implied promise" by the defendant that i t would "honestly consider" the p l a i n t i f f ' s 410 bid. A leading American writer on the law of contract, however, 408 The p l a i n t i f f , i t should be noted, was the lowest bidder. The contract i n question was awarded to a company which had submitted a bid almost twice as great as the p l a i n t i f f ' s . 409 (1956) 140 F Supp 409 at pp 412 - 413. And again: "..... when ^defendant] invited p l a i n t i f f to incur this expense, i t must necessarily be implied that £the defendant] promised tot give f a i r and impartial consideration to i t s bid", (at p 413). Cf. Kessler and Fine, (supra), at p 420. 410 A breach of this promise would result i n a l i a b i l i t y to recompense the p l a i n t i f f for expenditures needlessly incurred. Of. United  States v Purcell Envelope Co.. 249 U S 313, 39 S Ct 300. 129 suggests, correctly i t i s submitted, that the cause of action against a party who initiates negotiations without intending to contract i s not based on contract at a l l , and that the adoption of contractual language by the Heyer court was "prompted by the jurisdictional 411 peculiarities of the Court of Claims". The appropriate theory of recovery, i t i s said, i s tort. This view i s supported by subsequent American cases which endorse the ratioaln Heyer, and state that the cause of action against a negotiator who has no intention of contracting 412 i s founded on tortious principles. Again, Judge Laramore, who dissented from the majority opinion i n Heyer, considered the p l a i n t i f f ' s action to be tortious i n nature, and therefore f a l l i n g outside the jurisdiction of the Court of Claims. 4 - 1 3 Hudson, the leading English authority on the law relating to building and c i v i l engineering contracts, considers the legal position of a party who has been led to incur expense by a negotiator who has no intention of contracting. It i s concluded that: "|wherej i t can be shown that the employer has no intention of letting the contract to the person invited to tender, or to one of a number so invited, the invitation 411 Summers, (supra), at p 2 5 7 . The "jurisdictional peculiarity" spoken of i s that actions sounding i n tort f a l l outside the original jurisdiction of the Court of Claims. Summers i s of tHetview that this circumstance forced the majority of the Heyer Court to base l i a b i l i t y upon contractual principles. Cf. the dissenting opinion of Judge Laramore. 412 Eg, Edelman v F H A. 251 F Supp 715. 719 (E D N Y, I 9 6 6 ) ; Rapp v Salt Lake City. 5 2 7 P (2d) 6 5 1 , 6 5 5 ( 1 9 7 4 ) ; Transcountry  Packing Co Inc v United States. 5 6 8 F (2d) 1 3 3 3 ( 1 9 7 8 ) . But see also Keco Industries, Inc v United States, 428 F (2d) 1233; McCarty Corporatlonvv United States. 499 F (2d) 6 3 3 ( 1 9 7 4 ) ; Armstrong and Armstrong Inc v United States. 3 5 ° * F S uPP 5 1 ^ » -514 F (2d) 402 (1975); cf Scanwell Laboratories Inc v Shaffer. 1 3 7 U S App D C 371, 424 F (2d) 859 (1970); Excavation  Construction Inc v United States. 494 F (2d) 1289 (1974). 413 Cf Luce v United States, 498 F (2d) 1348, (1974). 130 i s clearly fraudulent and an action w i l l l i e [in tort 1 4l4 for deceit! to recover such expenses by way of damages". The writer finds authority for this proposition i n the case of 4l< Richardson v Silvester. J There, the defendant inserted an advertisement i n a newspaper for the letting of a farm. The p l a i n t i f f , desirous of becoming the tenant, incurred expenditure i n going to and inspecting the property, and i n the employment of persons to inspect and value i t for him. I t afterwards transpired that the defendant had i n fact no power to l e t the property, and "caused the advertisement to be issued to serve some purpose of his own other than that appearing by the advertisement?. "The p l a i n t i f f successfully brought an action i n tort for deceit, and was held entitled to recover the amount of his wasted expenditures. In the course of judgment Blackburn J said that: " i t was a false statement knowingly made and the natural consequence would be that a person who was desirous of becoming a tenant would incur expense i n looking at the farm .... [ i f a personJ acts on it,,and i s injured, 4l6 he has a cause of action". Thus, i n English law, i t would appear to be settled that a party who suffers losses as the result of another's ulterior negotiating 417 motives has a right of recourse against that person i n tort. 414 Huds6n,~oBuilding and Engineering Contracts, (10th ed. 1970), at pp 229 ** 230. This i s also the position i n Scotland. See Gloag, Contract, (2nd ed 1929), at p 19. 415. (1873) L R 9 Q B 34. . ' V r j: 416 i d at p 36. Cf Quain J at p 27. 417 please see next page. 131 I f a party i n i t i a t i n g negotiations without intending to contract makes assurances or promises that he w i l l i n fact contract, there i s authority i n the United States for the view that the "victim" of his scheme may be able to recover his expenditures i n an action 418 based upon the theory of promissory estoppel. In Chrysler 419 Corporation v Quimby, 7 the defendant promised to renew the p l a i n t i f f ' s automobile franchise i f the l a t t e r purchased a l l the outstanding stock i n the franchise. The defendant broke the promise and there was evidence before the court that the defendant made the promise 420 without any intention of ever f u l f i l l i n g i t . The promise was made solely i n order to induce the p l a i n t i f f to buy the remaining stock. The p l a i n t i f f subsequently raised an action i n promissory estoppel and was awarded the loss resulting from the defendant's 421 failure to f u l f i l the said promise. 4 l ? In Continental law a party who negotiates without intending to contract w i l l be liable i n damages to the other party under the culpa i n contrahendo doctrine. Eg., see 6(l) Planiol& Ripert at No. 133 (French law); Erman,Beitrage Zur Haftung jur das bei Vertragsverhandlungen, 139 Archiv Fur Die Civilistische 273, 275 (1934) (German law). Cf Kessler and Fine (supra); Von Mehren, The C i l i l Law System, 2nd ed., at p 837, et seq. 418 See chapter 11(2), ante, and Cf Kessler and Fine (supra). He need, of course, not raise the plea of promissory estoppel at a l l , for he should be able to recover his needless expenditures i n an action based upon the principle expounded i n the Heyer case. Cf Snyder, "Promissory Estoppel as Tort", (1949) 35 Iowa L Rev 28. 419 (1958) 51 Del 264, 144 A 2d 123. See discussion at note (339). supra. 420 Cf (1966) 65 Mich L R 351 at p 357. 421 In other words, the court based the p l a i n t i f f ' s recovery upon an "expectancy" measure rather than upon a "reliance" measure. Two reasons may be offered i n explanation. F i r s t l y , the p l a i n t i f f ' s expectation loss could i n fact be measured without too much d i f f i c u l t y i n the Quimby Case. See note (339), supra. Secondly, given the above, the defendant's deceitful conduct was f e l t by the court to justify the award of damages on an expectancy footing, cf Restatement (Second) of Contracts (Tentative Draft), Section 90, comment (e); (I966) 65 Mich L R 351 at p 357. 132 (b) Conclusion We have seen that most legal systems have thought i t necessary to protect p l a i n t i f f s suffering losses at the hands of parties who in i t i a t e negotiations without any intention of entering into a contractual relationship at the end of the day. Indeed, the denial of r e l i e f i n such a situation could not, on any view of justice, be supported. It could not seriously be argued that parties entering into contract negotiations should assume the risk that their co-negotiators might merely be "leading them on", or i n s t i l l i n g them withsa "false sense of security". Thus, the conduct of a party who negotiates with another i n order to prevent him from competing i n another deal can not be condoned. Nor can the conduct of a party who negotiates merely i n order to exact some advantage from another party. For instance, a landowner might get a builder to prepare plans and estimates for a dwelling he proposes to construct by his own hand} the builder i s led to believe that serious negotiations for the construction job are i n progress, unaware that the landowner i s "using him" i n order to avoid the costs involved i n employing the services of an independent architect. Here, the law of tort w i l l come to the builder's aid and award him the amount of his needless expenditures by way of damages. The same argument would extend to the case of a party who "bona fide" initiates negotiations, and subsequently decides that he does not wish to contract, but for some reason f a i l s to notify the other party of his change of mind, thus involving him i n further expense. The defendant i n this situation should, on the same principle as above, be held tortiously l i a b l e to reimburse the party 133 doing the work for expenditures incurred after the decision not to 422 contract was made. 422 Cf Goff and Jones, The Law of Restitution, (2nd ed,l978) at Chapter 32. 134 IV THE AGGRIEVED CONTRACT NEGOTIATOR IN SCOTS LAW. This short section of the paper examines the protective devices available to a party entering into contract negotiations i n Scotland. The case law indicates that an aggrieved negotiating party might obtain restitution for his wasted expenditures i n one or other of two situations. The f i r s t line of cases, paralleling the Anglo-Canadian cases which allow negotiating p l a i n t i f f s r e l i e f 423 on the basis of restitutionary theory, J i s analysable within a "fault-risk" framework. A second possibility, indicated by two 424 early nineteenth century cases, i s the recovery by a pursuer of his wasted expenditures on the basis of what i s somewhat loosely called "the wrongful acts or conduct" of the defender during the negotiation period. We shall consider each of these heads of recovery, beginning with the former. 423 See analysis of Anglo-Canadian cases at Chapter II(2)(e), ante. 424 Walker v Milne. (1823) 2 Shaw 338; Heddle v Baikie. (1846) 8 D 376; Cf Bell v Be l l . (l84l) 3 D 1201. 135 (a) Discussion of the Scottish Gases Allowing Recovery on the Basis  of the "Fault-Risk" Formula. We have already dealt with the notions of "faul t " and "risk" i n some detail i n our study of the Anglo-Canadian pre-contract 425 authorities. ^ In deciding whether the claim of an aggrieved negotiating party for the recovery of his wasted expenditures should succeed, the Scottish courts, i t seems, work within a broadly similar framework. Consider the case of Pillans and Wilson v Castlecary Fireclay 426 Co Ltd. There, the pursuers were a firm of printers and the defenders were manufacturers of f i r e bricks. The parties were i n negotiation for a contract for the production of a trade catalogue with coloured representations of the various kinds of brick marketed by the defenders. The negotiations spanned over a period of some fourteen months. The pursuers did much work for the defenders:! at one stage the "style" of the catalogue was changed by the pursuers because of the defenders desire to add new material, and the pursuers even bought a different type of colour-block on which to print the catalogue. Proofs of the finished work were submitted and resub-mitted to the defenders at various stages throughout the fourteen month period. The pursuers acted throughout i n the firm expectation that the defenders would contract and place an order for the production of the catalogue. The work done went far beyond what printers ordinarily do 427 gratuitously or at risk when negotiating for contracts. Just when i t appeared that the projected contract was about to be consummated, 425 See note (423), supra, 426 1931 S L T 532 427 Cf Barry J at p 39 , ante. 136 the defenders put an end to the negotiations, and placed the business i n the hands of another firm of printers. In so doing, they were clearly at "fault". Lord Murray said that i t was clear thati the risk of a unilateral termination of negotiations by the defenders. y Remuneration for their present efforts was expected by both parties to come out of the profits of the "imminent" contract, and when the defenders frustrated this common expectation of contract, the law of restitution provided the pursuers with an alternative medium of recompense. 430 The case of Sinclair v Logan J i s decided on essentially similar principles. The pursuer, a joiner, and the defender, the owner of a public house, were i n negotiation for a contract for the carrying out of alterations to the said public house. The pursuer, on the instructions of the defender, prepared detailed plans of the proposed alterations; the pursuer obtained estimates from sub-contractors 428 1931 SLT 532 at p 536. Cf Sheppard J at p 32 , ante. The pursuers had given an estimate of the cost of the catalogues at an early stage of the negotiations. The defenders took no objection to i t , and did not even attempt to negotiate a lower price with the pursuers i n the f i n a l stages of the abortive negotiations. 429 As i s , for example, a common tenderer. The fortuitous occurrence of another printer coming along who was prepared to do the job at an unusually low price could not defeat the p l a i n t i f f s claim for remuneration when they had done so much work over a period of fourteen months. Cf discussion at p 65 , et seq, ante. This they could not do with impunity for, having put the pursuers to so much trouble and expense, the latte r were no longer taking 430 I961 SLT (Sh Ct) 10. 137 and conducted negotiations with the police department on behalf of the defender; the pursuer's plans were approved at a s i t t i n g of the licensing court; the pursuer prepared amended versions of these plans at the defender's request; the pursuer obtained approval of these amended plans from the licensing court. Thefpursuer was held entitled to remuneration on a quantum meruit for these various services when the defender refused to proceed with the proposed alterations. The court said that the pursuer would not have done what he did were he not* "to be remunerated either directly .... or i n the profit 431 he would derive from being the principal contractor". A more recent case illustrates the "risk-factor" i n contract negotiations working to defeat a restitutionary claim by a potential contracting party. In Site Preparations Ltd v Secretary of State for 432 Scotland, J the pursuers, on hearing that the Department of Agriculture and Fisheries was proposing to start on an o i l complex development i n the North of Scotland, approached the Department indicating their interest i n participating i n the development. Thereafter, they prepared plans and details of the construction and operating costs offthe proposed development, and various reports were sent to the Department. The evidence established that Site Preparations had been made aware from the outset that the Department was only prepared to consider their 433 proposals as proposals of one of "several possible developers", ^ i t being a distinct p o s s i b i l i t y that the Department i t s e l f might 431 i d at p 12. The court followed the earlier case of Landless v  Wilson, (1880) 8 R 289. 432 I975 S L T (Notes) 41. 433 However, i t seems that no other party did i n fact submit proposals. 138 decide to carry out the development. At the end of the day Site Preparations were informed by the Department that i t had decided to carry out the construction work itself. An action was then raised in which Site Preparations sought to recover the expenditures incurred during the abortive negotiations. ^ The action was dismissed by Lord Kincraig in the Outer House of the Court of Session. His Lordship agreed with the submission of defending counsel, who urged that sincet "no aspect of error was involved, the pursuers having been made aware at the outset that there could be no guarantee of a contract, there was no room for the application of the remedy of recompense."^5 The key to the decision lids in the finding that the Department had not held itself out as willing to contract with the pursuers. Indeed, the defender had made i t clear at various stages of the negotiations that i t might decide to carry out the development work itself. Therefore, there was no "common belief i n ,the imminence of contractual relations". Rather, the pursuers were "determined businessmen", willing to expend time and money in the hope that the defender might later contract with then. They put themselves to 4l6 expense, not because they thought they "had the contract", but 43> In fact, the main thrust of the pursuers* case was that the Department used the information supplied in their plans and reports, and had been thereby "lucratus" to the extent of £30,000. Generally speaking, financial gain does assist the pursuer's case. See, eg, Maclver v American Motors (Canada) Ltd, [ I 9 7 6 J 5 WWR 217i Brewer vl&rysler Canada Ltd ri9777 3 WWR 69. *K35 1975 SLT (Hotes) 4l, at p 42. 436 As was the case, for example, in William Lacey (Hounslow) Ltd v Davis 119573 1 WLR 932; Brewer v Chrysler Canada. CL977.3 3 WWR 69i Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 MSWLR 3551 139 because they thought their present effortsswould maximise their chances 437 of getting i t . In other words, they were taking the risk that the defender might not award them the contract. 437 Cf Hotel Holdings Ltd v G N R, 4 N & PEIR 458, affirmed 8 N & PEIR 301: Maron Properties et a l v New Brunswick Liquor Corporation, [19773 18 NBR (2d) 472 (QB)t City of Moncton v Stephen, (19561 5 DLR (2d) 722. 140 (b) A Brief Look at the Cases Baaing Recovery on the Defender's  "Wrongdoing". A few nineteenth century decisions allow pursuers recovery for expenses incurred in pre-contractual settings seemingly on the ground of the defender's "unjustifiable" or "wrongful" conduct during the negotiation period. The facts of these cases are set out In the following pages, and an attempt will then be made to determine the nature and the type of actions which may be held to constitute "wrongful conduct". The case of Walker v Milne and Others.**39 decided in the Court of Session in 1823, will be considered f i r s t . There, a group of persons was proposing to erect a monument in memory of Lord Melville. The pursuer's land was thought by a l l concerned to be the most attractive site upon which the monument could be built. The pursuer was approached with a view to securing his agreement on the matter. Much discussion thereafter took place, but no agreement, enforceable in a court of law, had been reached by the parties when the defenders changed their minds about building on the pursuer's land and broke of f the negotiations. In the words of the court, "although there had been a communing, no contract had been concluded". The subscribers subsequently erected the monument elsewhere. The pursuer raised an action to recover certain expenditures incurred by him in anticipation of the commencement of the erection 438 See Walker v Milne, (1823) 2 Shaw 379. and Heddle v Baikie. (1846) 8 D 376, as explained in the later cases of Allan v Gilchrist. (1875) 2 R 587, and Gilchrist v Whyte. 1907 SC 984. Cf Dobie  v Lauder's Trustees. (1673) 11 M 749. 439 (1823) 2 Shaw 379. 141 of the monument, and for loss sustained by reason of certain alterations made to his land by the subscribers while negotiations 440 were i n progress. The court concluded that: "the pursuer i s entitled to indemnification for any actual loss and damage he may have sustained, and for the expenses incurred i n consequence of the alteration 441 of the monument. 442 The pursuer i n the case of Heddle v Baikie was also successful i n his claim for the recovery of wasted expenditures. Heddle's predecessors had been the tenants of a farm under a succession of leases from the predecessors of Baikie for about 50 years, when, the farm being advertised to be l e t , Heddle, whose father was the outgoing tenant, applied for a 19 year lease. The pursuer was immediately l e t into possession, and expended money on the farm i n anticipation of the conclusion of the lease. The defender later refused to grant a written lease. The pursuer was held entitled to recover the expenditures incurred by him on the defender's 443 property. As i s the case with Walker v Milne, i t i s not easy to discern the basis of the court's decision i n Heddle. Later authoritative decisions of the Inner House of the Court of Session do, however, attempt to isolate the ratio of the decisions. I t i s said that they rest upon the "wrongful conduct" of the defender during the 440 The pursuer had l e t the subscribers into possession of his land at an early stage of the negotiations. 441 (1823) 2 Shaw 379 at p 380. For the basis of decision, see p 142 et seq, post. 442 (1846) 8 D 376. 443 Cf Romer L J and Denning L J i n the Brewer Street Investments case at p 82 , ante. 142 abortive negotiations. Lord Deas, in the case of Allan v Gilchrist. said that: "what was recognised £in the cases of Walker v Milne and Reddle v BaikJeJ was a claia for re-iabursenent of substantial loss occasioned to the one party by the representations and inducements recklessly and unwarrantably held out to hia by the other party". LLc Lord Ardwall, in the later case of Gilchrist v Whyte. J used similar language and said that Neddie's award was fort "loss sustained in consequence of the unjustifiable representations and inducements made and held out by the one party to the other contrary to a l l good faith, and 446 his unjustifiable conduct throughout the whole transaction". His Lordship further says that the Court will only entertain a claim for recompense where there is a refusal to consummate a contemplated agreement: "in very special circumstances indeed, and for the most part only in cases where (l) loss has been wrongfully caused by one of the parties to the other: (2) where the wrong has been done without any excuse: (3) where the losing party i s in no way to blame for the l o s s . " ^ 7 W f (1875) 2 H 587. 445 1907 S C 984. 446 id at p 993. The pursuers in the cases of Allan v Gilchrist and Gilchrist v Whyte were unsuccessful because the defenders' conduct was not thought by the court to be "wrongful". In Allen v Gilchrist, the defender refused to complete a contract for the sale of a shop. In anticipation of the conclusion of the contract, the pursuer, with the knowledge of the defender, had dismissed his employees and made arrangements for retiring from business. As a result he suffered substantial losses. His claim for recompense for these losses was dismissed by the court because the defender's conduct during the negotiations did not disclose the requisite element of "wrongfulness". But cf Doble v Lauder's Trustees. (1873) 11 M 749. 447 please see next page. 143 The question therefore arises of what i s meant "by the term "wrong" i n this context. Nowhere i n the cases i s there an explanation of the term but, with i t s delictual undertones, i t would seem to mean something more than just an ordinary unilateral termination of 448 44Q advanced negotiations. Both Lord Deas and Lord Ardwall 7 speak of "representations and inducements recklessly and unwarrantably held out" to the pursuer negotiator by the defender. Thus, the conduct of a party who initiates negotiations without intending to contract would, i t seems, clearly be classifiable as "wrongful" 4*50 within Lord Ardwall*s formulation. Express Statements or promises by the defender that he w i l l contract with the pursuer, and expenditure by the pursuer at the defender's urging i n reliance on these promises may be facts which would persuade the court to hold that the defender has "wronged" 451 the p l a i n t i f f i f he goes back on his word. J The pursuer's case would appear to be stronger i f the defender has been pecuniarily benefitted by his efforts. The combination of financial gain with 447 1907 SC 984 at pp 993 - 994. This dictum, insofar as i t purports to confine restitutionary recovery to a pursuer to whom loss has been "wrongfully" caused, (see p 143 » post), cannot stand with the Scottish authorities considered i n the preceding section which are analysable with a "fault-lrisk" framework. Indeed, these authorities make no reference to those earlier cases which proceed upon the basis of notions of wrongdoing. 448 In Allan v Gilchrist, (supra). 449 In Gilchrist v Whyte. (supra). 450 See, Gloag, Contract, (2nd ed, I929) at p 19; B e l l v Bell (I84l) 3 D 1201. I t i s thought that these facts would, as i n English law, also presnt a prima facie case of fraud for which damages could be claimed i n d e l i c t . See chapter III, ante; Gloag, (supra); and cf Mackay v Rodger, 1907, 15 SLT 42; Hamilton v Lochrane. (1899) 1 F 478. 451 Cf Dobie v Lauder's Trustees. (1873) 11 M 749. The pursuer here might, of course, be successful i f he bases his case on the "fault-risk" framework discussed earlier. See Chapters II and IV(a), ante. the defender's unfulfilled promises of contract nay be a sufficient basis upon which to argue that the defender's conduct in resiling 4*J2 fron the negotiations amounted to a "wrong". 452 But, see note (451), supra. 1 4 5 V SUMMARY AND CONCLUSION It has been seen that the legal systems which have been the subject of this study do give a measure of protection to parties entering into contract negotiations. Qualifications have been introduced 453 to the principle of "freedom of negotiation" ^ i n order to avoid the injustices which would result i f a party doing substantial work and expending vast sums of money during the negotiation period were subject to the "whim" of the other negotiator. The courts have said that a party breaking off negotiations at a late stage w i l l , i f certain 454 requlsite c r i t e r i a are satisfied, incur a l i a b i l i t y to recompense the other party for his wasted expenditures. Most of the cases allowing negotiators recovery for their wasted expenditures appear i n the law reports of the last thirty years or so. This may be partly due to the fact that the modern commercial contract i s preceded by a much more protracted period of 455 negotiation than was the case i n former times. v v Therefore, aggrieved negotiators would be suffering much less substantial losses than i n present day conditions, and as a result would be less inclined ^ 5 3 Eg., see Kessler and Fine, "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contracti A Comparative Study", (1964) 77 Harv L Rev 401, at p 412; Summers, u ,Good Faith* i n General Contract Law and the Sales Provisions of the Uniform Commercial Code", (I968) 54 Va L Rev 195. 454 Eg., see Chapter I I ( l ) , ante, for a discussion of the circumstances i n which&hegotiating p l a i n t i f f may avail himself of a restitutionary remedy In Anglo-Canadian law. 4 5 5 An idea of the scale and magnitude of modern construction projects may be gleaned from cases lik e Sabemo Pty Ltd v North Sydney  Municipal Council [1977J 2 NSWLR 880, where the p l a i n t i f f negotiator expended close to half a million dollars during negotiations extending over a period of five years. 146 456 to attempt to recover them. Nowadays, with the sheer magnitude and complexity of the subject matter of commercial transactions, the amount, of pre-contract work done by, for example, builders negotiating for large construction jobs i s enormous (eg Sabemo Pty L t d ) , * ^ as i s the work done by prospective franchisees (eg Hoffman*"^ and Maclver v  American Motors J y ) and prospective dealers (eg Brewer v Chrysler  Canada) It i s not being urged that courts should increasingly or too readily interfere with the freedom of parties to r e s i l e from contract negotiations and impose l i a b i l i t y merely because one party suffers loss when the other walks away from incomplete negotiations. Increasing erosion of the principle of freedom of negotiation would 46l "unduly clog contractual negotiations" and place too onerous a 462 duty upon contract negotiators, and may even cause parties to enter into contracts "they do not wish" for fear of incurring a l i a b i l i t y to the other party i f they should break off the negotiations. Thus, the doctrines of unjust enrichment and promissory estoppel, while i n certain circumstances allowing aggrieved negotiating parties recovery for their wasted expenditures, at the same time 456 Hence, the assumption may have emerged that parties entering into contract negotiations always took the r i s k that their co-negotiators might withhold the projected agreement. 457 [1977] 2 NSWLR 880. 458 (1965) 133 NW (2d) 267. 459 [1976J 5 WWR 217. 460 [1977J 3 WWR 69. 461 Von Mehren, (supra), at p 850. 462 Cf Kessler and Pine, (supra), at p 412. 147 s p e l l out the inherent limitations on recovery: a party basing his claim upon the former doctrine has to surmount the limitations 463 imposed by the requirements of "fault" and "risk", J whereas a party who proceeds on the basis of promissory estoppel must establish that his actions i n reliance were both "foreseeable" and "reasonable", and that injustice would be caused unless the promisor were held to his word. However, while the freedom to withdraw from negotiations may i n form be retained, i t clearly cannot be absolute. I f i t were, the most serious of injustices would be going without redress. Against i t must be balanced other considerations, and i f certain 465 c r i t e r i a are satisfied i t may i n certain cases be impinged upon. ^ 463 See p 22 , et seq, ante. 464 See Chapter II(2) ante. 465 In much the same way, freedom of contract and certainty, though prime values i n the law of contract, are not absolute values. Courts w i l l , on occasion, overlook the expressed intention of contracting parties, and give r e l i e f running counter to the stipulations of their agreement. Eg. see Stockloser v  Johnson. £1954] 1 0JB476. 148 BIBLIOGRAPHY of Principal Works Cited Angus; Anson; Birks; Boyer; Cheshire and Pifoot; Chitty; Costigan; Dawson and Palmer; Dobbs; Fuller and Perdue; Gloag, W.M.; Goff and Jones; Henderson; Hudson; Jones; Kessler and Fine: Law Reform Commission of B r i t i s h Columbia; "Restitution i n Canada since the Deglman case", (1964), 42 Can B. Rev. 529. the Law of Contract,. (24th ed., 1975. by A G Guest). "Restitution for Services", (1974) CLP 13. "Promissory Estoppels Principle from Precedents", (1952) 50 Mich L R 639. Law of Contract, (9th ed., 1976). Law of Contracts (24th ed., 1977. by A G Guest). "Implied-in-Fact Contracts and Mutual Assent", (1920) 33 Harv. L Rev. 376. Cases on Restitution, (2nd ed., 1969). The Law of Remedies, (1973). "The Reliance Interest i n Contract Damages", (1936) 46 Yale L. J. 52, 373. The Law of Contract, "2nd ed., 1929). The Law of Restitution, (2nd ed., 1978). "Promissory Estoppel and Traditional Contract Doctrine", (I969) 78 Yale L. J. 343. Building and Engineering Contracts, (10th ed., 1970, by I N Duncan Wallace). "Restitutionary Claims for Services Rendered", (1977) 93 L.Q.R. 273. "Culpa i n Contrahendo, Bargaining i n Good Faith, and Freedom of Contract: A Comparative Study", (1964), 77 Harv. L. Rev. 401. Report on the Need for Frustrated Contracts Legislation i n British Columbia, (Project No. 8., 1971). 149 McCamus; "Restitutionary Remedies", Special Lectures of the Law Society of Upper Canada, (1975), 255. Restatement of the Law of Contracts, ( I932) . Restatement (iSecond) of the Law of Contracts, (I965). Restatement of the Law of Restitution, (1937). Seavey; "Reliance upon Gratuitous Promises or Other Conduct", (1951) 64 Harv. L. Rev. 913. Shattuck; Sullivan; Summers; Sutton K.C.T.; Von Mehren; Williams G.L.; ^Gratuitous Promises - A New Writ?", (1937) 35 Mich. L. R. 908. "The Concept of Benefit i n the Law of Quasi-Contract", (1975). 64 Georgetown L. J. 1 . "'Good Faith' i n General Contract Law and the Sales Provisions of the Uniform Commercial Code", (1968) 54 Va. L. Rev. 195. Consideration Reconsidered, (1974). The C i v i l Law System, (2nd ed. 1977). Law Reform (Frustrated Contracts) Act, 1943 (19^4). 

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