In a building in Edmonton, because of the problemsthat happened between the tenants for their parking lots and to prevent thissituation to happen again, the manager of the building put a sign on theparking garage that contained:”Tenants are required to park in their own assignedparking lot.
Violators will be towed away at owner’s expense”Andrew, the tenant of the apartment number 7, had aparty and invited a few friends to his place. Andrew did not inform his guestsabout the situation of the parking. When Jim arrived, he could not find anempty parking spot in the visitors’ section; so, he decided to park his car inparking stall number 9 which was empty at the time. Bill, the tenant ofapartment number 9 came home and found that his parking spot was occupied.Since he could not find any way to contact the owner of the car, he called themanager to handle the situation.
The manager called a tow truck and they towedaway Jim’s car. After the party, when Jim found out about his car, the managerpointed at the sign and told him that it was totally his fault to ignore thesign which clearly indicated that he was not allowed to park in any parkingslot other than visitors’ area. To defend himself, Jim told the manager that hewas not a tenant of the building, thus the sign did not apply to him as a guestor visitor. Therefore, he asked the manager to pay for the tow expenses. The above example clearly shows that if the courtwants to use the literal approach in defining the meaning of the sign andfinding the innocent party, the decision would not make sense and would not befair. It was clear from the sign that Jim was not supposed to park his car inanother apartment’s parking stall. However, if the court wants to take theliteral meaning of the sign, it would mean that the manager had no right tocall the tow truck and get his car towed. Clearly in this case, the literalapproach cannot help in finding a fair solution to the issue.
Because areasonable person would understand the hidden meaning of the sign and would notviolate other tenants’ rights. This is one of the many cases that shows that,in certain circumstances, the literal approach is ineffective. The other three approaches are contextual approach,the golden rule, and the contra proferentem rule. 1.
Contextual approach “goes beyond the four corners of the document bylooking at the parties’ presumed intentions and their circumstances” (McInnes,Lerr, & VanDuzer, 2014, p. 218). In this approach the court considers thepresumed intentions of the parties and their circumstances in defining themeaning of the terms in documents. In the above example, manager would arguethat the purpose of the sign was about the parking stalls, regardless ofwhether the drivers were tenants in the building or not. Contextual approachsuggests a more reasonable and fair solution to this issue.2. Golden rule “says that words will be given their plain,ordinary meaning unless to do so would result in absurdity” (McInnes, Lerr,& VanDuzer, 2014, p. 219).
Absurdity is a subjective word and it depends on the interpretation of areasonable person of a document. In the case of the above example, theinterpretation of a reasonable person would back up that of the contextualapproach in order to avoid absurdity. Therefore, the building manager intendedto warn everyone including tenants and their guests from violating othertenants’ parking rights.
3. The contra proferentem approach “ensures that the meaning least favourable to theauthor will prevail” (McInnes, Lerr, & VanDuzer, 2014, p. 219). This rule is justified because the buildingmanager, which was the author of the sign, should have created a sign withunambiguous terms. An example would be:”Park only in your assigned parking stall. Violators will be towed away at vehicle owner’sexpense.” However, using the contra proferentem rule, the buildingmanager could not enforce Jim to pay for towing expenses, because the outcomewould be the most favourable to the author.
There are different kinds of damagesthat can be awarded based on the type of injury: expectation damages andreliance damages. Expectation damage is what one partyusually is awarded, in case the other party does not fulfill the contract. “Expectationdamages represent the monetary value of the benefit that the plaintiff is expectedto receive under the contract” (McInnes, Lerr, & VanDuzer, 2014, p. 288). This definition showsthat the expectation damages are forward-looking; meaning they would intend toplace the plaintiff in the position that they would have been, should the otherparty performed based on the terms of the contract.Reliance damages are the other typeof damages that are usually awarded when expectation damages are hard tocalculate. Reliance damages are designed to put the innocent party in theposition that they would have been, if the contract had never been made in thebeginning. As mentioned in the textbook, “reliance damages represent themonetary value of the expenses and opportunities that the plaintiff wastedunder a contract” (McInnes, Lerr, & VanDuzer, 2014, p.
296). Expectation damages are the oppositeof reliance damages. If one asks for reliance damages, they are asking theother party to give them back what they lost, as a result of the other party breachingthe contract. They are asking to be put back in the situation that they wereenjoying before entering into the contract with the other party.
However, ifone asks for expectation damages, they are asking the other party to give themwhat they were supposed to get, had the other party fulfilled the contract. Therefore,reliance damages look backward to try to undo the effects of a contract, butexpectation damages look forward to get the results of fulfilling a contract.The plaintiff is generally entitledto receive either expectation damages or reliance damages, but not both. Thus,the plaintiff should consider which one is better for him/her. Reliance damagesare a reasonable way to recover losses under business contracts; however, thereare some limits to them.
They can be awarded only to the extent that a contractis not unprofitable.They can be awarded only to the extent that acontract is not unprofitable, but one cannot use reliance damages to escape theconsequences of a bad bargain. This rule ensures that one party cannot hold theother party liable for his/her own poor decision. The reason is that if the contract had been performed, the plaintiff would have lost money anyways. Thus,the rule is justified. The calculation formula is:Paid in reliance – Extent of bad bargain = ReliancedamagesRachel agreed to buy Monica’s car in exchangefor $30,000. Rachel provided Monica with a $10,000down payment; However Monica refused to deliver the car as agreed. Rachel sued Monicafor breaching the contract.
At the trial, the evidence indicated that Rachel hadentered into a bad bargain. Even though Rachel had agreed to pay $30,000 forthe car, the evidence showed that the car was worth just $25,000. If thecontract had been fully performed, Rachel would have suffered a net loss of $5,000.
Since Rachel did not expect to earn a profitunder the contract, she could not recover any expectation damages. Additionally,although Rachel paid $10,000 under the contract, she could not recover reliancedamages to the extent that her contract was unprofitable. If the contract had goneas planned, Rachel would have suffered a net loss of $5,000. Therefore, she canjust recover $5,000 in reliance damages, and is responsible for the $5000 loss thatshe expected to lose, because of entering into a bad bargain.The above example shows that reliance damagescannot be used to escape the consequences of a bad bargain.
It emphasize thatwhen entering into a contract, it is important for the involved parties toresearch the business situation and the contract to find and prevent anypotential loss.