Engineering Law and Professional Liability: Definitions

Updated for 2010 Changes to the Professional Engineers Act

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In each of the seventeen Professional Practice Exams including

April 1993; September 1998; April 1999; August 2000; August 2001; April 2002; December 2004; April and December 2005; December 2006; April, August and December 2007; April, August and December 2008; and April 2009

the first question under Engineering Law and Professional Practice asks the applicant to define five of eight definitions related to the subject of the examination. The examinations listed above included the following forty definitions:

ADR
arbitration in international contracts
bid shopping
common law
common mistake
consequential damages
Contract A breach
contract A in tendering
contract rectification
contra proferentem
defamation
discipline
director's conflict of interest
director's fiduciary duty
director's standard of care
discharge by frustration
discoverability
dispute resolution board (DRB)
duress
duty to mitigate
enforceable contract
enforcement
equitable estoppel
fraudulent misrepresentation
fundamental breach
gratuitous promise
inappropriate conduct under the Ontario Human Rights Code
injunction
innocent misrepresentation
libel
limitation periods applicable in Ontario
limitation period applicable to an action in tort against a contractor
liquidated damages
New York convention
parol evidence rule
partnering on construction projects
quantum meruit
secret commission
slander
specific performance
statutory holdback under the Construction Lien Act
tort liability
true construction approach
undue influence
unenforceable contract
unilateral mistake
vicarious liability
void contract
voidable contract

ADR

TBW

arbitration in international contracts

TBW

bid shopping

Marston, Ch. 16 Tendering Issues — Contract A, pp.131-133.

An owner who uses a bid or a tender from a party to reduce the bid or tender from another party; or when an owner solicits a bid or a tender from a party with no intention of entering into a party with that party and only using the bid or tender to lower the bid or tender of another.

common law

Marston, Ch. 1 The Canadian Legal System, pp.1-3.

Common law is law developed by judges through decisions of previous courts, as opposed to statute law. Common law uses the principle that it is reasonable to render similar judgments for similar situations. The body of precedent is the common law and it binds or guides future decisions.

Common law is based on the systems of laws developed by King Henry II in 1154 meant to be common throughout his realms. Local juries and judges developed over time the rule of stare decisis or the rule of precedent.

Reference: wikipedia.

common mistake

Marston, Ch. 15 Mistake, pp.115.

When two parties agree upon the terms of contract but an error occurred in the transcription of the contract, for example, a secretarial error, the error is said to be a common mistake. Under such circumstances, a party may apply for an equitable remedy whereby the court orders a change to the contract (a rectification) to reflect what was originally agreed upon; however, the party must demonstrate that written contract is therefore inconsistent (see parol evidence rule).

Case: Fowler v. Fowler (1859).

Case: Bercovici v. Palmer (1966).

Reference: wikipedia.

Case: City and Westminster Properties (1934) Ltd. v. Mudd (1959).

consequential damages

Marston, Ch. 19 Breach of Contract, pp.147-149.

The direct damages caused to an innocent party by a breach of contract are damages related to the contract such as additional costs required to fulfill the breached obligations. The consequential, special or indirect damages are any other damages suffered by the innocent party as a result of the breach. This could include, for example, lost wages, lost profits or revenues, fines, etc. The defaulting party, however, must be aware at the time of the signing of the contract of the consequences of a breach. See liquidated damages.

Case: Hadley v. Baxendale (1854).

Case: wikipedia.

Contract A breach

TBW

contract A in tendering

Case: wikipedia.

TBW

contract rectification

Case: wikipedia.

TBW

contra proferentem

Marston, Ch. 17 Contract Interpretation, p.136.

If the language of a provision of a contract is ambiguously written, the courts will interpreted against the party which drafted the provision. This emphasizes the need to ensure the language of a contract is unambiguous.

Reference: wikipedia.

defamation

Marston, Ch. 4 Tort Liability, pp.64.

The tort of defamation is where the reputation of the plaintiff is damaged by an untrue statement made by the defendant. If the statements are transitory (e.g., spoken), the tort is referred to slander whereas if the statements are written, broadcast, or otherwise published, the tort is referred to as libel.

Reference: wikipedia.

discipline

A Member or a holder of a temporary, limited or provisional licence or a certificate of authorization may be disciplined if he, she, or it is guilty of professional misconduct or incompetence. Such allegations may be made by the Council, the Executive Committee or the Complaints Committee and are heard by the Discpline Committee.

The Discipline Committee consists of at least five individuals (Section 27 of the Act) has the authority to hear evidence, determine guilt and impose numerous penalties (Section 28 of the Act).

director's conflict of interest

TBW

director's fiduciary duty

TBW

director's standard of care

TBW

discharge by frustration

Marston, Ch. 18 Discharge of Contracts, pp.142-144.

When the the circumstances surrounding a contract change so drastically by no cause of either party that the original contract is pointless, the contract may be held to be discharged by frustration.

For example, in the case of Taylor v. Caldwell the plaintiff contracted the use of a music hall for four concerts from the defendant Caldwell; however, the hall was destroyed by a fire before any of the concerts were performed and where neither party was at fault. Taylor sued for breach of contract and sought damages for the costs of staging four concerts. The courts declared that as there was no term in the contract regarding disasters that the contract was discharged by frustration.

discoverability

TBW

Case: City of Camloops v. Nielsen et al., Marston, p.112.

dispute resolution board (DRB)

TBW

duress

Marston, Ch. 14 Misrepresentation, Duress, and Undue Influence, pp.110-113.

If one of the parties was influenced to enter into a contract by means of threatened or actual violence or imprisonment, that party may be said to be under duress and the contract is voidable.

Case: Mutual Finance Co. Ltd. v. John Wetton & Sons Ltd., Marston, p.111.

When the party is influenced by means of threatened or actual economic hardship, the party may be said to be under economic duress.

Case: Cotaverken Energy Systems Ltd. v. Cariboo Pulp & Paper Co., Marston, p.111.

Case: Atlas Express Ltd. v. Kafco (Importers & Distributors) Ltd., Marston, p.112.

Reference: wikipedia.

duty to mitigate

Marston, Ch. 19 Breach of Contract, p.149.

When a defaulting party breaches a contract, it is the responsibility of the innocent party to make reasonable efforts to mitigate or minimize the damages. In any subsequent action by the innocent party (the plaintiff) to recover for damages, the courts may not compensate for damages which could have been reasonably avoided.

Reference: wikipedia.

enforceable contract

Marston, Ch. 7 Contracts, p.79.

An contractual agreement between two parties which includes the five elements of

an offer being made by one party and accepted by the other,
mutual intent to enter into the contract,
consideration,
capacity of contract, and
lawful purpose

forms, by common-law precedence, a legal agreement that is enforceable in a court or through binding arbitration.

Reference: wikipedia.

enforcement

There are numerous provisions in the Act which, if contravened, consitutes an offence which may result in significant fines. Most penalities are listed in Section 40 of the Act while penalties for falsification involving the registring or issuing of a licence or Certificate of Authorization are listed in Section 41 of the Act.

A person who

Practices professional engineering without a licence;
Offers services within the practice of professional engineering to the public without a Certificate of Authorization;
Does not have a licence but uses the title "professional engineer", "engineer" or other title, a term, a description, or a seal lead to the belief that the person may engage in the practice of professional engineering; or
Does not have a Certificate of Authorization but uses a term, title, description, or seal leading to the belief that the person may provide to the public services that are within the practice of professional engineering

is guilty of an offence. This may include partners and directors or officers of corporations.

equitable estoppel

Marston, Ch. 10 Consideration, p.92-96.

When a court provides relief to one party in a contract form enforcing the strict terms or obligations of the contract due to an inequitable nature of the breach, the court is said to have equitably estopped that party from enforcing the terms.

Such an action is said to be an equitable estoppel.

Cases where the court may grant an equitable estoppel include where one party has made a gratuitous promise leading to a breach, or if that party has habitually allowed the breach of a term of the contract and then attempted to revert to a strict interpretation of that term, or if that party has performed an action which induced the other party to breach a term of the contract.

Case: Conwest Exploration Co. Ltd. et al. v. Letain, Marston, p.92 (also see LexUM).

Case: John Burrows Ltd. v. Subsurface Surveys Ltd. et al., Marston, p.93 (also see LexUM): numerous late payments

Case: Owen Sound Public Library Board v. Mial Development Ltd. et al., Marston, p.95: actions of one party causing the other to breach

Reference: wikipedia.

fraudulent misrepresentation

Marston, Ch. 14 Misrepresentation, Duress, and Undue Influence, pp.109-110

A misrepresentation occurs when a party makes a false statement having the effect of inducing the deceived party to enter into the contract. The definition of a fraudulent misrepresentation was given by Lord Hershell in Derry v. Peek: making "a false representation

knowingly, or
without belief in its truth, or
recklessly, careless whether it was true or false".

As with innocent misrepresentations, the deceived party may, within a reasonable amount of time, repudiate the contract and to claim damages resulting from any additional costs; however, the deceived party may also claim damages in tort for deceit.

Case: Derry v. Peek (1889), Marston, p.109.

fundamental breach

The doctrine of fundamental breach has been "laid to rest" by the Supreme Court of Canada in Tercon v. The Queen.

Case: Tercon Contractors Ltd. v. The Queen in right of British Columbia (also see LexUM).

Marston, Ch. 20 Fundamental Breach, pp.155-164

gratuitous promise

Marston, Ch. 10 Consideration, p.92.

A promise which which is offered and accepted, has mutual intention, consideration, capacity, and lawful purpose satisfies the conditions of a contract, even if it is verbal. However, if a promise is made without consideration, that is, there is no consideration on the part of the offering party, then it cannot be a binding contract. The offeror may be bound morally to fulfill the promise, but the offeror is not bound legally. Such a promise made without consideration is said to be a gratuitous promise.

If, however, a gratuitous promise is made by one party suggesting that one or more of the terms or obligations of the contract have changed and if the other party then acts accordingly, the promisor may still revert back to the strict terms of of the contract. The promisee may, however, apply to the courts for relief on the basis of equitability.

Note that consideration is usually an exchange of items of value; however, consideration may also be given in the form of a seal.

From the OED, equitable: 1 Characterized by equity or fairness. a. Of actions, arrangements, decisions, etc.: That is in accordance with equity; fair, just, reasonable.

If the court provides relief, the court is said to have equitably estopped the promisor from enforcing the terms of the contract.

Case: Conwest Exploration Co. Ltd. et al. v. Letain, Marston, p.92 (also see LexUM).

inappropriate conduct under the Ontario Human Rights Code

From the Ontario Human Rights Code, Part 1:

Employment
5. (1) Every person has a right to equal treatment with respect to employment without discrimination because of
race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, family status or disability.

Harassment in employment
5. (2) Every person who is an employee has a right to freedom from harassment in the workplace by the employer or agent of the employer or by another employee because of
race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, age, record of offences, marital status, family status or disability.

Vocational associations
6. Every person has a right to equal treatment with respect to membership in any trade union, trade or occupational association or self-governing profession without discrimination because of
race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, marital status, family status or disability.

Harassment because of sex in workplaces
7. (2) Every person who is an employee has a right to freedom from harassment in the workplace because of sex by his or her employer or agent of the employer or by another employee.

injunction

Marston, Ch. 19 Breach of Contract, pp.152-153.

An injunction is a remedy for a breach of contract whereby the court orders a party to refrain from performing of an act. Such actions are the result of a contract containing a negative convenant; that is, a term in a contract where one party promises not to perform a specific act. See specific performance.

Reference: wikipedia.

innocent misrepresentation

Marston, Ch. 14 Misrepresentation, Duress and Undue Influence, p.109.

A misrepresentation occurs when a party makes a false statement having the effect of inducing the deceived party to enter into the contract. The misrepresentation is innocent when the deceiving party has reasonable grounds for believe the false statement to be true or does not appreciate that the statement is false.

The deceived party may, within a reasonable amount of time, repudiate the contract and to claim damages resulting from any additional costs.

Reference: wikipedia.

libel

Marston, Ch. 4 Tort Liability, pp.64.

A tort of defamation where the reputation of the plaintiff is damaged by an untrue statement either written, broadcast, or otherwise published statements by the defendant.

From the OED, libel, diminutive of liber (book): 1. A little book; a short treatise or writing.

Reference: wikipedia.

limitation periods applicable in Ontario

TBW

limitation period applicable to an action in tort against a contractor

TBW

liquidated damages

Liquidated damages are damages the amount of which are written into the terms of the contract which an innocent party may collect as a result of a specific breach, for example, late performance. Liquidated damages are only allowed to compensate the innocent party and should not be designed to punish the defaulting party; otherwise, the terms may not be enforceable on the basis that they form an unjust enrichment.

Marston, Ch. 19 Breach of Contract, pp.149-150

New York convention

TBW

Marston, Ch. 29 ADR on International Projects, p.245

Marston, Ch. 3 Global Considerations, p.30

parol evidence rule

Marston, Ch. 17 Contract Interpretation, pp.136-137.

A common-law precedence preventing a party to a written contract from presenting evidence that a verbally-agreed-upon term was not included in the contract as long as the contract appears to be consistent.

A common mistake may allow one party to apply for rectification but only under such circumstances where the contract may be shown to be inconsistent.

Reference: wikipedia.

partnering on construction projects

TBW

quantum meruit

Marston, Ch. 19 Breach of Contract, pp.150-151.

From Latin, this phrase means "as much as he has deserved". When a service has been performed to satisfy an obligation in a contract and the contract does to state an appropriate compensation, the performing party may claim payment based on a basis of quantum meruit. Three situations which may cause such consideration of payment include:

The contract specifying an obligation without a corresponding consideration,
The contract is not discharged according to the terms of the contract for whatever reason (be it by breach of contract or discharge by frustration).

Reference: wikipedia.

secret commission

A secret commission, also called a bribe or a kickback, is an exchange between an agent (including employees) and another party of a benefit for either an action or inaction relating to the business of the agent's principal (including employers). Such actions are prohibited by the Criminal Code of Canada.

A secret commission must amount to a confict of interest which contravenes the Code of Ethics (Paragraph 77.3 and 77.4) and constitutes professional misconduct according to 72(2)(i) and 72(2)(j).

Marston, Ch. 23 Duty of Honesty, pp.179-180.

Reference: Section 426 of the Criminal Code

slander

Marston, Ch. 4 Tort Liability, pp.64.

A tort of defamation where the reputation of the plaintiff is damaged by an untrue transitory statement made by the defendant.

Reference: wikipedia.

specific performance

Marston, Ch. 19 Breach of Contract, p.152.

Specific performance is a possible remedy which may be ordered on the defaulting party by a court to compensate the innocent party for damages which result from a breach of contract. It is usually used to complete a transaction given as a term of the contract and is usually not applied when the performance would need to be supervised. See injunction.

Reference: wikipedia.

statutory holdback under the Construction Lien Act

TBW

Reference: wikipedia.

tort liability

Marston, Ch. 4 Tort Liability, pp.37-70.

TBW

true construction approach

Marston, Ch. 20 Fundamental Breach, p.159.

TBW

undue influence

Marston, Ch. 14 Misrepresentation, Duress and Undue Influence, p.113.

TBW

Reference: wikipedia.

unenforceable contract

An unenforceable contract is one which is valid but which will not be enforced by a court.

Reference: wikipedia.

unilateral mistake

Marston, Ch. 15 Mistake, pp.115-119.

A unilateral mistake refers to an error made by one party in the drafting of the terms of a contract or in the subsequent submission of bids. While it may be equitable to provide relief if a mistake is made, the courts will usually not intervene to provide relief.

The Imperial Glass case is one where one the offeror had incorrectly calculated the price of one of the items it would supply under the terms of the bid or tender. The offeree was aware of the mistake but chose to enter into the contract which was offered and accepted. The actions of the offeree were seen not be be fraudulent and therefore the courts upheld the terms of the contract.

The Belle River case is one where the offeror made a mistake in a bid or tender, the offeree was aware that a mistake was made yet accepted the bid or tender understanding that the contractor would be at a serious disadvantage under the terms of the contract which would result from the bid or tender. The courts observed that submission of the bid or tender did not form a contract and therefore the offeror was not obligated to enter into a contract with the offeree.

The Ron Engineering case was one where the bidding or tendering process itself was under a separate contract and when the offeror became aware of a mistake in the bid or tender which was made, the offeror was not obligated to enter into the contract; however, the offeror had violated one of its obligations under the bidding or tendering contract and was therefore still liable under the terms of that contract. This bidding or tendering contract is referred to as Contract A while the actual contract which would result from the bid or tender as Contract B.

In the case of a Contract A, the consideration of the parties submitting the bids or tenders (the offerors) is demonstrated by sealing the bids or tenders.

Case: Imperial Glass Ltd. v. Consolidated Supplies Ltd., Marston, p.116.

Case: Belle River Community Arena Inc. v. W.J.C. Kaufmann Co. et al., Marston, p.116.

Case: Ron Engineering et al. v. The Queen in right of Ontario et al., Marston, p.118-120.

A unilateral mistake differs from a common mistake where an error appears in a contract as a result of either a secretarial or recording nature.

Reference: wikipedia.

vicarious liability

Marston, Ch. 4 Tort Liability, pp.52-55.

In an employer-employee relationship, the employer is understood to have the duty to control the actions of the employee and the employer is therefore vicariously liable for any injuries caused by the employee while employed.

Case: Dutton v. Bognor Regis United Building Co. Ltd., Marston, p.52.

Case: Candler v. Crane, Christmas & Co., Marston, p.53.

Case: Northwestern Mutual Insurance Co. v. J.T. O'Bryan & Co., Marston, p.54.

Reference: wikipedia.

void contract

A void contract is one which is not a contract—neither party is bound to the contract and neither party need perform any of the obligations of the contract.

voidable contract

A voidable contract is a contract where only one party is bound to the contract. The unbound party may choose to repudiate the contract in which case, the contract is a void contract.