Date: Mon, 19 Dec 2005 10:30:09 -0500

From: John Swan

Subject: Snapping at an Offer

Smith v. Hughes does not support an argument that the contract for the purchase and sale of the shares is valid and enforceable. The common law would not let a buyer get away with purchasing shares for a tiny proportion of their value on the basis that the buyer could have had no reasonable expectation that the seller meant to sell at the price it offered.

McMaster University v. Wilchar Construction Ltd. [1971] 3 O.R. 801, 22 D.L.R. (3d) 9; aff'd, (1973), 12 O.R. (2d) 512n, 69 D.L.R. (3d) 400n, and Stepps Investments Ltd. v. Security Capital Corporation (1976), 14 O.R. (2d) 259, 73 D.L.R. (3d) 351, are Canadian examples where one party was not allowed to hold the other to a deal in circumstances where the first party knew that the other had made a mistake. Smith v. Hughes would support this result to the extent that it stands for the argument that one party cannot hold the other to a deal when the first party knows that the other is labouring under a mistake.

On a completely different issue the Economist has a story this week at page 81 of a Japanese company which placed an order on the exchange to sell 610000 shares of a company for 1 yen each when it intended to sell 1 share for 610000 yen. It appears to be assumed by everyone that this transaction which was presumably governed by Japanese law was binding but surely this would not be so in any common law country.

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