200 THE ADVOCATE
VOL. 78 PART 2 MARCH 2020
Normally, to do this, I would have to explain the facts, arguments and
results of that decision. I have been saved the trouble of doing that by Bastarache
J., who in Friedmann discussed the decision in Harmer v. Armstrong
C. The Harmer v. Armstrong Decision
25 Despite the recognition of the sealed contract rule by this Court and
other courts across the country, the appellant has asked this Court to
abolish it. The appellant contends, amongst other claims, that the rule is
now internally inconsistent. Following the decision of Harmer v. Armstrong,
supra, the appellant claims that the rule no longer bars a principal
from suing a third party on a contract entered into under seal for his or
her benefit. As a result, the appellant argues, it is unjust not to allow the
third party to sue the principal. To support this claim, the appellant cites
the following passage from Cheshire, Fifoot and Furmston’s Law of Contract
(13th ed. 1996), at p. 495:
The technical sealed contract rule, however, is subject to this limitation,
that if the agent enters into a sealed contract as trustee for
the principal, whether the trust is disclosed on the face of the contract
or not, and he refuses to enforce it against the other party,
then the principal, qua beneficiary, may himself enforce any proprietary
right to which he is entitled by bringing an action against
the third party and the agent. It would seem to follow that in such
a case the principal is equally liable to be sued by the third party.
Emphasis in original.
If the final sentence of the passage is correct, the sealed contract rule
would no longer exist.
26 With respect, the passage cited above interprets the decision in
Harmer beyond its original scope. The case involved a breach of trust. Armstrong
was interested in purchasing some publications and approached
Harmer and another potential investor to contribute a large portion of
the purchase price. The investors agreed to contribute four-fifths of the
price and authorized Armstrong to make an offer to purchase the papers.
An agreement under seal was reached between the vendor and Armstrong
to purchase the periodicals. Armstrong, however, asserted that he
was the sole purchaser and, shortly after, asked to be released from his
agreement to purchase. The vendor subsequently sold the papers to
another purchaser. Harmer sued both Armstrong and the vendor for specific
performance of the agreement. At trial, Maugham J. found that
Harmer was not entitled to a judgment for specific performance because
the contract was under seal and he was not a party to it.
27 All three of the judges on appeal of the decision of Maugham J.
agreed with his finding that Armstrong had entered into the agreement
to purchase the periodicals as a trustee for Harmer and the other investor.
They also agreed that Armstrong had breached that trust in seeking to be
released from the agreement. Lord Hanworth M.R. found that when a trust
relationship existed, the trustee could take steps on behalf of the beneficiary
to enforce the performance of a contract by the other contracting