Chapter 10: Contractual Defects Flashcards
Contractual Defects
Provide one of the parties with a defence when the other party commences a lawsuit.
5 contractual defects studied:
- Incapacity to contract.
- Absence of writing.
- Mistake.
- Unfairness during bargaining.
- Illegality.
Capacity
Legal power to give consent.
Age of Majority
The age at which a person is held fully accountable in law.
Minors
People who have not reached the age of majority.
Voidable
A contract is voidable if a minor is entitled to avoid the legal obligations that the contract would have otherwise created.
Is every contract with a minor void at the outset?
Not necessarily.
What is affirming the contract?
Losing the right to void a contract.
What happens to contracts when a minor reaches the age of majority?
The minor must decide, within a reasonable time frame, whether they want to avoid the contract they created as a minor.
A minor creates a contract and collects benefits. However, upon reaching the age of majority, that minor decides to void the contract. What occurs next?
The minor must give back the benefits they received from the contract.
What are some contracts that minors cannot avoid?
Contracts for necessary goods such as food, clothing, education, medical treatment, and medical treatment.
Can minors avoid contracts of employment that are to their benefit?
No.
What are the two situations in which people can lack capacity because of a deficient intellect?
- If a court has declared a person to be lacking in mental capacity.
- If they lack the mental capacity to contract at the time the contract is formed.
What are the two criteria for voiding a contract due to intoxication?
- The person must have been so drunk they could not know or appreciate what they were doing.
- The other contractual party must have been alerted to that fact.
Chartered Corporations
Treated the same as individuals who have reached the age of majority.
Statutory Corporations
Have limited contractual capacity.
Difference between chartered and statutory corporations:
Chartered corporations are treated the same as individuals who have reached the age of majority, while statutory corporations have limited contractual capacity.
Statutory corporations are limited to the…
Powers given to them through legislation.
Ultra Vires
Beyond the authority.
What happens when a corporation acts ultra vires?
It lacks the capacity to contract, and are consequently unenforceable.
Associations
Are usually unincorporated business organizations that lack contractual capacity.
How does an association enter into a contract?
An individual can enter into a contract for its benefit.
Indian Band
A body of Aboriginal people whose land and money are held by the Crown.
Can unincorporated associations have legal capacity to contract?
Yes, if it is granted to them through legislation.
Do Indian Bands have contractual capacity?
Yes.
How are Indian Bands restricted in their contractual capacity?
They cannot enter a deed, lease, contract, instrument, document, or agreement purporting to permit a person other than a member of a band to occur or use a reserve, or to reside or otherwise exercise any rights on a reserve.
The capacity to contract by public authorities is restricted by…
The division of powers in the Constitution Act 1867.
Statute of Frauds
Requires some contracts to be evidenced in writing as a way of reducing the risk of perjury.
Does the Statute of Frauds apply to guarantees?
Yes.
Guarantee
A contractual promise by a third party, called a guarantor, to satisfy a debtor’s obligation if that debtor fails to do so.