Chapter 6

Question 1

What is a contract

Answer 1

a voluntary exchange of promises, creating
obligations which, if defaulted on, can be enforced and
remedied by the courts

Question 2

Elements of a Contract

Answer 2

1. Consensus: mutual agreement
2. Consideration: the price each party is willing to pay to participate in the contract
3. Capacity: legally capable of understanding
4. Legality: object and consideration involved in the agreement must be legal
5. Intention: must intend that legally enforceable obligations will result from
   contract

Question 3

1. Consensus

Answer 3

• Meeting of the minds, includes both offer and acceptance
• Essential that contracting parties share an
  understanding of the bargain struck.
  *Terms must be unambiguous
  *Failure to read a contract is no excuse

Question 4

Offer

Answer 4

Communication of a willingness to be bound by certain terms
Valid Offers must contain:
All of the terms of the contract
A communication of willingness to be bound
All significant terms of the proposed contract
- Parties
-Price
-Property
Terms can be implied – must be consistent with the parties’ intentions – Common practice
considered

Question 5

Beacock v Wetter [2006] BCSC

Answer 5

Facts: Wetter owned a house which she agreed to rent to Beacock. They discussed that
Beacock would rent the house for $950/month and eventually buy it for $200,000. No
written contract was signed by the parties. Beacock paid rent and made improvements to the
house. During further discussions, Beacock increased his offer to purchase to $215,000 but
was unable to obtain financing. Beacock filed a builder’s lien against the property for the
improvements and sued for specific performance, or breach of contract.
Held: There was no consensus or meeting of the minds regarding the terms of the
agreement. There was only an intention to enter into an agreement at an unspecified time in
the future. A contract to make a contract is no contract at all.

Question 6

Invitation to Treat

Answer 6

An invitation to potential customers to engage in the process of negotiation
Invitations to Treat are NOT offers
* Advertisements or sales promotions are not
binding offers
* Articles displayed for sale are not offers but
merely invitations for customers to offer to pay
the price of the item

Question 7

Offer by Conduct – Boots case

Answer 7

offer may be implied by conduct
Ex. Gesture of raising a hand and calling “taxi”

Question 8

Communication of an offer

Answer 8

*An offer must be communicated
*Only the person or group to whom an offer is made can accept it
*For a contract to be binding, all important terms must have been disclosed to the
offeree
*Exemption clauses must be brought to the attention of the person granting it
- Signs in parking facilities - “Park at your risk”
- Tickets to sporting events
*Fundamental breach may avoid exemption clause

Question 9

The End of an Offer

Answer 9

An offer must be in force when accepted - Many ways for an offer to come to an end before acceptance:
1. Offer ends at a specified time
2. After a reasonable time (if time not specified)
3. At the death or insanity of the offeror
4. Revocation of offer (withdrawn) before acceptance and revocation is communicated to the offeree
5. When the offer is rejected
6. A counteroffer is put forward – form of rejection

Question 10

Counter offers – Dickinson v Dodds

Answer 10

Facts: Dodds sent Dickinson a signed letter offering to sell his land. The letter stated that the offer would remain open under 9am the next Friday. On Thursday afternoon, a friend informed Dickinson that Dodds was arranging to sell the house to a third-party. Later that day, Dickinson left a note at Dodd’s residence purporting to accept the offer.

Held: Court held in favor of Dodds – the offer was withdrawn when the claimant learned that the defendant was arranging to sell the property to another.
Until someone accepts, an offer can be revoked – even if a promise to hold the offer open is made.

Question 11

Offers That Cannot Be Revoked

Answer 11

Option agreements and Tenders

Question 12

Acceptance

Answer 12

Acceptance is the offeree’s intention to commit

*Must be unconditional
*The inclusion of new terms in an acceptance is a counteroffer
*Acceptance will not overcome the defect of an incomplete or defective offer

Question 13

Communication of Acceptance

Answer 13

Acceptance of an agreement is usually accomplished by communicating it to the offeror

Question 14

Postbox Rule

Answer 14

When acceptance is mailed, it is effective when and where it is posted

*Rule applies only when response by mail is appropriate

Question 15

Douez v Facebook

Answer 15

Facts: Douez, a BC resident brought an action in BC against Facebook, alleging that Facebook had breached the BC Privacy Act by using her name and likeness without consent for the purposes of advertising. Facebook made an application to stay proceedings on the basis of a forum selection clause in the Terms of Use which Ms. Douez had agreed that disputes were to be resolved in California, under California law.

Question 16

Consideration

Answer 16

The price one is willing to pay for a promise of that benefit
- All parties must derive some benefit from the deal

Question 17

Adequacy of Consideration

Answer 17

Need not be fair, but:
Unfair consideration may indicate undue influence, insanity or fraud

Question 18

What constitutes Valid Consideration

Answer 18

• Settlement out of court
  Each party gives up court determination of the matter – therefore a signed release is a binding contract.
• Request for services
  Must pay reasonable amount for services

Question 19

Exceptions – Promissory Estoppel

Answer 19

when a gratuitous promise to do something in the future causes a
person who relies on that promise to incur an expense, the promisor will not be allowed to enforce other contractual rights that are inconsistent with that promise.

Must show:
1. reliance on a gratuitous promise; and
2. resulting damage

Question 20

High Trees Case

Answer 20

Facts: In 1937 High Trees House Ltd. leased a block of flats for a rate £2,500/year from Central London Property Trust Ltd. Due to the war and the resultant heavy bombing of London occupancy rates were drastically lower than normal. In January 1940, to ameliorate the situation the parties made an agreement in writing to reduce rent by half. However, neither party stipulated the period for which this reduced rental was to apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill and by 1945, the flats were back at full occupancy. After the war, Central Property changed its mind and demanded payment of all the rent owed under the original lease, including back rent. It argues that the promise to take less rent was one sided and as a gratuitous promise, was non-binding.

Held: For the period after the war, High Trees has to pay full rent but was not required to pay back rent – the property trust was bound by its promise to take less – High Trees used the plaintiff’s promise as a defence to the plaintiff’s claim.