Chapter 6 Flashcards
What is a contract
a voluntary exchange of promises, creating
obligations which, if defaulted on, can be enforced and
remedied by the courts
Elements of a Contract
- Consensus: mutual agreement
- Consideration: the price each party is willing to pay to participate in the contract
- Capacity: legally capable of understanding
- Legality: object and consideration involved in the agreement must be legal
- Intention: must intend that legally enforceable obligations will result from
contract
- Consensus
- 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
Offer
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
Beacock v Wetter [2006] BCSC
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.
Invitation to Treat
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
Offer by Conduct – Boots case
offer may be implied by conduct
Ex. Gesture of raising a hand and calling “taxi”
Communication of an offer
*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
The End of an Offer
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
Counter offers – Dickinson v Dodds
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.
Offers That Cannot Be Revoked
Option agreements and Tenders
Acceptance
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
Communication of Acceptance
Acceptance of an agreement is usually accomplished by communicating it to the offeror
Postbox Rule
When acceptance is mailed, it is effective when and where it is posted
*Rule applies only when response by mail is appropriate
Douez v Facebook
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.
Consideration
The price one is willing to pay for a promise of that benefit
- All parties must derive some benefit from the deal
Adequacy of Consideration
Need not be fair, but:
Unfair consideration may indicate undue influence, insanity or fraud
What constitutes Valid Consideration
- 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
Exceptions – Promissory Estoppel
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
High Trees Case
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.
