Chapter 7

Question 1

Capacity

Answer 1

legally capable of understanding

Question 2

Minors and contracts

Answer 2

Minors (or infants): under age of majority, are not bound by their
agreements, though adults are bound by their agreements with minors

Contracts that are binding to minors:
- For the acquisition of necessaries
- Contracts of employment
- Services that benefit the minor

Question 3

Parents Liability

Answer 3

Parents are not responsible for minors’ contracts, exceptions:

• Legislation creating responsibility in many jurisdictions
• When the minor is acting as an agent having the appropriate
  authority to bind the parent in contract
• Parent guaranteed minors’ obligations

Question 4

Insanity

Answer 4

Must Show:

1. The person had no understanding of the nature of the transaction; and
2. The other party knew or ought to have known of insanity.

Question 5

Drunk

Answer 5

Treated like insanity

1. So intoxicated they didn’t understand the nature of the transaction
2. the other party knew or ought to have known.

Question 6

Legality

Answer 6

object and consideration involved in the agreement must be legal

Question 7

Contracts performed illegally

Answer 7

If contract is performed illegally or against public policy, the Court may order:

• Contract is void and restore parties to their original positions
• Severance of the illegal performance
• Enforcement, if violation is procedural and not substantive

Question 8

Contracts formed illegally

Answer 8

The contract itself is illegal = void

• Courts may sever the illegal provisions of the contract, leaving the balance of the contract enforceable to avoid inequitable judgments

Question 9

Restrictive Covenants

Answer 9

Goodwill needs to be preserved upon
- Sale of Business
- Change of Employment
- Leaving a professional partnership

• like non-compete after employment

Question 10

Intention

Answer 10

must intend that legally enforceable obligations will result from contract

Question 11

Reasonable-person test

Answer 11

Would a reasonable person have
thought that the person making
the promise was serious and that
the agreement was legally binding?

Question 12

Carlill v Carbolic Smoke Ball
Company [1893]

Answer 12

Facts: The defendants manufactured a product that they claimed would protect users from influenza. They offered 100 pounds to anyone who used their product as prescribed and still contracted influenza. They stated in an advertisement, that 1000 pounds had been deposited in the Alliance Bank, Regent Street and this showed their sincerity in the matter. Carlill used the product, got influenza and claimed the money. The company refused, stating that the advertisement was mere puffery and not intended to be taken seriously.

Held: by depositing money into a bank account to back up the claim
took it out of the category of advertisement puff. A reasonable
person would have thought the advertisement was serious.

Question 13

Form of the Contract

Answer 13

There is no general rule that a contract must take a certain form

Question 14

Requirement of writing

Answer 14

Types of contracts generally included under the Statute of Frauds
and required to be in writing:
- Longer than one year
- Land transactions
- Guarantees and indemnities
- When goods are sold over a specific value
- Promises in consideration of marriage
- Promises of an executor to pay a debt of deceased from the
executor’s own assets

Question 15

What constitutes writing

Answer 15

Essential terms must be in writing:
- Indication of the parties, the subject matter of the contract, and the
consideration to be paid
- Other terms may become essential depending on the nature of the contract
- Can be actual agreement, receipt, note, email
- May be created after the fact
- The document(s) must be signed or initialed but only by the person
denying the existence of the contract

Question 16

Statute of Frauds

Answer 16

The Statute of Frauds is a legal doctrine that requires certain types of contracts to be in writing to be enforceable in a court of law. The purpose of the statute is to prevent fraud and perjury by requiring written evidence of important agreements.

Question 17

Electronic Documents

Answer 17

Electronic records and communications have become more common

• In many situations, a signed, printed document is needed to provide
  evidence in writing
• Electronic documents have legal effect and are enforceable
• Federal and provincial legislation passed to recognize electronic
  documents and signatures
• Does not apply to wills, trusts, powers of attorneys, land transfers, or negotiable instruments