Contract Law

Question 1

What is a contract?

Answer 1

An exchange of promises that is enforceable by the courts.
> Can be simple, and even oral;
> Can be complex, which tend to be in writing.

Question 2

Why do we use contracts?

Answer 2

Simply for protection.

Question 3

What are the consequences if you do not follow through with a contract?

Answer 3

You can be sued for breach of contract.

Question 4

What are expressed terms?

Answer 4

Terms outlined in the contract.

Question 5

What are implied terms?

Answer 5

Terms not outlined in the contract, but that are implied.
> Common sense terms
> Past dealings
> Industry standard

Question 6

What are the 3 types of contracts that must be in writing, according to which Statute?

Answer 6

> Statute of Frauds:

1. Land
2. Personal guarantee
3. Insurance

Question 7

4 duties of a lawyer when dealing with contract law:

Answer 7

1. Draft
2. Opinion before signing
3. Facilitate completion of contract
4. Litigate

Question 8

4 core elements of a contract:

Answer 8

1. Offer
2. Acceptance
3. Consideration
4. Intention

Question 9

Describe offer:

Answer 9

> “I will do this …. if you do that”

Question 10

Describe acceptance:

Answer 10

> “okay”, “yes”, “you’ve got a deal”

> Acceptance must be communicated in the manner specified in the offer

Question 11

Describe the 2 ways an offer can be terminated, other than simply rejecting the offer:

Answer 11

1. Lapse: an offer lapses (expires) at the time specified in the offer (a built-in deadline);
   > If there is no expiry date in the offer, then the offer lapses within a “reasonable time.”
2. Counter-offer: if the person receiving the offer proposes a change to the offer, the original offer has been rejected;
   > Counter-offer = new offer (which is now open for acceptance).

Question 12

Describe consideration:

Answer 12

> The “price” that each party pays for the promise of the other party.
Both parties must get consideration (value) from the contract.
Consideration can be anything of value (money, product, service).

Question 13

What does the term “caveat emptor” mean?

Answer 13

“Buyer beware” or “Seller beware”
> If you sell something, or buy something, for less, or more, than its value, then that’s on you
> If the seller/buyer didn’t do their homework on how much the item is truly worth – too bad for the seller/buyer

Question 14

Define a gratuitous promise:

Answer 14

A promise given without consideration in return.

> A “gratuitous promise” is not enforceable, unless the promise is made in writing AND under seal.

Question 15

4 situations when the law will protect someone in the world of contracts:

Answer 15

When there is a power imbalance:

1. Undue influence: spouses (pre-nuptial agreements, divorce contracts);
2. Minors: aren’t bound by their contracts, unless it’s a contract for necessities (food, shelter, clothing);
3. Individuals with mental disabilities (or are intoxicated): same as the rule for minors;
4. Under duress: threatened with physical or economic harm to sign a contract.

Question 16

2 Statutes that override any contracts made, to protect against power imbalances:

Answer 16

1. Employer/employee: Employment Standards Code;

2. Landlord/tenant: Residential Tenancies Act.

Question 17

Describe 2 assumptions about intention:

Answer 17

Parties must truly intend to enter into an arrangement that has legal consequences.

1. In a business setting - intention is presumed;
2. In a social or family setting - it is presumed that there is no intention.

Question 18

Which of the following statement(s) about a guarantee are correct?

a) a guarantee must be in writing to be enforceable.
b) a guarantee must be sealed to be enforceable.
c) a guarantee must be sealed to be enforceable only if the guarantee is signed by a minor.
d) both (a) and (b)
e) both (a) and (c)

Answer 18

d)both (a) and (b)

Question 19

Which of the following statements about the Pepsi commercial shown in class is correct?

a) A contract was not formed because Pepsi did not receive sufficient value.
b) A contract was not formed because there was no intention.
c) A contract was formed because all of the essential elements were present.

Answer 19

b)A contract was not formed because there was no intention.

Question 20

A wife tells her husband that she will never agree to a divorce unless he signs their property settlement contract. This situation may be an example of which contract law principle?

1) Fraudulent misrepresentation
2) Undue influence
3) Mental incapacity

Answer 20

2)Undue influence

Question 21

In contract law, “consideration” means:

1) Money
2) Being respectful of legal obligations
3) The value that each party receives under a contract

Answer 21

3)The value that each party receives under a contract

Question 22

Rachel says to Sarah, “I’llsell you my baseball card collection for $500. Sarah responds, “Okay, but only if you include your baseball bat as well.” Rachel says, “No way.” Sarah says, fine, I’ll give you $500 for the baseball cards. Has a contract been formed? Why or why not?

Answer 22

No, because when Sarah states she will only buy the baseball card collection if Rachel includes the baseball bat as well, this is a counter-offer.
When a counter-offer is made, the original offer to buy the baseball card collection for $500 has been terminated.
So when Sarah says “fine, I’ll give you $500 for the baseball card” then that is a new offer to Rachel and she can choose to accept or decline that offer.

Question 23

Name an Alberta statute that affects contracts by ensuring that statutory protections of the statute are not over-ridden by contract.

Answer 23

Residential Tenancies Act.

Question 24

Which of the following contracts may not be binding on a minor?

1) A contract for the purchase of food
2) A contract for the purchase of clothing
3) A contract for the purchase of some home electronic equipment

Answer 24

3)A contract for the purchase of some home electronic equipment

Question 25

Which of the following contracts must be in writing to be enforceable?

1) A guarantee
2) All of the above
3) A house purchase contract
4) An insurance contract

Answer 25

2)All of the above

Question 26

Which of these is a requirement for a valid contract?

(a) Acceptance
(b) Fairness of consideration
(c) Witnesses
(d) Intention
(e) Seal
(f) Revocation

Answer 26

(a) Acceptance; and

(d) Intention

Question 27

A seal is required when:

(a) A contract is signed by a minor
(b) There are no witnesses to a contract
(c) The contract is a personal guarantee
(d) One party is not getting consideration under the contract
(e) A contract is in writing

Answer 27

(c) The contract is a personal guarantee; and

(d) One party is not getting consideration under the contract

Question 28

Name 3 contracts that must be in writing to be enforceable:

Answer 28

(1) Insurance
(2) Real estate
(3) Personal guarantee (& seal)

Question 29

You have taken your little sister’s piggy bank hostage; you are trying to convince her to give you her last piece of Halloween candy (your sister is 5 years old). She finally promises to give you that piece of candy, but then quickly eats the candy when her piggy bank is safely returned.

When you sue your little sister for breach of contract, you will lose. List all 4 of the reasons why you will lose.

Answer 29

(1) Under duress.
(2) Gratuitous promise.
(3) She is a minor, and candy is not a necessity.
(4) In a family setting, it is presumed there is no intention.