Contract Law Flashcards
what is a contract?
voluntary exchange of promises, creating obligations that, if defaulted on, can be enforced or remedied by Courts.
- does not have to be written, although written document is evidence that a contract exists.
what two things are needed in a contract?
offer (tentative promise) and acceptance (promise to do the act requested by the offeror)
what is the underlying assumption of contract?
- courts role?
parties are free to negotiate whatever terms they like.
- if dont want to take it, leave it
- court enforce agreement as it stands, will not re-write the agreement to be fair.
5 elements of a contract?
- consensus
- consideration
- capacity
- legality
- intent
what is consensus in a contract?
meeting of minds btw offerror + acceptor
what is consideration of contract?
the price each party is willing to pay for a promise of the other party.
what is capacity of a contract?
parties need to be legally competent
what is legality of a contract?
purpose of the contract and consideration must be legal and not against public policy
what is intent of a contract?
parties must have intention to be legally bound
what is a valid contract?
all 5 elements are satisfying, contract exists and parties are bound
what does void mean?
no contract exists because one or more required elements are missing
what does voidable mean?
there is a contract, but one party has the option of backing out of the contract.
what does enforceable contract mean?
contract exists + either party can get a remedy from the courts if the other party defaults.
what is a valid but unenforceable law?
a contract exists but there is no remedy available from the court.
offeror vs offeree?
offeror: party making an offer
offeree: party decides whether they accept the offer
express vs implied contract?
expressly communicated: oral, writing, explicit
implied: if conduct suggests you’re participating in contract, then u are.
what needs to happen to reach consensus?
- must be an offer (sets out terms)
- unconditional acceptance
- agreeing to continue negotiation =/= contract.
what is an offer?
tentative promise, subject to a condition or containing a request, made by offeror to the offeree
what are NOT offers? 2 examples
- invitation to do business =/= offer
2. advertisements =/= offers, are invitations.
3 c’s needed for a valid offer?
- certain (unambiguous)
- complete (all terms are covered = parties, property, price; agreement to agree =/= contract)
- communicated (oral, writing, conduct - offeree cannot accept an offer made to someone else)
when can an offer be terminated?
- any time prior to acceptance; termination = null offer, cannot be accepted
4 ways in which an offer may be terminated?
- lapse
- recovation
- rejection
- counteroffer
what is lapse of an offer?
specified, or reasonable time expires.
- offeror dies or loses mental capacity
what is revocation of an offer?
- offer taken off the table; need to clearly communicate that to offeree
- communication may not have to be direct; but best if direct.
what is rejection of an offer?
kills/terminates the offer
- offeror not obligated to accept the same terms they offered in the first place.
what is a counter-offer?
rejection + new offer proposed.
- reverses roles, previous offeree now becomes offeror with the counter offer
when and where is contract formed
contract formed
WHEN offer is accepted
WHERE acceptance is received.
how to choose the jurisdiction that governs the contract?
if not in province, can make it part of contract to be bound by laws in X jurisdiction.
three essential requirements for acceptance?
- Positive form (not silence)
- unconditional + unequivocal (no conditions, clear acceptance)
- communicated to offeror, unless conduct signifies acceptance (acknowledge deal is made)
exception to communication of acceptance?
post box rule: acceptance occurs when and where the acceptance is mailed from. bound to contract on that day, even if gets notice days later
other stipulations of agreements?
- offeror may request HOW the offer is to be accepted (fax, phone etc)
- silence may count as acceptance, use reasonable person test
- if offeree takes benefit in conduct, they have accepted the contract
two stages in contract law
- contract formation
2. performance of the contract
whats required to form a contract?
5 “ingredients”
- consensus
- consideration
- capacity
- legality
- intention
what may happen with the performance of the contract?
- parties fulfill obligations to perform
- failure to perform = breach
- breach = enforce/remedy
two forms of contracts?
- bilateral (two promises, contract before performance
2. unilateral (one promise, offer requires performance/action to satisfy acceptance)
what are standard form agreements?
offeree isn’t able to negotiate, take it or leave it.
when may an offer not be binding in a standard form agreement?
- offeree ignorant of terms when agreement was made
2. offeror didn’t take sufficient steps to bring them to offeree’s attention.
consideration in a contract?
give + get.
- no contract if there’s a gratuitous promise
- adequacy of consideration is irrelevant
4 elements where there’s lack of consideration?
- past consideration (can’t pay retroactively)
- illegal consideration
- impossible consideration
- gratuitous promises
what is capacity?
with diminished capacity cannot make contract.
- courts protect them a lil extra.
- diminished capacity seeks protection.
- contracts are voidable
individual with mental impairment must show 3 things to get out of contract?
- didn’t understand what he was doing
- other person knew or ought to have known of the lack of capacity
- he took steps to back out of contract once sanity/sobriety regained
legality of contract?
if violates the law or offends public policy, courts will not enforce the contract
intention of contract?
- both parties must genuinely enter into the deal
- need intent from both parties
- if there’s disagreement over intent, use reasonable person test.
- if there’s agreement that neither party can sue in the event of a breach, then there’s no intent to form a legally enforceable bargain
general rule of requiring writing
no formal requirements of having contract in writing.
- verbal agreements are binding.
what is statute of frauds?
requires certain types of contracts to be in writing
- failure to comply = courts will not enforce.
types of contracts under the statute of frauds?
- contracts longer than 1 year
- title to land
- guarantees (assuming responsibility on the loan)
- Marriage (prenup)
- Promise of an executor to pay debt of deceased
- Sale of goods where the value of goods exceeds $50 (need receipt, purchase order, invoice etc)
