CONTRACTS

Question 1

Contract (definition)

Answer 1

= a promise, or set of promises, that the law will enforce

Question 2

7 elements of a contract

Answer 2

Offer, Acceptance, Consideration
Intention to Create legal Relations, Capacity, Legality, Certainty of Terms

Question 3

Offer (definition)

Answer 3

= a tentative promise made by one party, subject to a condition or containing a request to the other party
- must be definite and certain
- must be communicated to the intended recipient
- it is binding as soon as it is accepted

Question 4

What is a Standard form contract also called and why

Answer 4

A “contract of adhesion”, and a “Take it or leave it” offer
- no room for negotiation over terms of the contract

Question 5

Standard form contract (examples, pro and cons)

Answer 5

• terms and conditions when clicking on a page, airline companies
  advantages: highly efficient (fast / easy)
  disadvantages: inequality of bargaining power, little or no room to negotiate terms.

Question 6

Contra Proferentum Rule

Answer 6

Where there is doubt about the meaning of a contract, the words will be construed against the party who put them forward

Question 7

Counter-offer definition

Answer 7

• a rejection of the original offer and a new offer is formed that can be accepted or rejected by the counter-party

Question 8

Lapse of an offer

Answer 8

= the termination of an offer when the offeree fails to accept it within a specified time, or if no time is specified, then within a reasonable time (or if a party dies or becomes insane)

Question 9

What is a revocation

Answer 9

withdraw
- an offeror may revoke an offer at any time before acceptance
- must provide notice of revocation to make it effective

Question 10

Postal Rule Exception

Answer 10

• mail or telegram. Acceptance occurs when acceptance is put in the mailbox, not when it is received.

Question 11

Options (definition)

Answer 11

= a contract to keep an offer open for a specified time in return for a sum of money

Question 12

Jurisdiction of a contract

Answer 12

• the courts of the place where it is formed have jurisdiction over dispute

Question 13

acceptance (definition)

Answer 13

= final unqualified consent to the terms of the offer

Question 14

Mailing: acceptance vs revocation

Answer 14

acceptance by mail is binding when its sent and revocation is binding when its delivered

Question 15

How do we communicate acceptance

Answer 15

either by word or by conduct
- unilateral contracts (can only be accepted by performance)

Question 16

negative option billing (definition)

Answer 16

= a practice of adding services and sending bills without request and relying upon the customer to cancel if they don’t wish the service

Question 17

inviting tenders (definition)

Answer 17

= seeking offers from suppliers
- a government or business calls for tenders for the construction of a large project
- tendering is one area of contract law where obligations of good-faith negotiations exist
- the law falls short of imposing a negligence duty of care

Question 18

Ways in Which an Offer Comes to an End (4)

Answer 18

1. The offer may lapse when the offeree fails to accept within the time stated in the offer or if no time limit is stated within a reasonable time.
2. The offeror revokes the offer before the offeree has accepted.
3. The offeree rejects the offer or makes a counteroffer (which is, in effect, a rejection).
4. The offeree accepts before any of the three above has occurred (in which case the offer ends and is replaced by a contract between the parties)

Question 19

bilateral contract

Answer 19

= a contract where offeror and offeree trade promises and both are bound to perform later, promiser and promisee (I will buy this car – I will sell this car)

Question 20

unilateral contract

Answer 20

= a contract in which the offer is accepted by performing an act or series of acts required by the terms of the offer

Question 21

subsidiary promise

Answer 21

= an implied promise that the offeror will not revoke once the offeree begins performance in good faith and continues to perform

Question 22

Bargain (definition)

Answer 22

= Each party pays a price for the promise of the other

Question 23

Gratuitous Promise

Answer 23

No consideration = no contract
- a promise made in the absence of consideration (don’t get anything in return)
- even accepted by the offeree, the promise is not a contract enforceable in law

Question 24

Adequacy of Consideration

Answer 24

It does not matter what the value of the consideration is

Question 25

Past consideration

Answer 25

= a gratuitous benefit previously conferred upon a promisor = no consideration

Question 26

Debtor/Creditor Rule
Foakes v. Beer

Answer 26

A new contract is not formed when a debtor promises to reduce their debt

A debtor owed his creditor a large sum of money, and payment was overdue. The creditor agreed to accept a series of installments of the principal, and to forgo her right to interest, if the debtor paid promptly and regularly. The debtor paid the principal as agreed, but the creditor sued for the interest. She succeeded because her promise to accept less than the total sum owing—principal plus accrued interest—was a gratuitous promise and did not bind her.

Question 27

Mercantile Law Amendment Act

Answer 27

When the creditor accepts part performance (i.e. a lesser sum of money) in settlement of a debt, and the debtor pays the reduced amount, the entire debt is extinguished
- if the parties agree to a lower payment of debt that is an enforceable contract even if there is no consideration

Question 28

Exception of Consideration: Equitable estoppel

Answer 28

= the court’s exercise of its equitable jurisdiction to estop a promisor from claiming that she was not bound by her gratuitous promise where reliance on that promise caused injury to the promise
- a shield, not a sword
If someone tells you something and you act accordingly, the person cannot sue even if what they said is untrue (you can throw that stuff out – oh no it’s my stuff – too late, I acted accordingly to what you said)

Question 29

Requirements for equitable estoppel

Answer 29

(1) Some form of legal relationship already exists
(2) One of the parties promises (perhaps by implication only) to release the other from some or all of the other’s legal duties to him
(3) The other party, in reliance on that promise, acts in a way that alters his position and would make it a real hardship if the promisor reneges on his promise.

Question 30

injurious reliance

Answer 30

= loss or harm suffered by a promise who, to his detriment, relied reasonably on a gratuitous promise
- US, cause of action, like equitable estoppel

Question 31

quantum meruit

Answer 31

applies to goods supplied on request as well as to services rendered

If, for example, A promises to pay B $100 after B has given her and her family an excellent dinner, A is not bound, since she is under no existing legal obligation at the time she makes her promise. If, however, A agrees to pay B $100 after B has requested catering services, A would be bound; in fact, A was already bound to pay B a reasonable price, and she and B have simply agreed later upon what this price should be.

Question 32

Seals (Exception of Consideration)

Answer 32

• specialty contract, 20 y allowed to sue
• a document under seal is still called a deed and requires no consideration
• a seal must be affixed (or the word “seal” written) on the document at the time of signing
• certain documents, such as a deed of land and a mortgage, traditionally required a seal even if there was consideration

Question 33

Intention to Create legal Relations

Answer 33

Reasonable bystander test: did the outward conduct of the parties lack serious intention to create legal obligations?

Question 34

Void vs Voidable

Answer 34

void: never existed; failed formation = no contract
voidable: exist, but can be made void at the option of one of the parties

Question 35

lack of capacity

Answer 35

Minors, Mentally incompetent people, Corporations, Labour unions, associations and other organizations, Aboriginal Band, Bankrupts

Question 36

Capacity of Minors

Answer 36

Exceptions: still bound by any contract for the supply of necessary/essential goods and services – quantum meruit, only; or beneficial contracts of service (employment/apprenticeship)
- may always back out of any other contract but can enforce the contract if they choose to do so

Question 37

What happens when you reach age of majority?

Answer 37

(1) Voidable contracts: for e.x. installments, must back out immediately
(2) Ratified contracts: for e.x. buying something where payment happens after date of majority; contract is ratified if paid

Question 38

Mentally incompetent people (capacity)

Answer 38

same rules as minor

Question 39

Corporations (capacity)

Answer 39

separate legal entities; ultra vires acts of statutory corporations

Question 40

Labour unions, associations and other organizations

Answer 40

not separate legal entities; representative actions

Question 41

Aboriginal Bands

Answer 41

recognized as “special unincorporated associations” – representative capacity similar to labour union

Question 42

Bankrupts

Answer 42

under certain contractual disabilities (except for necessities) until discharged from bankruptcy

Question 43

When is a contract illegal?

Answer 43

Criminal Code – court will not enforce a contract that’s a crime
Income Tax Act – court will not enforce a contract meant to avoid taxes
Competitions Act – restraint on trade
Law Society Act Violation of Common Law or Public Policy
Indemnity for committing torts is not allowed (Insurance excepted)
Contracts considered to be immoral, a perversion of justice, or prejudicial to the interests of the Canadian public

Question 44

Certainty of terms

Answer 44

Void for uncertainty: vague or incomplete agreements can be deemed “void” by a court, therefore no contract was ever formed.

Vague terms:
fair value”, as opposed to explaining how $$ should be determined
* incomplete contracts: i.e. missing essential terms such as price or what goods are to be purchased