Contracts Part 1 Flashcards
Contract
a voluntary exchange of promises that is enforceable by courts.
Consensus (Meeting of the Minds)
parties must come to a common understanding of their obligations and responsibilities (terms must be clear and unambiguous).
The three elements of a contract
1) Offer
2) Acceptance
3) Consideration
Offer
tentative promise that contains the terms of the anticipated contract.
What must an offer contain?
must contain all important terms such as parties, property, and price.
Mellish Rule
exemption clauses must be communicated at the time of entering the contract, no later.
Offer Exemption Clauses
meant to limit liability.
Standard Form Contracts
no bargaining power and frequently contain one-sided terms.
Contra Proferentum
Ambiguities interpreted in favour of the party forced to accept the terms.
End of Offer
Can specify a time and not not specified, then end at a reasonable time.
What are the three ways to end an offer?
1) Revocation: if communicated.
2) rejection by offer: party who receives offer.
3) Counter-Offer: acts as rejection.
Acceptance
Commitment by offer to be bound by terms of offer.
- Must be compete and unconditional (addition of any terms = counter-offer).
- Must be communicated.
Unilateral Contract
Acceptance is performance of contract.
Consideration
an exchange of benefits which may be money, services, goods, or promises.
Gratuitous Promises
These are one-sided promises and are not enforceable.
Exception of Services (Quantum Meruit)
must pay a reasonable amount for services requested and received.
Consideration Exceptions
Parties can change contract obligations, but all parties must receive ‘new’ consideration.
Gratuitous promises are not binding on promisor with some exceptions:
- taking less in full satisfaction of debt is binding.
- Promissory Estoppel: reliance on gratuitous promise may b used as a defence only.
Past Consideration is No Consideration
If consideration has already been given, it cannot support a new contract.
Void
there never was a contract and both parties are free from obligations (e.g., marriage where one party was already married).
Voidable
a valid contract. However, one party has the right to escape the contract if they so choose (e.g., where one spouse was so intoxicated that he/she could not properly cosent).
Capacity
some people incapable of entering contracts. Contracts may be void/voidable.
What are the two incapable parties?
1) Infants: anyone under the age of majority. Contract is binding on the adult, but not on the infant.
2) Insanity/Intoxication: they can be involved to escape a contract if the three elements are shown:
1) you must show you were so insane/intoxicated that you did not understand the nature of the transaction.
2) other party knew or should have know of the insanity/intoxication.
3) you must repudiate contract as soon as possible when sanity/sobriety is regained.
Intention
parties must intend legal consequences to result from contract. In general, you cannot escape a contract by saying ‘I was just kidding’.
Statue of Frauds
certain types of contacts must be in writing.
M - marriage
Y - cannot be performed in less than one year.
L - interests in land.
E - executor paying the debt of an estate.
G - purchased of goods of more than $500.
S - sureties (guarantors).
