Introduction of Contracts Flashcards
1
Q
What does a contract do?
A
- Gives rise to rights and obligations between parties
- Legal contract recognized by the law, you are obligated and have rights, likewise the party you have contracted with has rights and obligations
2
Q
Contract Definition
A
An agreement between two or more capable persons for legal consideration to do or not do some lawful and intended act
3
Q
What are the 5 essential elements of a contract?
A
- Mutual agreement
- Capacity of the parties
- Legal consideration
- Lawful subject matter
- Genuine intention
4
Q
Capacity of the parties: Infant facts?
A
- Infant - anyone under the age of 18 is unable to sign off on a contract
- If infant makes contract thought, they can choose to enforce it or make it voidable
- Different if contract of necessaries
- Food, shelter, clothing
- Liable if it is necessaries
5
Q
Capacity of the parties:
Impaired or Mentally Challenged
A
- Prove that they were under the influence or mentally challenged
- Prove that there was evidence they should have known
6
Q
Capacity of the parties:
Aliens
A
- Even if they are from a different country, they have the same responsibilities as any other party
- Enemy alien (at war with Canada) - voidable/suspended
7
Q
What are the three types of businesses?
A
- Sole proprietor
- Partnership
- Corporation
8
Q
Type of Business:
Sole Proprietorship
A
- One owns the business
- Personally liable to contracts
- Any personal asset can be listed as collateral if you owe $
- Responsible for all torts
- Unlimited personal liability
9
Q
Capacity of Parties:
Sole Proprietor
A
Can enter into how many or whatever contracts they want, just remember there is unlimited liability
10
Q
Type of Business:
Partnership
A
- Two or more people carry biz with a view of sharing profits
- Joint and several liability
- Fiduciary relationship
- Law of master and servant
- When employer hires employee, employer dictates what gets done and how
- When owner contracts with independent contractor, just can’t say how to do it - Law of principle and agent
- Agent represents the principle, steps in it shows the way of contract and carries it out on behalf till the end - No legal name, all are liable
11
Q
Type of Business:
Corporations
A
- Cannot die
- Limited liability
- Public or private
12
Q
Capacity of Parties:
Corporation
A
- As it is artificial and legit entity, nobody owns the corporation
- Two entities: individual person, and corporate person
- Corporate person can be sued as the entire entity
- Individual person is also sued
13
Q
Type of Business:
Corporation - Articles of Association
A
- Simple set of documents that name the corporation
- Will require details office, number of shares going to have, and whether they are transferrable or not
- Encompassing:
- One page doc asking name of corp, registered office address, share office structure (authorized share capital), shareholders, directors, etc
14
Q
Type of Business:
Corporation - Bylaws (Included in Articles)
A
- Rules that govern corp
i. e.. setting up board of directors, different officers, frequency of meetings, quorum specs, - Either unlimited right to contract to limited ability to contract
15
Q
Capacity of Parties:
Corporation
A
- Corporation has full capacity to contract unless article or bylaw prohibits it
- Totally depends on the corp
16
Q
Type of Business:
Corporation - Certification of Corp
A
- Once issued, corp is officially in existence
17
Q
Type of Business:
Corporation - Debenture
A
- Essentially security as a type of document
- If corp were to ever go under, the people would have the first claim on assets
- AKA, corporate shield or corporate veil
18
Q
Type of Business: Corporation - Advantages
A
- Limited liability, partnership joint
- Flexibility, shareholders can change if partner wants out, corp is a legal entity of itself
- Good form of management (S to D)
- Can be easily dissolved by the unanimous vote of the shareholders
- Tax implications more favourable as it is taxed on its own
- No fiduciary relationship between the shareholders and the corporation
19
Q
Type of Business: Corporation - Disadvantages
A
- Minority of shareholders have a weak position
- Transfer of shares can be limited by articles of association or bylaws
- More expensive to incorporate
- It is an individual legal entity unto itself, it has to file its own tax returns
- Problems in the sale of shares (death, shareholders running)
20
Q
Type of Business:
Corporation - What are the two types?
A
- Private
- Does not have a right at all to sell its shares to the public and cannot adverse they are trying to raise capital and has shares to sell - Public
- Advertises to the public at large that you can buy shares in it
- You can go to any investor and they would be able to buy shares for you in any and every public corp
- Must have a prospectus (overview of corp and must be approved by Provincial Security Commission)
- Benefits from being on a stock exchange
21
Q
5 Essentials of Contracts:
Mutual Agreement
A
- There is an offer and an acceptance
- must be definite and acceptance has four components
22
Q
5 Essentials of Contracts: Mutual Agreement - 4 components of acceptance
A
- Must be unconditional
- Must be conveyed, delivered, communicated
- Must be made in the manner required by the offer
- Must be made within the time period required by the offer
23
Q
5 Essentials of Contracts: Mutual Agreement - Postal Acceptance Rule
A
Definition: Communication of acceptance takes place the moment a letter is posted
- The communication is now the property of the addressee (person mailing it to)
- There is no such thing as a postal communication rule
- Revocation does not take place in law until it has been received
- The postal office is the agent or long arm of the addressee
Also includes electronic document is deemed ass ent when it enters an info system and no longer control of the sender
24
Q
5 Essentials of Contracts:
Genuine Intention
A
Definition: All parties must have the objective of entering agreement genuinely
25
5 Essentials of Contracts: Genuine Intent - Fraud Components?
1. False representation - any representation that is not true
2. Material facts - using the facts of the case
3. With knowledge of its falsity (knowing it's false)
26
Mens Rea?
Definition: The essential ingredient for every criminal wrong doing, you cannot have a crime without the intention to committing the crime
"Criminal Intent"
27
5 Essentials of Contracts: Genuine Intent - Misrepresentation
Definition: No mens rea means that there is no criminal intent of it and thus it is not false representation, it is misrepresentation
Only 2 of the 3 elements must be present for misrepresentation
28
5 Essentials of Contracts: Genuine Intent - Fraudulent Misrepresentation
- Key ingredient "will only buy if ___ is part of title"
29
Will duress void contract?
Yes
30
What is undue influence?
Definition: Improper and unconsious use of an influence or power posses by one person
Voids contract
31
5 Essentials of Contracts: Genuine Intent - Mistake
Definition: Will void contract if mistaken judgement
1. Mistake as to the existence of the subject matter. Mutual mistake. (i.e., car burns down w/out any party knowing)
2. Mistake as to the identity of subject matter. No consensus (one party thinking something but in reality it is not true/lack of communication)
3. Identity of the contracting parties.
32
Non Est Factum
Definition: The defence in a contract where signer was unaware of what the contract entailed
33
5 Essentials of Contracts:
| Legal Consideration
Definition: That what a person receives or is to receive for what he does or agrees to do
Basically, did you sign anything or were you offered anything to bind you to your offer?
1. Promise for promise
34
What is gratuitous promise?
Definition: When there is an agreement to something where one party is not set to benefit from such agreement (one sided)
35
5 Essentials of Contracts:
Legal Consideration - Gratuitous Promise (parameters)
When must you honour this promise?
1. Party has proceeded with major changes (i.e., construction ha started)
2. Substantial amount is being offered by the party
(Charitable donations are included)
36
5 Essentials of Contracts: Legal Consideration (Consideration breakdown)
Definition: Consideration is that what he receives or is to receive for what he does agrees to do
1. Must have value to it
i. e., Promise for a promise is considered valuable consideration
37
Is payment of money considered valuable consideration?
Yes.
Reason: Any payment of money is sufficient in the eyes of law.
38
5 Essentials of Contracts: Legal Consideration (Past Consideration)
Definition: Contracts will be rendered voidable if you receive something you already are entitled to with the terms of the agreement (i.e., paying an incentive for contractor to get job finished on time)
39
5 Essentials of Contracts:
| Legal Consideration - Seal
Definition: A seal is regarded as a consideration (part of legal consideration)
Regardless if there is no other promise
40
5 Essentials of Contracts:
| Lawful Subject Matter
Definition: The commission of a crime would be unlawful
Layman's terms: is the title at hand or agreement on hand discussing something that is legal to do?
41
5 Essentials of Contracts: Legal Subject Matter Examples
1. Obstruction of the civil service
2. Obstruction of justice
3. Restraint of marriage
4. Immoral contracts
5. Restraint of trade (most important for business)
42
5 Essentials of Contracts: Lawful Subject Matter - Obstruction of the civil service
Example: Individual in the civil service and is bribed, the contracts is not enforceable as it is contrary to public policy
43
5 Essentials of Contracts: Legal Subject Matter - Obstruction of Justice
Example: Bribery in any way that is unlawful
44
5 Essentials of Contracts: Legal Subject Matter - Restraint of Marriage
Example: it is not in public interest for parties to contract OUT of a marriage
45
5 Essentials of Contracts: Legal Subject Matter - Immoral Contracts
Example: Prostitution (this depends on state)
46
5 Essentials of Contracts: Legal Subject Matter - Restraint of Trades
Definition: The prohibition of never practicing a profession/trade ever again
1. Limited restraint is acceptable though: time period or radius factors
Reason: it is not lawful as everyone has the right to earn a living
