LAWS 207 - Contract + Tort Law PT2 Flashcards
What is a contract?
A binding agreement made between two of more persons that the law recognizes and will enforce
What formats can a contract be in?
Written or oral
What are the different types of contracts?
Explicit - apartment lease with terms agreed to by landlord and tenant
Implicit -buying a coffee where you serve yourself and hand money over without exchanging a word
What is Canadian contract law based on (outside of Quebec)?
English common law
When did contract law develop and what tort existed before that?
No law of contracts before the 16th century, but a tort of failing to pay money for a debt.
What are the features of a legally enforceable contract?
Offer, acceptance, consideration and intent to create legally binding relations.
Legal capacity to contract and compliance with legal formality requirements.
When is a contract created?
A contract is created when one party promises to do something and another party accepts that offer in its entirety.
What is offer and acceptance
Exchange of promises
Can contractual promises relate to previous acts?
Promises must only relate to acts performed at the time of the contract or in the future
What is and isn’t intention to be legally bound
Commercial or arm’s-length agreements are held to be contracts because the intention to be legally bound is presumed
Social and family agreements and moral vows are not found to be legally enforceable since no intention to be legally bound is presumed.
What is the subjective/purposive approach to legal intent
What did the parties think they intended
What is the objective/literal approach to legal intent
What would a reasonable person think the parties had intended?
What approach is favoured by common law judges
What would a reasonable person think the parties had intended
What is the golden rule of contracts
Giving words their plain and ordinary meaning
What is the exchange of valuable consideration?
Most contracts require that
each party promise
something of value or
promise to suffer a detriment
in order for a contract to be
enforceable.
Example: You park your car in
a parking lot. The lot owner is
promising you a parking
space as valuable
consideration, and you
accept the offer by promising
to pay an agreed price for the
space.
What are the factors to determine legal capacity to contract
Parties are assumed to be roughly equivalent in bargaining power and parties meet minimum standards of intelligence and maturity.
What are the basic legal requirements of an enforceable contract
- capacity of all parties (precondition)
- intention on the part of two or more parties to create legal relations
- mutual agreement
- a benefit (consideration) flowing to each side
- compliance with formal requirements (required only in certain cases; signature, seal, etc.)
What is the positivist approach
The meaning to be given to the words in legal rules should be ordinary, dictionary meaning without resorting to social, economic, or political values to aid in interpretation.
Historically, it was the main approach to interpreting contract law up to the mid-20th century
What is judicial interventionism
Draws on social, economic, and political values in interpreting the meaning and application of legal rules and principles
Has an increasing impact on modern contract law, though Canadian judges tend to use it sparingly
What are the elements of a vaild contract
- Intention to create a legal relationship
- Offer and acceptance of the offer
- An exchange of something value (consideration)
- Legality
Courts rely on a presumption of law that promisors…
intend to be bound by the promises they make
Are arm’s-length transactions binding?
Generally yes.
Non-arm’s-length transactions between family members or parties in a social situation may not be found to be binding
Invitation to treat
An indication of willingness to accept an offer
Also known as invitation to do business, it is not an offer.
Widely accepted that t he person making the invitation does not intend to create a legally binding agreement.
Nature of an offer
Must contain all terms of the contract, either expressly or implicitly
Communication of an offer
Can be made verballing, in writing or through gestures (eg raising your hand to make a bid at an auction)
Forms of acceptance of an offer
By promise (bilateral contract) or by performance (unilateral contract).
What must the acceptance of an offer be like
Clear, unequivocal, unconditional and corresponds directly with the offer.
Communicated to the offeror in the manner requested by or implied by the offer.
Acceptance by promise (verbally, in writing, or inferred).
What situations make an offer no longer open for acceptance
- Rejection
- Counteroffers
- Revocation of an offer
- Lack of capacity
- Lapse of time
Rejection
Offer is no longer open for acceptance
Counteroffer
A response to an offer when an offeree does not unconditionally accept the terms but proposes to add to or modify them
Revocation of an offer
The offeror may, at any time prior to the acceptance of the offer, revoke the offer thus declaring it a nullity and no longer open for acceptance.
Lack of capacity
An offeror dies, declares bankruptcy, or becomes mentally incompetent, the offer no longer open for acceptance
Lapse of time
An offer may cease to be open for acceptance based on the deadline in the offer or implied deadline, depending on the nature of the subject matter of the potential contract
Rules for determining communication of the offer, acceptance, counteroffer, rejection and revocation
Generally effective when received by the offeror
If acceptance is made in writing the postal acceptance rule applies
The rule that an acceptance is effective when sent by the offeree if sent by a non-instantaneous mode of communication (eg mail)
Gratuitous promises
A promise made in exchange for nothing (eg the promise of a donation to a charity)
Deed
Written document, made under a seal
Elements of promissory estoppel
- Existing legal relationship
- Clear promise or representation is made
- Promisee relied on promise or representation
- Promisee acted on promise or representation to their detriment
- Promisee acted equitably
Adequacy of consideration
Courts enforce contracts with grossly adequate consideration for a promise, provided there is a equal bargaining power between the parties and no evidence of fraud, undue influence or duress
Past consideration
Something someone received before the promise was made is not consideration
Debtor-creditor relationships
Debtor is obligated to pay creditor a sum of money and this obligation is discharged once the full sum is paid
Existing legal obligation
Must be fresh consideration for a new promise
Quantum Meirut
As much as is deserved - implies a promise to pay a reasonable amount, even in the absence of a contractual term for price
Courts look to prices charged by similar suppliers and fix the contract price accordingly
A contract must have a legal purpose and so it cannot violate…
Any statute or public policy
If a contract has an unlawful purpose and is declared void…
The court may restore parties to pre-contract position
If a contract has an unlawful purpose and is declared void and illegal…
there will not be remedy available to the parties
What contracts violate statute law
Prohibited activities - ex murder, robbery, assault
Prohibited agreements - ex agreements to fix prices, eliminate competition, allocate markets, create monopolies
Activities with statutory requirements - ex contract in which an employee agrees not to make any workplace injury claims if injured on the job
What types of contracts violate public policy
Contracts designed to interfere with the administration of justice, contracts that injure the public service, contracts that promote unnecessary litigation, contracts that suppress evidence of a crime
When has restitution been permitted
Where a contract is illegal and granting relief is clearly not contrary to public policy or a party acted in good faith or in justifiable ignorance of whether the contract was legal or illegal.
What are the different contract classifications
Formal and simple
Formal contract
Deeds - are in writing and sealed by the promisor
Simple contract
May be oral or in writing and is not a formal contract
What is the statute of frauds
Enacted in 1677 England to deal with long-term leases and land rights
What does the statute of frauds require?
Certain contracts must be in writing and signed by the parties (eg contracting with minors, sale of land)
What are the technical requirements for written contracts
- Identify the parties to the contract by name of description
- Identify the terms of the contract including the offer that has been accepted and the consideration
- Be signed by the party whose promise is being enforced
- Include a printed or stamped signature which may suffice in place of an actual signature
Locus Sigilli
Seal
When are seals needed in to make a contract enforceable
- Change to document or clause with no new consideration
- Formal contract
- Corporate contract
- Gratuitous promise
What is the courts approach for enforcing contracts in respect to protecting weaker parties
Courts generally have a “hands off” approach but will sometimes intervene where parties are clearly unable to protect themselves in the bargaining process (eg one party takes advantage of a position of trust)
Are contracts with minors enforceable?
Generally, contracts with minors are not enforceable, but contracts for “necessaries of life” made by a minor are enforceable
How are necessaries determined? (contracts with a minor)
Goods that are “necessaries for life” are contextual; socioeconomic class may be relevant
Medical and dental services and sometimes employment, are necessaries
Is a minor required to pay for necessaries
A minor is liable to pay a reasonable price for necessaries that have been sold and delivered to the minor
What makes an employment contract enforceable for a minor
Generally employment contracts are enforceable unless the terms do not “benefit” (ie appropriate salary) the minor
The test of “benefit” may be whether a “prudent and informed parent” would have approved the contract for their minor child
Are contracts for non necessaries enforceable for minors
If the minor choses to enforce it
If a contract for non necessaries for a minor is fully executed…
the contract cannot be set aside; the court may order refund if price paid by the minor was not reasonable
If a contract for non necessaries for a minor is not fully executed
the minor may avoid the contract but must return goods or money paid by the other party
If a contract for non necessaries for a minor is ongoing
the minor can repudiate future liability but cannot recover money spent for benefits already received
What are the effects of reaching the age of majority on minor’s contracts
If the contract is for non-necessaries and has not been repudiated by the minor during their minority, contract has to be classified as to type:
- contracts for non-necessaires that are valid unless the minor repudiates them
- contracts for non-necessaries that are invalid unless ratified by the minor
Contracts for _______ that confer an ongoing benefit to the minor are valid unless _______ by the minor
non-necessaires, repudiated
What forms can repudiation take?
Oral, written, or inferred from an act
Contracts for _______
involving a one-time benefit for
the minor are invalid unless
_______in writing and _______ by
the minor.
non-necessaries, ratified, signed
What makes contracts with minors void
Contracts that are clearly prejudicial or harmful to the minor
What are the consequences of void minors’ contracts
- The minor is entitled - not being bound to the contract - to have all of their money or property returned
- The adult need not be restored to their pre-contract position
What factors may limit the capacity of an individual to enter a contract
Drunkenness: an intoxicated party may void a contract on the basis of their own intoxication
Mental illness: lack of capacity may arise from mental illness
What are representations
A statement made to induce someone to enter a contract
What are material representations
A statement of fact, not opinion, made by one party, that induced the other party to enter into the contract
What are terms
A provision of a contract, falling into two categories: conditions and warranties
What is a condition
Essential term of a contract, the breach of which denies the innocent party the benefit of the contract or defeats the purpose of the contract
What is a warranty
Minor term of a contract, the breach of which does not defeat the contract’s purpose
What is the literal approach to contract interpretation
Giving words their plain and ordinary meaning
What is the contextual approach to contract interpretation
Interpreting words and clauses based on the presumed intentions of the parties and the circumstances of said intentions
What is the golden rule in contract interpretation
Giving words their plain, ordinary meaning, as long as it does not lead to an absurdity
wk11 ch 13 slide 6 the search…
