Chapter 6 - The Elements Of The Contract: Consensus And Consideration

Front 1

What are the five elements of a valid contract?

Back 1

Consensus, consideration, capacity, legality, and intention.

Front 2

What is consensus?

Back 2

Mutual agreement to commit to a certain transaction.

Assumed to have negotiated on equal bargaining positions

Involves offer and acceptance

Front 3

What is consideration?

Back 3

Commitment of each party to do something or abstain from doing something.

The price each party is willing to pay to participate in the contract.

Front 4

What is capacity?

Back 4

Parties must be capable of understanding and entering into the agreement.

Limitations in Contracting capacity have been placed on infants, insane or intoxicated persons aliens and Native Americans (pursuant to the Indian Act).

Front 5

What is legality?

Back 5

The object and consideration involved in the agreement must be legal and not against public policy.

Front 6

What is intention?

Back 6

Both parties must be serious when making the agreement.

Both must intend that legally enforceable obligations will result from it.

Front 7

Are verbal agreements binding anaphora and enforceable?

Back 7

Yes, however some legislations requires certain types of agreements to be evidenced in writing.

Front 8

What is formal contract?

Back 8

A formal contract is sealed by the party to be bound by it, traditionally a wax seal is used.

Front 9

What is a simple contract?

Back 9

A simple contract or parole contract is inferred from the conduct of the parties. Portions of an express contract can be implied.

Hint 9

Vending machines

Front 10

What is an express contract?

Back 10

What's an express contract parties have expressly stated and their agreement verbally or in writing.

Hint 10

Real estate contracts, employment contracts

Front 11

What is an implied contract?

Back 11

An implied contract is inferred from the conduct of the parties. Portions of a express contract can be implied.

Hint 11

Vending machines

Front 12

What is a valid contract?

Back 12

A valid contract is a contract that is legally binding on all parties.

Front 13

What is a void contract?

Back 13

Avoid contract does not qualify as legally binding because one essential element of the contract is missing. If the parties fruits that they had a valid contract and follow the agreement, the courts would try to put the parties back in their original position.

Front 14

What is a voidable contract?

Back 14

A voidable contract has legal effect but one of the parties has the option to end the contract.

Front 15

What is an unenforceable contract?

Back 15

A contract that is required to be in writing under the state of frauds but does not meet with the requirement. This contract may be valid in all other aspects but the court will not force the party to perform such a contract.

Hint 15

Is the contract has been performed, a party cannot Escape it.

Front 16

What is an illegal contract?

Back 16

An illegal contract involves the performance of an unlawful Act. An illegal contract is also void, parties cannot be required to perform it.

Front 17

What is a bilateral contract?

Back 17

A contract in which both parties make commitment and assume obligations.

Hint 17

A person offers their home for sale, a buyer agrees to pay $150,000 to purchase the home.

Front 18

What is a unilateral contract?

Back 18

There is no exchange of promises. This contract comes into effect when one party actually performs what has been requested by the other.

Hint 18

A reward for the return of the Lost item, contract created when the item is returned and the offer is accepted.

Front 19

What is a meeting of the minds?

Back 19

Two parties must have a common will in relation to the subject matter of their negotiations.

They must have reached an agreement, once an agreement is reached, the contract is formed and can be implied through contact.

They must care and understanding of the bargain struck and be willing to commit to the terms of the contract. Not necessarily a full understanding or to have even read the contract. Inter both parties must have an opportunity to read and understand the contract.Terms must be clear and unambiguous, ambiguous terms can have the contract declared void for the lack of consensus.

Hint 19

Consensus

Front 20

Describe an offer

Back 20

An offer contains all the terms to be included in the contract: the parties, the subject matter, the price, and any other important terms.

The other party just needs to give consent or denial.

Contract is formed when the offer is accepted.

Some terms can be implied: these terms can only be incidental to the contract, it's important terms are missing, the court can declare no contract.

Hint 20

Consensus

Front 21

Offer on in term agreement

Back 21

When the parties intend to formalize the terms of the contract but also intend to be bound the contract before the formalization.All important terms must be agreed upon.

Front 22

What is subject to clauses?

Back 22

A term that makes the contract conditional on some future event

Hint 22

An offer to purchase a house is subject to the sale of their current house.

Front 23

What is invitation to treat?

Back 23

Invitation to engage in or process of negotiation.Not enforceable.

Different from an offer

Hint 23

Advertisement for a two-for-one sale.

Front 24

What is an offer by conduct?

Back 24

The conduct of the parties May imply an offer

Hint 24

Yelling taxi on a street corner, taking an item to the checkout counter at a store.

Front 25

Describe communication of an offer

Back 25

An offer can only be accepted after it is communicated.You cannot accept an offer made to someone else. Enter all important terms must be brought to the attention of the customer, especially exemption causes especially when onerous or unusual.

Hint 25

Offers that cross in the mail cannot be accepted.The return of the Lost item for a reward if the reward had not been communicated.

Exception, disclaimers on theft or damage

Front 26

Describe the ending of an offer

Back 26

Offer must be in Force at the time of acceptance.Ways an offer can come to an end: the offer expired at a specific time, the offer expired after a reasonable time, death or Insanity of the offer, revocation ( must be communicated), rejection and counter-offer: when the customer declines to accept the offer and makes another offer, request for information that is not a counter offer.

Front 27

What offers cannot be revoked?

Back 27

Option agreement, tenders, unilateral contract after performance has begun.

Front 28

What is an optional agreement?

Back 28

A separate agreement, with separate considerations, given to the offer to keep the offer open for a specified. Of time.

Front 29

What are tenders?

Back 29

Invitation for parties to make an offer, invitation to treat.

Hint 29

Request for tenders on a Land Development.

Front 30

What is duty of good faith?

Back 30

Parties must ensure they act in a way that does not defeat the objectives of the contract.

Hint 30

Insurance contracts

Front 31

Describe standard form

Back 31

Natsume's the parties are in equal bargaining positions when entering into a contract.

One-sided contract with fixed terms favoring the business, rental car contract, insurance contract.

Any ambiguity is red in favor of the disadvantage party.

Front 32

Explain acceptance

Back 32

Acceptance must be complete and unconditional: if a condition is put on acceptance, it is a counter-offer not acceptance, cannot accept part of the offer.

Exchanging order forms is not acceptance.And complete offers cannot be accepted: there's no such thing as a contract enter into a contract.

Front 33

Describe communication of acceptance

Back 33

Acceptance must be communicated to the offer this can be applied by conduct. Enter unilateral contract is accepted through completion of performance.

Silence after an unsolicited offer is not generally acceptance unless the customer and derives a a benefit.

Silence can be acceptance if the parties I have had prior dealings, duty to inform the supplier when he changes his mind.

Front 34

What is the general rule of acceptance?

Back 34

The contract is formed when and where the offer is informed of acceptance of the offer.

Front 35

What is the post box rule?

Back 35

Difficulty to the general rule when parties are dealing over long distance.No one is certain of the Party State of Mind.Acceptance is effective when it is put in the mailbox, exception to the general rule.New problem, offer doesn't know offer was accepted and but is bound by the contract.

Not extended to instantaneous forms of communication, fall back to the general rule.

Hint 35

Example email, Fox.

Front 36

What are the benefits to mail over instantaneous communication?

Back 36

There is a paper record, and can be determined which law applies.

Front 37

Describe consensus in electronic transactions

Back 37

An Intranet add with a link to click maybe an offer rather than an invitation to treat. If there is a button to click to accept the terms and conditions it may be an offer.

Front 38

Describe gratuitous promise

Back 38

One sided promise.Only one party is getting something out of the deal.Courts will not enforce.Once the gift is given the courts will not help to get it back.

Hint 38

A gift

Front 39

What is a gratuitous promise

Back 39

A one-sided promise, only one party is getting something out of the deal. Courts will not enforce it, once the gift is given the courts will not help to get it back.

Hint 39

Consideration

Front 40

Adequacy of consideration

Back 40

Consideration need not be fair, the court will not interfere if the party strike a bad deal. Courts May interfere if a customer has been taken advantage of.

Front 41

The adequate consideration must

Back 41

Had some legal value, it must be specific.

Front 42

Explain the price one is willing to pay

Back 42

Price one is willing to pay for a promise set out in the offer, not always money, it can also be anything the parties think is valuable

Hint 42

Consideration

Front 43

Existing Duty

Back 43

No adequate consideration in an agreement to do what one party is already obligated to do. A new bargain requires new consideration. When a public duty is owed a demand for further compensation is not tolerated.

Hint 43

Gratuitous promises are not consideration.

Front 44

Past consideration

Back 44

The bargain is struck after the price agreed upon has been paid. Problem is in timing of the promise.

Front 45

Paying less to satisfy a debt

Back 45

Common law states that an agreement to take to satisfy a debt is not binding. Legislation can overrule the common law.

Front 46

Illegal consideration

Back 46

Illegal or impose consideration is no consideration.

E. G. Promise to sell drugs for money, agreement between companies to interfere with free competition is Floyd, I promise to turn lead into gold for feet is no consideration.

Front 47

Settlement out of court

Back 47

Both parties are giving up their right to have a court decide the matter.

Front 48

Request for services

Back 48

Quantum Merit - " as much as deserved"

Obligation to pay a reasonable price e.g. agreed to pay a mechanic to fix your car but don't know how much it will cost until the work is done.

Must be paid even if the person is not permitted to finish the job.Does not apply the person seeking that in payment is the one who breached the contract.

Hint 48

Examples of valid consideration

Front 49

Exceptions to the general rule

Back 49

A person making a promise to do something in the future causes the person the promise was made to change their behavior period and prayer cannot be used as a "sword" only a "Shield" (defense).

Elements of promissory estopped, promise made, other party relies upon them promise made to their detriment.

Front 50

Field documents and exception to the general rule

Back 50

When a seal is used there is no requirement to show consideration for the contract to be binding. Seal shows that the parties were serious and being down to the agreement.