Ch. 3: Contract Law

Front 1

Elements of an enforceable contract

Back 1

1. Offer

2. Acceptance

3. Consideration

4. Capacity

5. Legality

6. Intention

7. Writing (only for certain types of contracts)

Front 2

Formation of a contract

Back 2

- Contracts can be written, oral, or by conduct

- Offeror makes an offer, the offeree accepts

- Offers may contain express terms and/or implied terms

- The form of an offer is unimportant as long as it conveys a proposal

- An offer must state all terms clearly and unambiguously

- Offers must be communicated before they can be accepted

Front 3

Invitation to do Business / Invitation to Treat

Back 3

- Not a real offer, rather a device used to attract customers to start negotiations for a contract

- Does the person making the offer intend to be bound if offeree accepts terms?

Eg. Advertisements

Front 4

Termination of an Offer

Back 4

- Expiry of a specified time

- Lapse of a reasonable time

- Rejection or counter-offer

- Revocation

- Death or Insanity of offeror

Front 5

Acceptance of a Contract

Back 5

- Must be mirror image of offer; any variation in terms is a counter-offer

- Offeror cannot stipulate silence as a mode of acceptance

- Acceptance is effective when communicated to the offeror; that is when and where contract is formed

Front 6

Postal Acceptance Rule

Back 6

Acceptance is complete when properly stamped and addressed envelope is placed in mailbox.

Applies where offer stipulates acceptance by mail or offer is made by mail and no stipulation is made as to how acceptance should be made.

Front 7

Consideration

Back 7

- Contracts require an "exchange" that must have some material value

- Adequacy of consideration is not an issue unless it relates to fraud, duress, etc.

Front 8

Forms of Invalid Consideration

Back 8

- Gratuitous promise: Nothing given in return

- Past consideration: Benefit previously conferred

- Existing legal duty: Already required under contract

Front 9

Use of a Seal

Back 9

- Alternate way to make promise binding

- Seal may replace consideration but not other requirements for a binding contract

- Must be affixed at time contract is signed

Front 10

Intent

Back 10

- Law presumes parties intend to be bound by contract

- Presumption is less clear with family and friends

- Test Employed by Courts: Would a reasonable person looking at the outward conduct of the parties say they showed a serious intent to form a contract?

Front 11

Capacity - Infants

Back 11

- Contracts voidable at his or her option

- Enforceable by minor against the adult, except in BC, where infants are bound by contracts for necessities

Front 12

Capacity - Insanity & Impairment

Back 12

- Contract is voidable at impaired party's option, with the exception for necessities

- Enforceable by impaired party against other party, but must show incapable at time of contract and other party was aware of condition

- Must repudiate immediately and accept no benefits

Front 13

Legality

Back 13

Contracts must be legal to be enforceable

Front 14

Writing

Back 14

- Required for contract not to be performed by either party within 1 year, or contract concerning an interest in land, or personal guarantees

- Evidence of writing may come into existence after contract is formed

- May be several documents

Front 15

Void/Voidable Contracts

Back 15

Void contracts have no legal effect, and cannot be "cured".

Voidable contracts have legal effect until declared invalid.

Front 16

Mistake

Back 16

A mistake is an error in term or an erroneous assumption about the facts.

For a contract to be invalid, a mistake must go to the nature of the agreement, and must not be an error in judgement. It rarely gives rise to a remedy.

Front 17

Misrepresentation

Back 17

A misrepresentation is a false statement about a material fact made during the course of negotiations which induced the other party to enter the contract. They can be innocent, negligent, or fraudulent. Remedies include either rescission or damages.

Front 18

Standard Form Contracts

Back 18

- Offer presented in printed document, the terms of which cannot be changed by offeree

- Special terms need to be brought to offerree’s attention

- Courts presume an unqualified acceptance

Front 19

Parol Evidence Rule

Back 19

Where a contract is in writing, no evidence will be admitted to “add to, subtract from, vary or contradict” the written contract.

Eg. Cannot say you discussed things differently than those facts which appear in a written contract

Front 20

Termination of a Contract

Back 20

- By performance (completion of service)

- Agreement (including terms of contract)

- Frustration (must occur after contract is formed

- Operation of Law

- Breach (only if serious and harmed party chooses to end contract)

Front 21

Breach

Back 21

- Occurs when one party wrongfully fails to perform its obligations

- Does not necessarily lead to termination - Condition - breach of fundamental, essential terms, allow for termination and damages

- Warranty - non-essential term, does not discharge contract, damages can be claimed

Front 22

Remedies

Back 22

Remedies are subject to exemption clauses, remoteness, duty to mitigate and liquidate damages. The goal of the court is to put the harmed party in the same position as if contract had been performed.