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29 Cards in this Set
- Front
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List the overarching types of contractual defects |
Incapacity to contract Absence of writing Consumer protection and writing requirements Mistakes Doctrine of frustration Documents mistakenly signed Unfairness during bargaining Illegality Covenants in restraint of trade |
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Define capacity |
The legal power to give consent |
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Define a minor How can minors have the incapacity to contract? |
A minor is a person who has not yet reached the age of majority (the age at which a person is held fully accountable in law) A contract is voidable if a minor is entitled to avoid the legal obligations that would have otherwise been created; they may also elect to avoid contractual liability in this case Minors who wish to avoid a contract must give back any benefits that they created as a minor |
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How can mentally incapacitated people have the incapacity to contract? |
If a court declares them as lacking in mental capacity, their contracts are immediately void and cannot be enforced Even if there is no court declaration, the contract can still be voided if the other party should have recognized that the person lacked the mental capacity to contract at the time it was formed |
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How can intoxicated people have the incapacity to contract? |
Two conditions must be met: - The person must have been so drunk that they could not know or appreciate what they were doing - The other party must have been alerted to that fact The intoxicated party must make a prompt election to void the contract once sober |
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How can business corporations have the incapacity to contract? |
Chartered corporations: treated the same as individuals who have reached the age of majority - Contracts entered that breach its charter will still be binding Statutory corporations: have limited contractual capacity - If the corporation acts 'ultra vires' (beyond its authority), the contract is unenforceable |
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Define an association How can associations have the incapacity to contract? |
Associations are usually unincorporated business organizations that lack contractual capacity - Exceptions include trade unions among others, and are generally legislated as statutory corporations Generally, an individual member is responsible for entering a contract for the association's benefit; the individual assumes liability for the agreement |
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Define an Indian Band How can Indian bands and aboriginal persons have the incapacity to contract? |
An Indian Band, according to the Indian Act, is a body of Aboriginal people whose land and money are held by the Crown Indian bands have contractual capacity similar to corporations - they can sue and be sued Under the Indian Act, 'Indians' have restrictions on their capacity to contract (in relation to reserve land) - Property cannot be used as security for a credit transaction, and cannot be transferred to another person without Crown consent |
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How can public authorities have the incapacity to contract? |
The only limit to a particular officer's capacity is the division of powers from the Constitution Act of 1867 |
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What is the Statute of Frauds? |
It requires some contracts to be evidenced in writing as a way of reducing the risk of perjury or lying in legal proceedings - Less common today since computers allow altering of agreements after they have been signed |
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Define a guarantee |
A contractual promise by a third party, the guarantor, to satisfy a debtor's obligation should the debtor fail to do so - Guarantor gives a conditional promise, e.g. a parent guarantees a bank loan only if their child defaults |
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Define indemnity |
An unconditional promise to assume another's debt completely - Guarantor is responsible for the loan as soon as it becomes due, whether the bank has contacted the original debt holder or not |
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How do guarantees and indemnity contracts differ with respect to how banks handle them? |
A bank needs to have a guarantee in writing, but can enforce an indemnity contract with just oral communication |
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What are some examples of contracts that are unenforceable unless evidenced in writing? |
Contracts for the sale of an interest in land Contracts not to be performed within a year |
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Define writing requirements (of a contract) List the criteria for writing requirements |
The form and content of the note or memorandum - either the agreement has to be in writing or there must be a note or memorandum that provides evidence of it Provides evidence of the essential elements of the contract - parties' names, subject matter, price Signed by the party against whom the agreement is being enforced A court can be satisfied with the combined effect of several documents, even if they do not expressly refer to each other |
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Define the effect of non-compliance |
Since the Statute of Frauds renders some contracts unenforceable unless they are sufficiently evidenced in writing, some contracts cannot support an action for breach of contract and therefore the contract can be unenforceable However they can still be used to pass property and to provide a defence |
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Define consumer protection (writing requirements) |
Certain types of agreements required to be in writing to protect consumers' interests - sometimes a copy of the agreement must be provided to the consumer - Helps reduce the number of disputes and is often in the interests of consumers, who are typically the weaker party in a contract |
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What are the general principles of mistakes in contracts? |
Some mistakes occur when an error affects the basic process of contract formation Other mistakes make it impossible for the objective of the contract to be achieved |
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List and explain the kinds of mistakes that prevent the creation of contracts |
Mistaken identity, which will only render a contract defective if: - The mistake was known to the other contractual party, and - The mistake was material (i.e. matters to the mistaken party in an important way) Mistake about subject matter - e.g. When someone makes an order with an understanding of a shipment date in October, but ends up receiving it in December (assuming the ship name was given and no date specified) when they no longer need it, because both the buyer and seller mistook the details of two ships with identical names |
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Explain mistakes that render the purpose of the contract impossible |
Both parties make the same mistake with regards to the existence of the subject matter, usually based on a false assumption - One can be protected by a force majeure clause |
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Define frustration of a contract What is the Doctrine of Frustration? |
A contract is frustrated when some event makes performance impossible or radically undermines its very purpose The Doctrine of Frustration is an attempt to strike a balance between the parties, and only applies if neither party is responsible for the relevant event - The parties may have agreed that one of them bear the risk of loss (for example through a force majeure clause) |
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How does the Doctrine of Frustration differ between common law jurisdictions, and other jurisdictions with legislation? |
Common law jurisdictions use an all-or-nothing rule - the purchaser can recover all of their contractual payments if they have not received any benefit from the seller, or nothing otherwise In other jurisdictions with legislation: - If the purchaser paid an advance or deposit, the court has discretion to divide the money between the parties - If the purchase received some benefit from the seller, the seller is entitled to either retain received money or make a fresh claim for compensation against the purchaser - If the purchaser neither paid money nor received benefit under the contract, the entire burden of the frustrating event falls on the seller |
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How are documents that are mistakenly signed handled? |
Generally, a signature that was a mistake is irrelevant and the contract holds However, there is one exception; 'non est factum': - Means "this is not my deed" - Only available if there is a fundamental, total or radical difference between what a person signed and what they thought they were signing - Cannot be used by someone who, due to carelessness, failed to take steps to understand the document |
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List the types of situations classified under unfairness during bargaining |
Duress Undue influence Unconscionable transactions |
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Describe how a contract formed by duress is voided List the types of duress |
If a contract is the product of duress, it is voidable - the innocent may choose not to perform, and to recover any payments they made under the agreement Duress of person: physical violence or threat of violence Duress of goods: seizure of goods or threat of seizure Economic duress: threat of financial harm - More likely to be considered if it was made in bad faith - Victim must show they could not have reasonably resisted - Courts are more sympathetic if victim promptly starts proceedings, and if the victim protested when presented with pressure - Contract more likely to be voidable if the victim succumbed to pressure without legal advice |
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Define undue influence Define fiduciary relationships |
The abuse of a relationship in order to influence someone and induce an agreement - Where no special relationship exists, there will be no presumption of undue influence - plaintiff must prove that undue influence was applied A relationship in which one person is in a position of dominance over the other - Results in a power imbalance based on trust and confidence - The law presumes undue influence whenever a fiduciary is involved in a transaction - If the fiduciary can prove the contract was fair, the contract will stand |
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Define unconscionable transactions What must the weaker party prove? |
An agreement that no right-minded person would ever make and no fair-minded person would ever accept - There was an improvident bargain - made without regard to the future, and - There was an inequality in bargaining positions between the two parties |
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Define illegal agreements How can illegality void a contract? |
Agreements expressly or implicitly prohibited by statute The common law is unwilling to recognize agreements that are contrary to public policy - e.g. A hitman cannot sue his client for not paying him after killing someone |
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Define and describe covenants in restraint of trade |
A contractual term that unreasonably restricts one party's liberty to carry on a trade, business or profession in a particular way Often require a person to: - Trade or not trade with a particular person - Work for someone in particular or, at least, no one else This type of covenant will be considered to be contrary to public policy unless the party seeking enforcement of the agreement can prove the limitation is reasonable |
