adms 2610 chapter 7_ 10e
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Part 3 The Law of Contracts
Prepared by Douglas Peterson,
University of Alberta
Chapter 7 An
Introductionto the LegalRelationship
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Historical development
Elements of a valid contractIntention to create Legal Relationship
OfferNatureCommunication of an offerLapse and Revocation
AcceptanceConsiderationCapacity
Legality
Overview
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Contract
An agreement made between two or morepersons that is enforceable at lawFreedom of contract, the general ability of
the parties to create specific rights andduties
Introduction
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Merchant law
Ecclesiastic lawManor courts17 th century development of thebargain theory of contract
Historical Development
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1. An intention to create a legal relationship2. Offer3. Acceptance4. Consideration5. Capacity to contract
6. Legality
Requirements must be met for a contract tobe enforceable by the Courts
Elements of a Valid Contract
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Contract
Meeting of the minds (consensual agreement)Consensus to subject and object of the contract
Essential element is a promise
Party intended to be bound by promise madeIntention is a presumption at law
Intention
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Presumptions in contract lawStrangers intend to be bound by their promises
Family members and close friends do not intendto be bound in contractsBoth are presumptions that can be rebutted
Invitation to do BusinessAdvertisements are not offersInvite offers that seller may accept or reject
Presumptions
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Intention of the Parties
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Nature of an OfferA tentative promise subject to a condition
Communication of an OfferAn offer must be communicated to the otherparty to be acceptedCannot accept an offer you do not know of
Crossed offers in the mail do not constitute acontractOnly person to whom offer is made may accept it.
Offer
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AcceptanceA statement or act given in response toand in accordance with an offerAcceptance must be communicated in themanner requested or implied by theofferor in the offer
By words or conduct
Acceptance
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Rules
Offeror is master of their offer and candictate form of acceptanceIf acceptance is to be by oral means
Acceptance complete by eitherphone or direct speaking to offeror
Acceptance (Specific Rules)
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Acceptance by postAcceptance takes place when the letter, properlyaddressed and postage paid, is placed in thepostboxAcceptance effective where placed in the postbox
Governing law, unless otherwise stated, is the law
of the place where the letter is postedPostal acceptance allowed even if not specificallystated if it is the normal or usual mode of acceptance
Postal Rule
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All other modes
Acceptance not complete until offerormade aware of acceptanceUntil it reaches offeror
Acceptance complete when and wherereceived
Other Modes of Acceptance
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Electronic documents covered by Federal lawPersonal Information Privacy and Electronic Documents Act E-documents are deemed to be sent whenthey enter a system outside of the senderscontrol , or when they become capable of being retrieved and processed by theaddressee
E-contractors can opt out of statutoryprovisions in their terms of use Location of the transaction determiningwhere contract is located is more difficult on-line
Electronic Offer and Acceptance
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Data messages are deemed to be dispatched fromthe originators place of business and received atthe addressees Location of contract (choice of law) is not readilyevident when messages are routed throughmultiple nations or provinces servers. The deemingprovisions above mark the location of offer andacceptance , not necessarily the location of thecontractLocation of contract is quite often stipulated in theexpress terms of use agreed to by the parties Courts are willing to seize jurisdiction based uponlocus of harm or based on taxation/customs issues
On-line Contracts
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Must be clear and unconditionalCounteroffer is a new offer and a rejection of
original offerSilence is not acceptance unless pre-existingagreement to this effect exists
Exception: party assented to the contractConsumer protection reinforces common lawrule of silence is not acceptance
Nature of Acceptance
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RulesIf a method of acceptance is stated, offeree mustcomply with requirementsIf only preference for a particular method of acceptance is stated then:
If a method other than the method mentioned
in the offer is selected, the acceptance wouldonly be effective when it was received by theofferor
Nature of Acceptance
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Unilateral Offers
An offer made to the world at largeThe performance of the act is acceptanceOfferor cannot revoke offer so long as
offeree is in the course of performing theirpart
Nature of Acceptance
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Forms of Acceptance
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LapseThe termination of an unaccepted offer bythe passage of time, a counteroffer, or thedeath of a partyRejection of an offer: offer cannot beaccepted later unless the original offer isrevived
Lapse of an Offer
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Passage of timeOffer lapses after:
Stated time in the offer expiresIf not stated period of time, after areasonable period of time
Reasonable period depends on subjectmatter and circumstances of thetransaction
Lapse of an Offer
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RevocationThe termination of an offer by notice
communicated to the offeree before acceptanceOffers can be revoked anytime before acceptanceunless there is an optionRevocation must be communicated to the offereeRevocation can be communicated in any form aslong as it is communicated
Revocation of an Offer
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OptionA separate promise to keep an offer open for aperiod of timeRequires consideration or signed under seal
Indirect RevocationRevocation can be communicated through
someone else (indirect)Must prove offeree had notice of revocationindirectly from a reliable source
Revocation of an Offer
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Offer and Acceptance
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ContractsPromises enforced by the courts
RequirementsIntention to create legal relationship
Presumptions certain people intend to contractand certain people do not intend to contract
OfferMust be communicated to offeree and only oneto whom offer is communicated can accept
SUMMARY
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AcceptanceMust be communicated in manner requested by
offerorPostal rule acceptance is valid when and whereplaced in post box
Other forms when and where acceptancereceived by offerorCounteroffers are a rejection and new offer
SUMMARY
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Lapse
Passage of time, counteroffer, or death of party
Revocation
Anytime before acceptance unless anoption is given
SUMMARY