Elements of a ContractChapter 16

What is a valid contract?Valid Contract Contract Types of Contracts

Express Implied Simple Contracts under seal

Offer2 parties Offerer-makes the offerOfferee-accepts the offer In order for an offer to be valid, a meeting of

the minds must take place. Meeting of the minds is when both parties understand their rights and responsibilities.

Serious Intent For an offer to be valid, it must be definite

and seriously intended. If an offer is made as a joke or in anger, then

it is not valid. An offerer’s words or conduct must indicate

both the clear intention and willingness to carry out the promise if the offer is accepted.

Definite Terms Terms of an offer must be clearly stated. If goods are being sold, quantity, price, size,

colour, terms of sale and delivery date must be defined.

For goods and services, there is usually a standard price.

Some terms are implied or assumed to be known.

Invitation to Buy Ads, displays and catalogues are invitations

by sellers for customers to make an offer to buy the products.

New forms of advertising are being used such as telemarketing and online advertising.

Federal and provincial governments have passed laws identifying unfair, deceptive and misleading practices.

Ads are not considered promises that are legally binding.

Communicating an OfferAn offer must be communicated before it is

accepted (mail, courier service, fax etc) An offer is not valid until it is received. Identical offers that cross in the mail does not

count as a contract because neither party has accepted the others offer.

Figure 16-5: a lost dog noticeYou are not entitled to an offered reward

because the poster is not communicated to you until after you have returned the award.

Terminating an Offer Unless an offer is accepted, no legal rights or

obligations can arise from it. An offer may also be terminated by revocation, which

means it is withdrawn before being accepted. (can have terms saying it cannot be withdrawn for a specific time.)

If an offer includes no deadline, it remains open for a reasonable length of time before lapsing.

A verbal offer lapses when the parties leave one another.

An offer lapses if one party dies or is declared incapable before acceptance.

Acceptance Can be in either words or by conduct and

must follow certain legal rules. Offerer can make a counter-offer which

changes one or more terms of the original offer. The offerer can accept or deny it.

Communicating Acceptance No contract exists until acceptance is

communicated to the offerer. It is assumed that the offer and acceptance

will be communicated in the same way.

Acceptance by MailAn offer made and accepted by mail is a binding contract. It doesn’t matter if the acceptance is lost, it is still valid if

the offeree can prove it was mailed in time. If it doesn’t arrive in time, a choice can be made by the

offerer to offer it to someone else. If it doesn’t specify a method of acceptance a “reasonable

method” of acceptance e must be used. The contract is not formed unit the acceptance reaches

the offerer. If the mailed offer states that the acceptance must be

mailed back, the acceptance is only valid if it actually mailed back.

Electronic ContractsConducted over the internet (E-commerce). A digital signature is used. It is personal,

verifiable, and protected by encryption. In 2000, legislation was passed to deal with

e-commerce. Electronic Commerce Act 2000

Silence and Inaction

An offerer might be tempted to say that if they are not notified after a certain amount of time, they assume that you have accepted their offer. This is not legally valid.

Acceptance has to be given actively in words or actions.

One exception: Negative-option marketingA consumer must take action in order not to receive an item or service.

Unsolicited goods and servicesIf you receive an unsolicited credit card you are

under no obligation unless you give written acknowledgement that you want to accept the card.

If there is no consumer-protection legislation is in place, you are only liable if you use the goods.

ConsiderationThe exchange of something of value.In most contracts, consideration for one party

is the purchase of a particular item or service, and for the other, it is the money paid.

Types of ConsiderationPresent consideration Occurs at the time the contract is formed. Future considerationOccurs when one or both of the parties promise to do something in the future. (buying on credit) Past considerationA promise by one person to pay another for services that have already been performed for free (not legally binding).

Adequacy of Consideration

Courts do not care about the amount of consideration exchanged as long as one party gives something to the other.

The courts do not regard love, affection, respect or honour as valuable legal consideration.

MinorsA minor is any person under the age of

majority, the age at which a person gains full rights and responsibilities in legal matters including contracts.

CapacityThe ability to enter into a contractAll sane and sober adults can enter into a

contract.There are laws that protect certain groups of

people from being exploited in contract situations.

Minors and ContractsMinors are obligated to fulfill contracts for

necessities (goods and services that everyone needs: food, clothing, shelter, education, and medical services).

To be considered necessary, a good or service has to do with your station in life (super rich vs average)

Best Interest of MinorsIf someone enters into a contract with a

minor for a necessity but the terms of the contract are not in the minor’s best interest, a minor may not be obligated to pay the contract price.

Example: $400 jacket

Void Contracts Contracts that are not in the minor’s best

interest are void (which means its like they never existed).