Elements of a Contract

1. Elements of a Contract Chapter 16

2. What is a valid contract? • Valid Contract • Contract • Types of Contracts • Express • Implied • Simple • Contracts under seal

3. Offer • 2 parties • Offerer-makes the offer • Offeree-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.

4. 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.

5. 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.

6. 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.

7. Communicating an Offer • An 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 notice You are not entitled to an offered reward because the poster is not communicated to you until after you have returned the award.

8. 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 • An offer may also be terminated by revocation, which means it is withdrawn before being accepted. (can have terms saying it cannot be withdrawn for a specific time.)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.

9. 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.

10. 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.

11. Acceptance by Mail • An 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.

12. Electronic Contracts • Conducted 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

13. 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 marketing A consumer must take action in order not to receive an item or service.

14. Unsolicited goods and services • If 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.

15. Consideration • The 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.

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

17. 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.

18. Minors • A 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.

19. Capacity • The ability to enter into a contract • All sane and sober adults can enter into a contract. • There are laws that protect certain groups of people from being exploited in contract situations.

20. Minors and Contracts • Minors 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)

21. Best Interest of Minors • If 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

22. Void Contracts • Contracts that are not in the minor’s best interest are void (which means its like they never existed).