AFM 335 - Contract Law

Vocabulary-style flashcards covering the principles of contract formation, terms, defects, termination, and employment law as presented in the AFM 335 lectures.

Contract

An agreement between two parties that is enforceable in a court of law.

Contract Formation Formula

$Offer + Acceptance + Consideration = Contract$ ($O + A + C = K$).

Offer

A clear expression of willingness to enter into a contract on specific terms, made with the intention that it will become binding once accepted.

Acceptance

Occurs when the offeree clearly and objectively communicates unconditional agreement to the terms of the offer.

Counter-Offer

Occurs when a party responds to an offer by changing or adding terms; it generally rejects the original offer and replaces it with a new offer.

Achter Land & Cattle Ltd. v. South West Terminal Ltd.

A Canadian court case where a text message reply using an emoji was held to potentially create a binding contract.

Consideration

Something of value exchanged between parties as part of a contract, often referred to as $Quid\,Pro\,Quo$ (something for something).

Gratuitous Promise

Also known as a gift; a promise made without receiving anything in return, which is usually not an enforceable contract.

Option Contract

A separate agreement where one party agrees to keep an offer open for a specified period of time, usually in exchange for additional consideration.

Express Terms

Provisions in a contract that state or make explicit one party's promise to another; they can be written or verbal.

Implied Terms

Contract terms that are not explicitly included by the parties but legally exist as part of the agreement, often through legislation or common law.

Rule of Business Efficacy

A principle that allows a court to imply a term to make a contract functionally workable.

Parol Evidence Rule

An evidence rule stating that if a written contract represents the final agreement, a court will not consider outside evidence that suggests additional terms.

Entire Agreement Clause

An express term used to explicitly invoke the parol evidence rule by stating that the written contract contains all agreed terms.

Force Majeure

A clause that addresses unexpected events or 'Acts of God' that release parties from their obligations without negative legal consequences.

Condition Precedent

A specific condition that must occur before contractual obligations become fully enforceable.

Condition Subsequent

A contract term that can automatically terminate the agreement if a specific event occurs, such as a price threshold being exceeded.

Liquidated Damages Clause

A provision that predetermines the specific dollar amount of damages payable upon a breach of contract.

Exclusion Clause

A term used to exclude or limit legal liability for certain or all types of claims.

Rescission

A legal remedy that cancels a contract and aims to restore the parties to their pre-contractual positions.

Misrepresentation

A false or misleading statement that induces another party to enter into a contract; it can be innocent, negligent, or fraudulent.

Duress

Improper pressure or coercion, such as physical threats or economic pressure, that undermines a party's ability to freely consent to a contract.

Undue Influence

Improper influence arising from relationships of trust, dependency, or authority that undermines independent consent.

Unconscionability

Occurs when a contract is so unfair that a court may refuse to enforce it, usually due to a serious inequality of bargaining power or exploitation.

Novation

A process where parties replace an existing contract with an entirely new agreement, discharging the original contract.

Breach of Condition

A serious breach affecting an essential term of the contract, which may justify termination and damages.

Breach of Warranty

A less serious breach involving a non-essential term; it usually allows for damages claims but not the termination of the entire contract.

Anticipatory Breach

Occurs when a party clearly indicates in advance that they do not intend to perform their future obligations.

Substitution / Assignment

The transfer of contractual benefits and obligations to another party, usually requiring the consent of the other original party.

Frustration

A legal doctrine that provides relief when an unexpected and unforeseen event makes performance of a contract functionally impossible.

Factoring

A business practice involving the acquisition of contractual benefits (such as accounts receivables) from another party for cash.

Mitigation

The legal expectation that an 'innocent' party acts reasonably to limit their losses after a breach has occurred.

Specific Performance

An equitable remedy where a court orders a party to perform their specific obligations under the contract.

Quantum Meruit

A restitutionary remedy meaning 'as much as he has deserved,' used to award compensation when a formal contract cannot be established.

Independent Contractor

A worker who is autonomous, owns their tools, and bears the risk of profit or loss, as opposed to being an employee.

Dependent Contractor

A worker who possesses contractor characteristics but is economically dependent on a single primary client; they may be entitled to reasonable notice of termination.

Just Cause

A high legal threshold justifying immediate termination without notice, usually involving serious misconduct, habitual neglect of duty, or willful disobedience.

Constructive Dismissal

When an employer unilaterally changes the employment relationship in a way that allows the employee to treat the contract as having been ended by the employer.

BFOR (Bona Fide Occupational Qualification)

A standard or rule that is permitted even if it is discriminatory because it is reasonably necessary to perform the job and was adopted in good faith.

Bardal v. Globe and Mail

A landmark case identifying factors for determining common law notice, including character of employment, length of service, age, and availability of similar employment.