v. The law of contract

GMGT3300

role of contract law

• voluntary legal relationships

• not legal obligations forced upon everyone like tort or criminal liability

• parties choose to make a contract and only then become legally obligated to comply with terms

nature of contract (how does it begin?)

begins with a promise, BUT not all promises becomes a contract

• contract comes into existence until an offer has been made by one party and accepted by another party

most popular description of a contract

a promise or set of promises which the law will enforce

what are the 4 basic requirements to form a legally enforceable contract?

1. offer

2. acceptance

3. consideration

4. intention

define offer

• an offer is a description of a promise or set of promises one party (offeror) is willing to make, subject to the willingness of the other party (offeree) to agree to the same promises

• offer is transformed into a contract only if offeree accepts the offer

• both offeror and offeree are bound to carry out promises

is an invitation capable of forming a contract?

NO

• does not provide a definite offer

• only an invitation for others to make offers

• advertisements are a good example of invitations to the pubic

• other ex.

  • auction - auction listing is an invitation, and bidders are offers, only once you are the highest bidder, you will be accepted into forming a contract

  • display at a store - see a jacket on sale (invitation) and if you want to purchase it, you are going up to the cashier to offer to buy it and if they accept, a contract is then formed

ways of communicating an offer

can be written or oral

• also can be expressed without words

  • ex. taxi open doors or bidder raising their finger at an auction

• BUT offeree cannot accept an offer until she or he is aware of it

example of crossed offer

• A tells B she is interested in selling her car

• A write to B saying she is willing to sell her car for 1500$

• B also writes a letter crossing A letter in the mail offering to buy the car for 1500$

• this is not a contract because B was not aware of A’s offer

• unless either of them send a subsequent acceptance, no contract will be formed

define standard form contact

• also known as a contract of adhesion

• an offer prepared in advance by the offeror, including terms (favourable to offereor) that cannot be changed by offeree but must be accepted as is or rejected

reasons for an offer to lapse? (“termination of an offer”)

1. offeree fails to accept offer within the time specified in the offer

2. when offeree fails to accept the offer in a reasonable time if offeror has no specified any time limit

3. when any of the parties dies or becomes insane prior to acceptance

*always put a time-limit on your offer

notice of revocation

an offeror may be able to revoke (withdraw) an offer at any time before acceptance, even when it has promised to hold the offer open for a specified time

• offeror must provide notice of revocation to make it effective

what are two ways to keep an offer open (not to revoke it)?

1. specify in the offer that it is irrevocable

2. implement a subsequent contract called an option

define what an option contract is

• a contract to keep an offer open for a specified time in return for a sum of money (consideration) - without consideration, an option is unenforceable

• in return the offeror agrees:

  • to keep offer open for specified time

  • not to make contracts with other parties that would prevent the offeror from fulfilling its offer

explain rejection and counter-offer by the offeree

when offeree recieves an offer and chooses to change some of its terms - hasnt accepted the, but made a counter-offer of his own

• basically rejected the original offer and brings that one to an end

• if offeror rejects counter-offer, originial offer does not revive, but can re-offer

A sent an email to B offering to sell her car for $2000. B replied by email, “i will give you $1900 for the car.” two days later B sent an email again to A saying , “ ihave neen reconsidering. i will accept your offer to sell for $2000 after all.”

does a contract exist?

NO

• B’s counter-offer brought the original offer to an end

define contra preferentum

court reads contract against the interest of the party that created it, if two interpretations are possible. applies when contracts are ambiguously written

• chatgpt explanation: If you wrote the contract and something in it is unclear, the court will interpret it in the other person’s favour

list the different ways an offer can be terminated

1. rejection of the offer by the offeree

2. counter-offer

3. lapse:

   • no longer available for acceptance

   • offeree fails to accept within a reasonable period of time (no time specified in offer)

   • one party dies or goes insane

4. revocation

Acceptance must be..

• certain and unconditional, and must be a positive act whether in words or in conduct

• if by conduct, conduct must refer unequivocally to the offer made

• chatgpt explanation: Acceptance must be positive and unequivocal. This means it must be clear, definite, and unambiguous.
  Acceptance can be shown by words or conduct, but if it is shown by conduct, that conduct must be directly related to the offer and must clearly show an intention to accept the exact terms of the offer.

moment of formation of a contract

• the moment a contract is formed by acceptance of an offer, each party is bound to its terms

• must be able to analyze:

  • who made the offer

  • when it was communicated

  • when and by whom the offer was accepted

  • when acceptance was communicated

Method of acceptance

• if the offer expressly states how acceptance must be communicated, then it must be completed in that exact way

• by fax, email or telephone call

  • not effective until received

• in person

• by mail:

  • ordinary rule - acceptance by mail is communicated when sent (“postal rule”)

  • if stated in terms, not bound unless and until reaches offeror, then acceptance is not valid when dropped in the mailbox

  • terms of offer will always override the general rules

*note this can also apply to methods of revocation

define bilateral contract

• offer of a promise for a promise

  • promisor: party who is under an obligation to perform a promise according to contract

  • promise: party who has the right to performance according to contract

• a contract where offeror and offeree trade promises and both are bound to perform later

• ex. A promises to sell her car for $2000 to B, and B accepts and promises to pay $2000

• ex. employer promises to pay a wage or salary, and employee promises to work for a future period

define unilateral contract

• offer of a promise for an act

• A contract where only one party makes a promise, and the other party accepts by performing an act.

  • Only the promisor makes a promise.

  • The offeree accepts by doing what the promise asks, not by promising.

relevance of consideration

• presence of consideration makes an accepted offer an enforceable contract

• consideration: the price for which the promise of the other is brought

• an exchange or bargain

  • bargin = each party pays a price for the promise of the other

define gratuitous promises

• a promise made without bargaining for or accepting anything in return

• not a contract enforceable in law

• chatgpt: A promise made without giving or expecting anything in return.

define past consideration

• a gratuitous benefit previously conferred upon a promisor

• since no element of bargain, past consideration is no consideration at all

• chatgpt: Past consideration is when something was done before the promise—it cannot normally count as consideration.

• Therefore, if someone promises to pay for something already done, it’s usually a gratuitous promise because no new consideration is given.

exisiting legal duty and consideration

• If someone is already legally obligated to do something, performing that duty cannot count as new consideration for a contract.

• Consideration must be something new or extra, not something you are already required to do by law.

define impugning a contract

• means you are attacking its integrity

• chatgpt: Impugning a Contract: Challenging or attacking the validity of a contract in a legal setting.