Contract Creation

Contract

Contract

A promise, or set of promises, that the law will enforce

3 Elements To Create Contract

• Offer

• Acceptance

• Consideration

Offer

Definition:

A tentative promise made by one party, subject to a condition or containing a request to the other party

Elements of Offer:

• Definite and Certain

• Communicated to recipient

• Intended to be binding, once accepted

Invitation To Treat

Invitation for people to create offer

Standard Form Contract

An offer that leaves no room for negotiation over contract terms

Counter-Offer

A new offer that is created as a result of a rejection of the original offer

Acceptance

Final unqualified consent to the terms of the offer

Ways of Revoking an Offer

• Revocation

• Lapse

Revocation

Offeror can revoke the offer at any time prior to its acceptance

Exceptions To Revocation

• Offeree paid to keep offer open

• Offer was made under seal

Lapse

If the offer has a time limit to accept and that time passes, the offer is deemed revoked

Communication of Acceptance

Regards to when and where the contract acceptance occurs is reasonable in the circumstance

Postal Rule Exception

Acceptance occurs when acceptance is put on the mailbox, not when received

Consideration

Price paid for contract

Gratuitous Promise

When a party makes an offer that’s accepted by another party without consideration – no consideration = no contract

Past Consideration

A past promise that forms the basis of a future promise - past consideration = no consideration

Debtor/Creditor Rule

A new contract is not formed when a debtor promises to reduce their debt

Mercantile Law Amendment Act

If a creditor accepts part performance in settlement of a debt, and the debtor actually paid the reduced amount, the entire debt is extinguished

Seals

A promise made property under the seal of the promisor doesn’t require consideration to make it legally binding

Equitable Estoppel

Court will exercise its “equitable jurisdiction to prevent a party from denying his/her promise, despite no consideration

Intentions To Create Legal Relations

If two parties enter a contract without the intentions to of creating legal obligation (like a joke), the contract isn’t legally binding

Capacity

Some parties lack the necessary legal competence/capacity to enter contracts, so they hold limited or no capacity – i.e., minors

Capacity of Minors

Generally NOT legally bound to contracts, and can void most of them

Limitations On The Capacity Of Minors

• Contracts on the supply of necessities/essentials

• Beneficial contracts of service

Capacity of Mentally Incompetent People

Same as minors, not legally bound to contracts

Void Vs Voidable

Void: Failed formation = no contract

Voidable: Contract exists, but can be made void at option of one of the parties

Legality

The object of the contract can’t be illegal

When Is A Contract Illegal

• Violation of an act

• Violation of common law or public policy

Certainty Of Terms

Terms of the contract must be clear enough to be understood as certain, or else contract is deemed unenforceable

Void For Uncertainty

Vague or incomplete agreements can be deemed “void” by the court, so contract never existed

Vague Terms

Unclear terms used

Incomplete Contracts

Contract missing essential terms