U of T RSM 225 Class 8 Lecture Slides Contracts Consideration v15 - v1
Page 1: Elements of a Contract
Offer
Acceptance
Consideration
Page 2: Consideration
Definition: The amount paid, or the promises made, by each party for the actions of the other
Types:
Unilateral: Offer accepted through performance of an act.
Example: Ordering a coffee at Starbucks (coffee in exchange for $3.00).
Bilateral: Exchange of promises.
Example: Agreement to supply monthly shipments of natural gas in exchange for monthly payments.
Requirement: Consideration is required for enforceability.
Page 3: Gratuitous Promises
Definition: Unilateral promise without corresponding promise or payment.
Enforceability: Generally unenforceable; no legal remedy if not performed.
Implication: Once performed, the individual cannot reclaim the service or property.
Key Term: "No consideration."
Page 4: Adequacy of Consideration
Court's Stance: Courts do not assess the adequacy of consideration.
Example: The "peppercorn example" illustrates that as long as a bargain is agreed upon, it constitutes valid consideration.
Binding Agreements: Mutual promises form good consideration regardless of newfound realizations about the initial agreement.
Exceptions: Courts may void a contract due to fraud, duress, or undue influence.
Page 5: Motive and Past Consideration
Irrelevance of Motives: A party's motives in a contract are not legally relevant.
Moral Duty: Will not establish a legal contract.
Case Reference: Eastwood v. Kenyon indicates that past benefits cannot bind a future promisor.
Page 6: Consideration and Existing Legal Duties
Case Reference: Stilk v. Myrick - A promise to pay sailors not to abandon a ship was unenforceable as they were already contract-bound.
New Consideration: A promise related to sailing an unseaworthy ship can be enforceable as it constitutes fresh consideration.
Page 7: Particular Consideration Problem
Scenario: ABC Co. and XYZ Inc. – ABC encounters difficulties and hints at abandoning the project. XYZ's promise to pay extra for timely completion raises questions about enforceability and pressure.
Economic Blackmail: Discussion on whether ABC's demands are fair or coercive.
Page 8: Particular Consideration Problem Continued
U.S. Courts: ABC can abandon job and is entitled to extra payment as fresh consideration for not abandoning the project.
Canadian/English Courts: View XYZ as having to pay despite original conditions, seeing it as blackmail; hence, no enforceable payment is owed.
Third Party Example: Payment from JPR & Associates to ABC, representing fresh consideration.
Page 9: Estoppel
Definition: Estopped means prevented; refers to preventing someone from denying a statement to another's detriment.
Types: Historically, focused on statements of fact, leading to the development of promissory estoppel.
Page 10: Promissory or Equitable Estoppel
Recovery Possibility: An individual, Ben, may suffer losses due to reliance on a gratuitous promise by Anne.
Traditional View: Generally, a party cannot recover for reliance on a gratuitous promise unless special circumstances exist.
Page 11: Promissory or Equitable Estoppel Continued
English Law: Equitable estoppel serves as a defense but not a foundation for a claim.
U.S. Law: Allows for "injurious reliance" claims as a foundation for recovery.
Case Reference: Hughes v. Metropolitan Railway highlights legal relations and performance alterations due to promises.
Page 12: Promissory or Equitable Estoppel Continued
Canadian Law: Expanding view of equitable estoppel.
Case References: Discusses options in case law relating to options and agreements and changes in performance.
Page 13: Requests for Goods or Services
Implied Promise: Law implies a promise to pay when goods/services are requested.
Quantum Meruit: Reasonable payment for the value of goods/services if no price is agreed upon.
Page 14: The Seal
Historical Context: Seals used to signify agreements in writings when few could write.
Current Use: Now limited, certain documents may still require a seal, but generally, documents need consideration to be enforceable.
Page 15: Mistake
Types of Mistakes: Involves mistakes about terms or assumptions made reaching an agreement.
Condition: Errors in judgment do not excuse contract performance.
Page 16: Mistake re: Terms
General Rule: Contracts generally enforceable if terms are reasonable.
Clarification: Obvious mistakes cannot be exploited; parties attempting to correct errors are protected.
Page 17: Mistake re: Terms Continued
Court Considerations: Determining whether reliance on contract terms is lawful based on circumstances.
Balancing Hardship: Courts might relieve parties from mistakes depending on context.
Page 18: Mistake re: Terms Continued
Rectification: Courts may rectify written contracts that fail to reflect parties' true agreements.
Conditions for Rectification: Includes clarity of agreement and absence of further negotiations.
Page 19: Mistake re: Meanings
Misunderstandings: Relates to differing interpretations of words in contracts.
Ambiguity: Generally, courts decide against parties benefiting from ambiguous terms.
Page 20: Mistake re: Assumptions
Example: Cargo sold unknowingly perished results in contract voidance.
Risk Responsibility: Expectations dictate risk bearing in fluctuating asset values.
Page 21: Mistake re: Assumptions Continued
Court's Role: Judge reasonable expectations and enforce fairness in contract performance.
Page 22: Mistake re: Assumptions Continued
Court Remedies: Courts can fashion remedies when equitable; if not possible, losses remain where they fell.
Page 23: Innocent Third Parties
Seller's Dilemma: Issues arise when goods sold to Rogue (deceptive buyer) are sold to a Purchaser.
Page 24: Innocent Third Parties Continued
Void Contracts: They never existed, thus no title can be conveyed from Rogue to Purchaser.
Resolution: If the contract is void, Purchaser must return goods or value.
Page 25: Innocent Third Parties Continued
Error in Identity: Mistaken identity in seller transactions renders void contracts, mandating goods' return.
Page 26: Mistake
Voidable Contracts: Contracts made under misrepresentation by Rogue may be voidable; purchasers may retain goods if innocent.
Page 27: Non Est Factum
Definition: "It is not my doing" refers to not being bound by a document due to misunderstanding of its content.
Court's Assumption: Courts assume individuals should read their contracts.
Page 28: Capacity and Illegality
Enforcement Criteria: Conditions under which contracts cannot be enforced due to parties lacking capacity or the contract's illegal nature.
Page 29: Capacity to Contract
Minors: Can sue on a contract but not be sued, with exceptions for necessaries and beneficial contracts.
Ratification After Majority: Contracts can continue into adulthood but must be repudiated if prejudicial.
Page 30: Void and Illegal Contracts
Void Contracts: Never existed; parties return to pre-contract positions.
Illegal Contracts: Courts will not assist in recovery; parties receive no remedies.
Page 31: Restraint of Trade
Restrictive Covenants: Courts assess reasonableness regarding non-compete clauses in agreements.
Factors Considered: Duration, geographic scope, and employment opportunities after the restriction.