Untitled Flashcards Set

Chapter 7

What is a contract?

• A legal agreement where a party agrees to give up something in exchange for another party giving up something

Legal agreement- wedding out informal agreements

• Must be intent to create legal relations

• Parties must have legal capacity to enter into a contract

  • Drunk? Under 18? 

• Subject of contract must be legal

Giving up something

• Must be something of value flowing from one party to another

• Called “consideration”- must be adequate, but it doesn’t have to be sufficient

• Key distinction between contract and gift

• GIVEN UP vs received

Exchanged

• There must be a meeting of the minds

• The parties must be in agreement on the primary terms of the contract

• This occurs through the process of offer and acceptance

Who can enforce the contract? (privity of contract)

• The only ones who can enforce a contract are the parties

• Third party beneficiaries, or strangers to the contract, cannot

• There are 2 ways to address this- agency and assignment

  • Assigning the contract ot the 3rd party

Breaching a contract- what if a party breaks their promise?

• First, we need to know whether the promise is actually broken or not- is it a term of their agreement?

• Second we need to consider whether the promise is an important one

• Third, if the promise is broken, we need to figure out what damages should be paid.

Offer and acceptance

• Meeting of the minds:

  • offer-> acceptance=contract

  • If it is accepted, the contract is active the instance it was accepted

  • Need to determine where and when the contract is accepted

  • offeror-> offeree

• How an offer ends

  • Offeror can revoke at any time prior to the acceptance

  • Can place a deadline offer

  • Can “lapse”- no longer be in effect, if a reasonable amount of time passed 

    • When would a reasonable person think the offer would last?

  • Can be rejected

  • Can be countered- offeror and offeree can switch

• Invitations to treat

  • When actions mean- make me an offer rather than offering

  • Ex. facebook marketplace

• Firm offers vs options

  • Gratuitous promises are often unenforceable by law

  • Offer- no consideration to create a contract, just a promise

    • Has the right to revoke offer at anytime

  • Pay Attention if something has been given up for the promises in exchange

• The tendering process

  • Addressing offer vs option

  • Going through a whole lot of work before even going to tendering process

    • Calls for tenders

    • Ex bidding for building LRT

    • Making sure that people cannot revoke bid

  • Process creates 2 stage contract analysis

    • Call for tender- contract A

    • Submit bid= acceptance to contract A

    • Submitted Bid -contract B

    • Choosing winning bid= acceptance of contract B

Acceptance

• Valid where and when it is received

• Two alternatives:

  • Instantaneous communication, 

    • Where and when received by offeror

    • Telephones and fax machines

    • Rationale- person accepting is in the best position to know whether or not acceptance has been communicates

    • Subject to reasonability

  • non-instantaneous communication

    • Mail, couriers

    • Acceptance is valid when it is sent

    • Rationale is that it allows party accepting offer to begin work on the contract right away

    • Downside- leaves offeror liable even if mail doesn't get delivered

    • Only applies to acceptance

• Electronic transactions act

  • Whenand where as if it is instantaneous communication

  • When:

  • Sent: outside of sender’s control

  • Received: presumed once it has entered recipient’s system and is capable of being retrieved

  • Where: deemed to be sent/ received aT place of business

  • Place with closest location of business

Bilateral and unilateral contracts

Bilateral

• Offer and acceptance- oral acceptance

• Promise to do something in the future

Unilateral

• Where acceptance is not of a future promise, but by performing their part of the bargin

• Ex. lav will pay anyone 50 if they return is cat

Carlill v Carbolic smoke ball

• Once offer out, court will give public time to perform

• Acceptance is only valid after full performance

Chapter 8- Consideration

How a contract is separated from a gift

• Value must be exchanged

• Gift- gratuitous promise- other person not  experiencing  a detriment in exchange

• Must be sufficient, not adequate

• Past consideration is not sufficient consideration

• Pre-existing public duties cannot be consideration

• Pre-existing contractual duties to a third party can be consideration

  • Fulfilling many contracts by doing one action

• Pre Existing contractual duties to same party cannot be consideration

  • If a and b have a contract, a can’t unilaterally change the terms of the contract without b giving up something as well.

  • Ex. gilbert steel

  • Ex. employee contracts- changing job duties without giving something in the exchange

Past consideration

• Ex. promised to do something a long time ago but doesn't ask for anything in exchange

• Ex. saving someone's life, they say they will pay you- not consideration

Pre Existing public duty

• Ie police officer, fire fighters

Part payment of debt- may extinguish the whole debt

• At common law, if the debtor agrees to give up something in addition ie. make the payment a day in advance, then there is consideration given on both sides and it is a valid change

Judicature act

• part payment extinguishes debt if expressly accepted as satisfying obligation or

• Part payment extinguishes debt is part of an agreement to extinguish that debt without any new consideration

Privity of contract- assignment

Who gets to enforce the contract?- only the parties of the contract

Ways to enforce terms

Assignments

• Contractual parties can sign their rights to a third party

General principles

• Benefits, and rights can be assigned

• Obligations cannot be signed

• Once assigned, the assignee can enforce its contractual rights

• The assignment itself is a contract- 2 contracts, original and assigning

• Assignments can be created by statute, or equity

Statutory assignments

• Judicature act

  • Must be written

  • Written notice given to the debtor

  • Must be absolute assignment of the whole debt

Equity assignment 

• Developed by court of equity be oral or written

• Notice is not required- bit important- timings are important

• Can be assignment of all or part rights

“Subject of the equities”

• Means debtor can rely upon defences against assignee could have used against assignor

  • Defence arises from the same contract- debtor can always rely on these defences

    • ex.

  • Defenses from other transactions- debtors can only rely on these defences if they arose before given notice of assignment.

    • If a and b have contract, and a separate contract- parties want to set off the amount they owe

    • They can set of on things before assignment

Trusts

• Trusts- splits ownership into 2 form

  • Legal ownership-title

  • Beneficial ownership-who gets the benefit

  • Trust Fund- parent legally hold the account- but they don't get the benefits of the money

  • Contractual property is a type of right and property

• Assignment has transfer of right, but trustee will hold it for beneficiary

Agency

• Agent and principle in arrangement where principal give agent, authority to enter into a contract on its behalf

• Agent enters into contract with 3rd party on behalf of principal

• Contract binding between 3rd party and principal.

• Authority

  • Actual authority- principle and agent have an agreement- contract binds principal

  • Apparent authority- world thinks that agent has authority- contract binds principal

    • EX- EMPLOYEE - risk management- notify people that sales reps are no longer with the company can be sued

  • Undisclosed principal- third party can enforce either

    • Agen enters into contract- does not tell anyone they are acting in someone’s behalf

Ratification

• If an “agent” enters into a contract claiming to be an agent for “principal”, then that principle can choose to ratify after the fact

  1. Ratification Must be clear

  2. Must occur within a reasonable time after the contract is creates

  3. ,must accept whole contract

  4. Principal must have been identified by the client- they must have intent and idea of who they want to enter into a contract for

  5. Principal must have legal authority to enter into contract

Chapter  9

Misrepresentations

• A false or misleading statement that induces someone onto a contract 

• Occurs during the negotiation stage

Types of pre contractual statements

1. Puffs

   1. Not contractually binding

   2. Salesmanship

   3. A reasonable person would find insignificant

   4. Law cant or wont enforce if wrong

2. Representations

   1. More serious than puffs

   2. Not contractual terms

   3. Statements of significance that convince someone to enter into a contract

   4. Grounded enough in reality, reasonable person would fins significant

   5. Law can provide remedy if representation if false or misleading

3. Contractual terms

   1. When a statement becomes a binding promise

   2. Oral agreements will require evidence 

   3. Written agreements may or may not be limited to words on paper

Puffs vs representations

• Statements that can be objectively confirmed are representations

Misrepresentations?

• Be actionable if:

• Statement is false/ untrue

• Positive statement: actively communicated, generally not silence, can be nod, action

• Factual statement- not opinion, prediction of future, or statement of law( law cannot support a claim for misrepresentation because everyone is presumed to know the law that governs a particular act)- can imply statements of fact

• Intending to- and actually causing the person to enter into the contract

When is silence a misrepresentation

• Buyer beware: parties are expected to protect them self

• No need to disclose facts expected to discover yourself

• Silence is problematic when:

  • When facts change- past statement is inaccurate

  • Half truths

  • Special contracts- duty to disclose- insurance- duty of upmost good faith

  • Special relationships- fiduciary relationships- obligation to act in clients best -beneficiary is dependant on fiduciary  interests, agree by agreement or law, relationships of trust eg, doctor, parent child

  • Legislation- ex investment vehicles for shareholders / purchasers

  • Active concealment of facts- ex- concealing cracks in foundations

Remedies for misrepresentation

• Depends on nature of misrepresentation

• Ask if misrepresentation was made innocently, negligently, or fraudulently?

Recession+ restitution

• Contractual remedy for all misrepresentations

• Innocent party gets to choose

• Aims to undo the contract

• Renders contract voidable- or opt to continue to performing

• Easy if neither side has performed promises

• Hard of performed

• Not available if it affects third party rights

• Equitable remedy- court does not have to grant it

  • Courts will not grant if it is not able to unwind the transaction

• Restitution- returning each others property back

• Affirmation A misrepresentation makes a contract voidable. It creates an option to rescind. Once that option arises, however, the plaintiff must make a decision within a reasonable time. If the plaintiff affirms the contract, by continuing to perform, then the right to rescind is lost.⁵¹⁸

• Laches Even if the plaintiff has not affirmed the contract, the right to rescission may be lost on the basis of laches. Legal rights are governed by limitation statutes—a claim must be commenced within a specific period of time. Equitable claims are subject to laches. There is no pre-set time limit, but if the plaintiff unreasonably delays, and if the defendant would suffer a hardship by being forced to litigate after so much time, then the claim will be dismissed.

Tort law remedies for negligent and fraudulent misrepresentations

To prove negligent misrepresentation:

• Defendant carelessly made statement

• That was false

• Inducing plaintiff into contract

• Causing damage

To prove fraudulent misrepresentation

• Defendant made false statement 

• knowing it to be untrue, 

• Intending to induce the plaintiff into contract causing damage

• Causing damage

Restoration is specie- involves a return of the same property that had been transferred

Indemnification- monetary compensation for a loans or expenses

Account of profits- requires one party to give up profits and benefits obtained

Contractual terms and interpretation- creating obligation that have to be performed

1. Expressed terms

   1. written/  oral

   2. Actually agreed upon terms

2. Implied terms

   1. CIRCUMSTANCES where there is a gap in the contract

   2. Court will fill in gas unlimited circumstances

   3. May be in disagreement over terms

Oral contracts are more difficult to prove

Written, courts stay within 5 corners of contract

Parol evidence rule

• Written contract, the court will not generally accept evidence of other communications intended to change the terms in the written agreement

• Parol evidence= evidence not contained within the written contract- cannot be used once the contract is signed

• Exceptions

  • To fix a mistake

  • To prove the contrat is defective

  • To resolve ambiguities- contractual term that could be interpreted multiple ways

• Key- insure promises negotiation make their way into the written agreement

Collateral contract

• To avoid parol evidence rule, parties may agree to a main contract, and am additional collateral one

Interpreting written contractual terms

• Ambiguous meaning:

• Dispute, court can take a few approaches

  • Literal approach- the ordinary meaning

  • Contextual approach- look at intentions and circumstances

  • Golden Rule- give words their plain meaning unless it results in absurdity.

  • Contra Proferentem The   contra proferentem rule resolves any ambiguity in a written document against the interests of the party that drafted it. That rule is a rule of fairness. A person should not be rewarded for creating uncertainty. Accordingly, the students could have argued that the dean’s written offer provided a reasonable person with no way of knowing what the Business School intended to do. That uncertainty, the students could have argued, should be resolved in their favour.

Terms implied by court or statute

• Court will imply terms where an agreement is incomplete and the term is reasonably necessary

• Is the term an obvious consequence of the parties agreement?

• Is it required for the purpose of business efficacy

• Statutes:

  • Consumer protection act

  • Sales of goods act

• Custom or Usage- If the same type of contract, with the same terms, is repeatedly created, then those terms can be implied if that sort of contract arises again. The pattern may have been repeated between the same parties. Assume that I have rented your tugboat every month for the last two years, always on the same terms. If we agree to another month’s rental, then our new contract will contain those terms, even if we said nothing about them.528 Similarly, in some industries, the same terms are used in every contract. If you and I contract within that industry, those terms will be implied even if we have said nothing about them and even if we are contracting for the first time.529

• Business Efficacy The courts will not imply a term merely because it would improve a contract. It is for the parties—not the judges—to decide on their rights and obligations. Nevertheless, a term may be implied, as a matter of law, if it is necessary for business efficacy- too obvious for words

• Good faith- duty of honest performance If a contract gives one party the power to decide how the agreement will be performed, the implied duty of good faith will be breached only if that discretion is abused for some non-contractual purpose. There is no need to act in the other party’s best interests.

Exclusion contracts and other contractual terms

Businesses use Standard form agreement: economic sense

• A clickwrap agreement is created electronically when a consumer consents to a website’s terms before making a purchase or using a service.

• Efficient, boilerplate clauses

• As a result, a judge may apply an exception to the general rule if the customer was required to quickly sign the document without enjoying a reasonable opportunity to consider its terms. In such circumstances, the party relying on the document must prove that the customer was given reasonable notice of the relevant terms. That exception prevents a more powerful party from burying onerous or unusual terms in the small print of a difficult document.

Plain language in contracts

• Legalese refers to the excessively formal and unnecessarily technical language that was traditionally used for drafting

Exclusion clauses

• Limitation clause/waiver

• Limits one party’s liability either partially or complete

• Can be onerous, therefore

  • Must be written in clear language

  • Other party with have reasonable notice

  • Other party must have agreed to the exclusion clause

  • Often found on the back of tickets

  • Includes causes of actions that cannot be held liable, and who can't be held liable

Other standard clauses

• Jurisdiction clause- where can lawsuit be brought

• Choice of law clause- what law will apply

• Force majeure- what happens during unforeseen event

• Confidentiality- what info cannot be disclosed

• Arbitration- do the parties have to arbitrate instead of litigate

• Entire agreements- is this the whole agreement or is there more-useful for parol rule