UNIT 4: Formation of a Valid Contract

List four instances where an offer might lapse before acceptance?

1. Either party dies before acceptance 2. Either party becomes bankrupt 3. No acceptance within the time period specified in the offer. 4. No acceptance within a reasonable time, if no time of acceptance specified.

6 requirements of a valid contract

1. Intention to create a legal relationship 2. Offer 3. Acceptance 4. Consideration 5. Capacity to contract 6. Legality

If a minor is engaged in business, how would the courts deal with contracts entered into by the minor?

A minor engaged in business is engaged in "non necessary" activity and consequently the agreement between the infant proprietor and another would likely be voidable at the infants option.

Describe the rules for acceptance of an offer and why such rules are necessary

Acceptance must be unconditional - because it must be in accordance with the terms of the offer. Acceptance must be communicated in accordance with the terms of the offer because the offeror determines how acceptance should be made. See rules for time and mode of acceptance in text.

How does an advertisement offering a reward for lost goods differ from an advertisement offering goods for sale?

An advertisement of a reward is treated as a binding offer to the public at large. It is accepted by the performance of an act. An advertisement of goods for sale is usually not considered as an offer because the seller is not expressing an intention to be bound by the advertisement - only inviting offers based upon availability of stock.

Why is a seal important on certain types of contract and how does it relate to consideration?

Any person who affixed a seal to a document containing a promise to do something had given the matter considerable thought act of affixing the seal symbolized the intention to be bound by the agreement. Some provinces of the registry system, require for seal for land transfers. Corporations can also use seal for formal documents. Court will not normally look behind a contract under seal to determine if consideration exists.

How is the basis for legality in a contract determined?

Based upon public policy. A legal contract does not offend public policy, an illegal one does.

Explain the purpose of a devotion to business clause in a contract of employment, and outline the circumstances where the clause would be enforced by the courts?

Based upon the duties of the employee in the employment relationship. Employer has a right to expect some degree of loyalty and devotion on the employees part in return for the compensation paid to the employee.

Why is it important that an offer must be communicated before acceptance may take place?

Communication must take place first because a party should not be bound by an offer of which he or she is not aware. In addition, a party must be fully aware of the terms of the offer before acceptance may be made.

Explain the nature of consideration as it applies to a contract and why its presence is an important requirement for a valid contract

Consideration is the price that a person is willing to pay for the promise set out in the offer. It need not be money and unless obtained in exceptional circumstances such as duress, undue influence or unconscionability, it need not be objectively fair.

Explain the difference between minors and drunken persons in terms of their capacity to contract.

Contracts for non necessary items are treated in a different manner, if a person is intoxicated or mentally impaired when entering into a contract for what might be considered a non-necessary items.

Explain why an intention to create a legal relationship is an important element of a valid contract?

Intention distinguishes situations where enforceable rights are created from those where parties do not intend to be legally bound by their promises.

What is the legal effect of a counter offer?

It is a conditional acceptance negates an offer and is itself an offer.

At what point is an offer no longer revocable?

Must communicate revocation to the offeree. If there is an option in the contract it is a promise not to withdraw an offer.

Betacorp holds personal information about its customers. What limitations exist as to how Betacorp may use that information?

Must obtain consent of individuals to collect, use or disclose personal information for commercial activity or health care. Such information must only be used for pre identified purposes for which it was collected and organized. Legally liable for maintaining privacy and control over that personal data.

Outline the common law rules relating to the capacity of minors to contract and the rationale of the courts in establishing these rules.

Not be bound by their promises and consequently they are not liable on most contracts that they might negotiate. Law attempts to balance the protection of the minor with the need to contract by making only those contracts for necessary items enforceable against a minor. Will be liable for a reasonable price for goods received or services supplied. Minors in long term contracts must repudiate them promptly on reaching the age of majority, otherwise they will not be bound by them.

Explain promissory estoppel and its use in a contract setting.

Once a fact is asserted to be true and another person relies on it to his or her detriment, that statement of fact cannot be denied by the person who made the assertion. Known as estoppel. Effective defence against a claim relating to the enforcement of contractual rights where the promisee has relied upon a gratuitous promise to his or her detriment.

If specialized e-business legislation is silent or absent on a particular point of law, is there a complete void in the law at least as far as e business is concerned?

Provincial electronic business acts have tended to separate out the twin goals of privacy and commercial certainty in new technological media. Essential for business to comply with the requirements of the PIPEDA and meet expectations of clients.

Why do courts refuse to address the adequacy of consideration?

Reluctant to become involved in deciding the fairness of the price or value that a person receives for a promise. May concern is with the presence or absence of consideration.

Describe the three main classes of contract that may be in restraint of trade

Restraint of trade: Illegal acts which impair the operation of the marketplace 1. Agreements contrary to the competition act 2. Agreements between the vendor and purchasers of a business that may contain an undue or unreasonable restriction on the right of the vendor to engage in a similar business in competition with the purchaser. 3. Agreements between an employer and an employee that unduly or unreasonably restricts the right of the employee to compete with the employer after the employment relationship is terminated.

Why are the courts reluctant to enforce restrictive covenants in contracts of employment? Under what circumstances would the courts enforce such a restriction?

Restrictive covenant could prevent a person from earning a living if it was enforceable under all circumstances. Hence, the limitation on its applicability. If the time and distance requirements of the restrictive covenant do not prevent the person from finding alternative employment, the courts will enforce such a restriction.

What condition must be met before revocation of an offer is effective?

Revocation of an offer is not complete or effective until it has been received by the offer, or the offeree has been clearly made aware of the revocation.

Why, at Common Law, do courts consider the acceptance on the due date of a lesser some as payment in full by a creditor a gratuitous promise?

There is no consideration for the creditors promise to waive payment of the balance of the debt owed.