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Part 3 The Law of Contracts

Prepared by Douglas Peterson,

University of Alberta

Chapter 7 An

Introductionto the LegalRelationship

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Historical development

Elements of a valid contractIntention to create Legal Relationship

OfferNatureCommunication of an offerLapse and Revocation

AcceptanceConsiderationCapacity

Legality

Overview

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Contract

An agreement made between two or morepersons that is enforceable at lawFreedom of contract, the general ability of

the parties to create specific rights andduties

Introduction

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Merchant law

Ecclesiastic lawManor courts17 th century development of thebargain theory of contract

Historical Development

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1. An intention to create a legal relationship2. Offer3. Acceptance4. Consideration5. Capacity to contract

6. Legality

Requirements must be met for a contract tobe enforceable by the Courts

Elements of a Valid Contract

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Contract

Meeting of the minds (consensual agreement)Consensus to subject and object of the contract

Essential element is a promise

Party intended to be bound by promise madeIntention is a presumption at law

Intention

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Presumptions in contract lawStrangers intend to be bound by their promises

Family members and close friends do not intendto be bound in contractsBoth are presumptions that can be rebutted

Invitation to do BusinessAdvertisements are not offersInvite offers that seller may accept or reject

Presumptions

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Intention of the Parties

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Nature of an OfferA tentative promise subject to a condition

Communication of an OfferAn offer must be communicated to the otherparty to be acceptedCannot accept an offer you do not know of

Crossed offers in the mail do not constitute acontractOnly person to whom offer is made may accept it.

Offer

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AcceptanceA statement or act given in response toand in accordance with an offerAcceptance must be communicated in themanner requested or implied by theofferor in the offer

By words or conduct

Acceptance

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Rules

Offeror is master of their offer and candictate form of acceptanceIf acceptance is to be by oral means

Acceptance complete by eitherphone or direct speaking to offeror

Acceptance (Specific Rules)

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Acceptance by postAcceptance takes place when the letter, properlyaddressed and postage paid, is placed in thepostboxAcceptance effective where placed in the postbox

Governing law, unless otherwise stated, is the law

of the place where the letter is postedPostal acceptance allowed even if not specificallystated if it is the normal or usual mode of acceptance

Postal Rule

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All other modes

Acceptance not complete until offerormade aware of acceptanceUntil it reaches offeror

Acceptance complete when and wherereceived

Other Modes of Acceptance

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Electronic documents covered by Federal lawPersonal Information Privacy and Electronic Documents Act E-documents are deemed to be sent whenthey enter a system outside of the senderscontrol , or when they become capable of being retrieved and processed by theaddressee

E-contractors can opt out of statutoryprovisions in their terms of use Location of the transaction determiningwhere contract is located is more difficult on-line

Electronic Offer and Acceptance

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Data messages are deemed to be dispatched fromthe originators place of business and received atthe addressees Location of contract (choice of law) is not readilyevident when messages are routed throughmultiple nations or provinces servers. The deemingprovisions above mark the location of offer andacceptance , not necessarily the location of thecontractLocation of contract is quite often stipulated in theexpress terms of use agreed to by the parties Courts are willing to seize jurisdiction based uponlocus of harm or based on taxation/customs issues

On-line Contracts

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Must be clear and unconditionalCounteroffer is a new offer and a rejection of

original offerSilence is not acceptance unless pre-existingagreement to this effect exists

Exception: party assented to the contractConsumer protection reinforces common lawrule of silence is not acceptance

Nature of Acceptance

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RulesIf a method of acceptance is stated, offeree mustcomply with requirementsIf only preference for a particular method of acceptance is stated then:

If a method other than the method mentioned

in the offer is selected, the acceptance wouldonly be effective when it was received by theofferor

Nature of Acceptance

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Unilateral Offers

An offer made to the world at largeThe performance of the act is acceptanceOfferor cannot revoke offer so long as

offeree is in the course of performing theirpart

Nature of Acceptance

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Forms of Acceptance

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LapseThe termination of an unaccepted offer bythe passage of time, a counteroffer, or thedeath of a partyRejection of an offer: offer cannot beaccepted later unless the original offer isrevived

Lapse of an Offer

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Passage of timeOffer lapses after:

Stated time in the offer expiresIf not stated period of time, after areasonable period of time

Reasonable period depends on subjectmatter and circumstances of thetransaction

Lapse of an Offer

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RevocationThe termination of an offer by notice

communicated to the offeree before acceptanceOffers can be revoked anytime before acceptanceunless there is an optionRevocation must be communicated to the offereeRevocation can be communicated in any form aslong as it is communicated

Revocation of an Offer

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OptionA separate promise to keep an offer open for aperiod of timeRequires consideration or signed under seal

Indirect RevocationRevocation can be communicated through

someone else (indirect)Must prove offeree had notice of revocationindirectly from a reliable source

Revocation of an Offer

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Offer and Acceptance

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ContractsPromises enforced by the courts

RequirementsIntention to create legal relationship

Presumptions certain people intend to contractand certain people do not intend to contract

OfferMust be communicated to offeree and only oneto whom offer is communicated can accept

SUMMARY

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AcceptanceMust be communicated in manner requested by

offerorPostal rule acceptance is valid when and whereplaced in post box

Other forms when and where acceptancereceived by offerorCounteroffers are a rejection and new offer

SUMMARY

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Lapse

Passage of time, counteroffer, or death of party

Revocation

Anytime before acceptance unless anoption is given

SUMMARY