The Law of Contract

OVERVIEW

Daily we make oral or written contracts.

In a contract, each party is committing to or providing something of value - money, goods, services or promising to act or not act in certain way.

In purchasing mints at the confectionary store, you offer to buy at the stated price (or something less), the merchant agrees or accepts the offer. You pay in cash; the merchant provides the mints. Each side is said to have provided "consideration" - money for the mints. The transaction or contract is completed and at an end.

Most contracts are oral and binding. But where there is some complexity or the contract will not be completed immediately or soon, a writing or writings is the wise "way to go". 

Are contracts legally binding? Yes. When the required elements of a contract exist, the contract is binding and the party that fails may be sued and the innocent party may be awarded damages (what it lost because of the breaching party). The book noted below called Canadian Law and Business Studies has a detailed chapter on the law of contracts.

Why are contracts so important? As noted above, in the course of a day we enter into numerous contracts and that alone attests to their importance in our daily living and the livelihood of many. World trade depends on contracts between importers and exporters. Treaties between nations as to what items may cross borders with or without tariffs are essentially contracts (agreements) between nations.

Between Inviduals or organizations, can contracts be verbal? As already noted, they can be. Memos, letters, emails, notes and actions are often used to support or confirm the terms of the contract that was agreed to verbally.

Which contracts must be in writing? Some contracts must be in writing such as contract that pertains to the purchase and sale of real property (land, house, condo, or building).

Is it true that contracts can only affect parties to it? That is generally the case. For example, your friend buys you a gift from a jeweler but the gift is defective. As the person who was gifted, you cannot use contract law to rectify the situation as you were  not a party to the purchase and sale of that item. Some other law may help you, but not contract law.

Can contracts with minors be enforced? Looking at this question from one perspective only, the minor can enforce the contract. As a general information statement, it may be said that, with some important exceptions, a contract cannot be enforced against a minor. If a real personal issue arises, consult with a lawyer or legal advisor.

MORE INFORMATION ON CONTRACTS BELOW CAUTION

Copyright 2022. Nothing on this website is legal advice.

This is merely partial general information. 

We encourage you to visit us at our alternate website: https://www.fera-gasparini.ca/ and also to have a quick look inside our new book on 

Canadian Law and Business Studies: https://bit.ly/3Ay0lSR

The book contains a complete chapter on the law of contracts.

What is "Frustration" in Contract Law? It "Ain't" What You Think, But Can Undo a Contract

An event is not a frustrating event if it is foreseen or provided for in the contract or if the frustrating event was caused by the fault of a party to the contract.

But when an uncontemplated event or circumstance occurs after the signing of a contract that without default of either party makes the performance of the contract impossible or would make performance a radically different thing than what was promised or intended by the parties or that strikes at the root of the agreement, both parties may be discharged from further performance and moneys paid may be restored to the party who paid them.

In the seminal case, a hotel guest paid a huge sum for a room to watch the Coronation of a King on a set date, but the event was postponed. The contract to rent the room to view the Coronation was frustrated.

Case Sources: Focal Properties Ltd. v. George Wimpey Canada Ltd. (1975), 1975 CanLII 49 (ON CA); Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1976), 1975 CanLII 726 (ON CA), Krell v Henry, [1903] 2 KB 740.

What is an “entire agreement” clause? With contracts, negotiations can be lengthy. What one side proposes early-on may not be accepted or partially accepted later on. At some point, to make sure there is no misunderstanding as to what was finally agreed to by both sides, the parties “write up” their agreement and include in it an “entire agreement” clause. With such a clause, the parties are saying no matter what we may have spoken about during negotiations, it is only what is expressly written in this agreement, or which can readily be implied from what we write down that counts. In other words, this written agreement and only this agreement represents our final agreement. Period.

In contract law, can an agreement be overturned because it is too one sided or unfair? Is lack of bargaining power, such as necessity, a factor in having a contract rescinded or cancelled? The answer to those questions is “yes”. When is a deal unenforceable? The answer to the last question is, “when it is unconscionable”. Basically, an agreement that results from, unequal bargaining power is unconscionable. The test for a finding of unconscionability is twofold: (1) inequality of bargaining power, and (2) a resulting improvident or insensible bargain. This is discussed in the 2020 Uber case before the Supreme Court of Canada. Anyone believing they have a claim for equitable relief should immediately discuss this with a professional legal adviser. This is merely general information, not legal advice.