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LAW 122 (809)


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Ryerson University
Law and Business
LAW 122
Nick Iannazzo

Chapter 10 CONTRACTUAL DEFECTS Six different contractual defects and their legal consequences Incapacity, absence of writing, mistake, frustration, illegality, and unfairness during bargaining INCAPACITY TO CONTRACT Capacity: is the legal power to give consent Sometimes the question of capacity depends on a person’s ability to understand the nature and consequences of their acts 1. Minors 2. Mentally disable persons 3. intoxicated persons 4. corporations 5. associations 6. Indian bands and aboriginal persons 7. public authorities Minors  Age of Majority: is the age at which a person is held fully accountable in law  Minor: people who have not reached the age of majority  Law says that everyone under that age of majority lacks capacity  Ontario, Alberta, Saskatchewan age of majority is 18 years  Some contracts are voidable at the minors option  Voidable: a contract is voidable if a minor is entitled to avoid the legal obligations that it created  If a contract is voidable a minor may elect to avoid liability  Minors cannot avoid contracts of employment that are to their benefit Mental Incapacity  A court has declared a person to lack mental capacity , there contracts are void and cannot be enforced at all  2 even if there is no court declaration a person may still be considered mentally incompetent  A minors contract is voidable even if the other party was unaware of the age issue  In contracts the contract of a person with a mental incapacity is voidable only if the other party should have recognized the problem Intoxication  That agreement is voidable if tow conditions are met o The person must have been so drunk that they could not know or appreciate what they were doing o The other contractual party must have been alerted to that fact Business Corporations  Corporations are treated as legal persons  Charted corporations: are treated the same way as individuals who have reached the age of majority o If a chartered corporation enters into a contract in breach of its charter, its charter may be forfeited  Statutory Corporations: have limited contractual capacity  Their capacity to contract is limited by the powers given to them through legislation  If statutory powers act Ultra vires “beyond the authority” hewn it attempts to contract into a manner that exceeds statutory powers Associations  Associations are usually unincorporated business organizations that lack contractual capacity  Ex private clubs charities, and religious societies Indian Bands and Aboriginal Persons  Indian band is a body of aboriginal people whose land and money are held by the crown  They can sue or be sued ABSENCE OF WRITING Certain types of contracts must be evidenced in writing STATUTE OF FRAUDS  Required some contracts to be evidences in writing as a way of reducing the risk of perjury or lying in a legal proceeding  Intended to discourage people from falsely claiming the existence of oral contracts  Less persuasive today because to the use of technology which can alter and reproduce documentation Types of Contracts that must be evidenced in writing Only certain types of contracts fall under statue of frauds Guarantees :  Guarantee: is a contractual promise by a third party, called a guarantor to satisfy a debtors obligation if that debtor fails to do so  The guarantor gives a conditional promise, and is required to discharge the debt only if you fail to do so  Indemnity: is an unconditional promise to assume another’s debt completely  An indemnity is therefore not a promise to answer for another’s debt, it is a promise to assume another’s debt altogether  Many provinces Statute of Frauds applies to contracts of guarantee by not to contracts of indemnity Contracts for the Sale of an interest in land  Interest in land are unenforceable unless they are evidenced in writing Contracts not to be performed within one year  Contracts that are not to be performed within one year of their creation are unenforceable unless they are evidenced in writing Writing Requirements Form and Content of the Note or Memorandum  Provide evidence of the essential elements of the contract such as the parties names, the subject matter of the agreement, and the prices and  be signed by the party against whom the agreement is being enforced Effect of Non Compliance  Statute of frauds renders some contracts unenforceable unless they are sufficiently evidenced in writing  Such contracts cannot support an action for breach of contract where the defendant please the statue of frauds as a defense CONSUMER PROTECTION AND WRITING REQUIRMENTS  By requiring agreements to be in writing and in some cases that a copy of the agreement be provided to the consumer these laws can help prevent exploitation of consumer and prevent disputes about the terms of the contract MISTAKE GENERAL PRINCIPLE
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