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BUS 393 (75)
Lecture

CHAPTER 3 formation of contracts.docx

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Department
Business Administration
Course
BUS 393
Professor
Robert Adamson
Semester
Winter

Description
CHAPTER 3: FORMATION OF CONTRACTS Contract: voluntary exchange of promises/commitments between parties legally enforceable in our courts 1. Consensus: achieved through process of offer/acceptance - Result = shared commitment when both parties clearly understand obligations/responsibilities assuming 2. Offer: tentative promise that contains terms of anticipated contract o IDENTIFICATION OF PARTIES IN AGREEMENT, SUBJECT MATTER, PRICE TO BE PAID - Exemption clause: offeror restricts/limits his own liability in transaction - Creates first legal consequence - Invitations to treat/deal: pre-contract communications (don’t have to take form of advertising, provide info, create contractual obligations) o Invitations don’t create legal obligations - End of offer?? o @ specified time o @ REASONABLE time (circumstantial) o Ends when…  Death/insanity of offeror  Upon revocation  No legal obligations made with offer o Conduct of offeree  Upon rejection  Upon counter-offer  Selling item does not end offer - Option agreement: situation here offer cannot be revoked and must remain open until [email protected] time 3. ACCEPTANCE: commitment by the offeree to terms of offer (total and unconditional) - Conditional acceptance doesn’t apply (counter-offer) - GENERAL RULE: acceptance is effective when and where COMMUNICATED - Unilateral contract: contract requiring actual performance of the contract as the method of acceptance o E.g. offering of reward… lost dog $100 reward. Method of acceptance = actual return of the dog - EXCEPTION - Post box rule: was accepted method for doing business @ distance - Appropriate to respond by mail? Acceptance was effective when and where it was posted o Not applicable when fax used  When faxed used, acceptance only when and where it is received 4. CONSIDERATION: exchange of promises/benefits required - both parties legal positions changes - Gratuitous promises: one sided. Do something for someone else, expect nothing in return o If an individual promises to give X and change mind, can’t sue legally o DEFENCE: Promissory estoppel: person makes false promise and listener relies on what was told to them in good faith and to their disadvantage  E.g. I pay builder extra 2g to get house done, builder hires help, I realize I don’t need extra help – revoke promise. - What is promised must be possible, legal, and of some value o Not including bringing dead dog back to life, drug deals - QUANTUM MERUIT: requester obligated to pay a reasonable amount for services delivered - Past consideration = no consideration o Benefit has been given before deal is struck, it cannot be a part of an exchange - Defence: SEAL – predates requirements of consideration and was used to indicate person’s commitment to the deed or transactio
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