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LS101 - Oct.3.doc

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Legal Studies
LS 101
Frances Chapman

LS101 – Oct.3 03/10/2007 20:23:00 ← CONTRACT LAW ← ← A contract may be defined as an agreement between two or more parties that is binding in law. This means that the contract generates rights and obligations that may be enforced by the courts. • Does not have to be written or signed • Can be just a handshake or nod of the head • The reason that a contract does not have to be drafted by an official is because people are free to negotiate with one another ← REMEDIES • Specific performance – party that isn’t cooperating must fulfill their side of the bargain • Monetary compensation – damages ← ← BILATERAL CONTRACT • 2 specific people – each promises to do something • e.g. buying a car (seller and buyer) ← UNILATERAL CONTRACT • Offer to the world • 1 person accepts the offer by acting • e.g. poster for a lost dog (offering $500 for a lost dog) • the problem is when several people try to come forward and accept ← ← THREE INGREDIENTS TO A CONTRACT ← 1) The parties must reach an agreement or consensus – offer and acceptance • meeting of the minds • Offer – statement of willingness by one party to enter an agreement with specific terms and conditions o Can be expressed or implied – not necessarily formal o Acceptance indicates that you are willing to be bound by the terms of the contract o Offeror – makes the offer o Offeree – person to whom the offer is being made • Reasonable person test • Purpose of the law when it comes to contracts is to protect this reasonable person and his/her reasonable expectations (biggest question – “what did you think was going to happen?”) • Invitation to treat o Something that is not binding o E.g. advertisements in newspapers, displays in stores o Not an offer – no legal effect o E.g. auction – only binding when the auctioneer says ‘sold’ • Termination of offer o Revocation o At any time before an offer is closed, either party can change their mind but ONLY IF COMMUNICATED TO THE OTHER PARTY o Rejection o Counteroffer o However, offer must be open for a reasonable time o Death or insanity • Acceptance unqualified o Must be communicated o Can be through an agent (e.g. lawyer, real estate agent) o Can be accepted at any time until its revoked – an offer can be revoked at any time before it is accepted o Geographic location is extremely important – differing laws, timezones (contract closes at 12..where?) o Led to Post Box Rule  The second the acceptance is put into the post box, the contract has been accepted  Applies even if the mail gets lost etc.  Effective at the time and place posted o However, revocation must be received before the offer is officially revoked ← 2) Both parties must provide valuable consideration - CONSIDERATION • This is the requirement that both parties to an agreement pay a price and that both parties receive a benefit. • can be anything of value – must be a two-way exchange of something • agreement to take less (for a debt) is legally binding – legislation overrides common law • Rules: o A gratuitous promise is unenforceable  Gratuitous = one-sided, therefore not a contract  If there is a seal on a contract, consideration is not required o Consideration must be specific o Consideration must have some value (economic)  Famous quote from an old case – “consideration can be as little as a peppercorn”.  Must be able to put some value on it – but does not have to be adequate o The consideration cannot be illegal or against public policy (e.g. prostitution) – examples in textbook  Can only contract for things that are possible – future consideration is fine though o Consideration may be present or future, but not past  Past consideration is not considered to be consideration and is not enforced ← 3) They must intend to be legally bound – INTENTION • the last element that must be present for a contract to exist is that the parties must intend legal consequences to follow from their agreement o no intention in personal/family relationships is considered o Carlill v. Carbolic Smoke Ball Company • Capacity o Minors  free to enter into a contract but the adult who the child is entering into contract with cannot enforce the contract against them  if the item is of true necessity, delivered and received, the child is bound by contract  if there is obvious fraud, the child can take the contract to court o Mental Disorder and Intoxication  Given protection under the law  Mental disorder must be severe enough that the person did not understand the nature of the agreement AND the person you were entering into the contract with must have known or ought to have known that you had a mental disorder
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