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Lecture

LS101 Lecture Notes - Consideration, Mental Disorder, Reasonable Person


Department
Legal Studies
Course Code
LS101
Professor
Frances Chapman

Page:
of 10
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
oCan be expressed or implied – not necessarily formal
oAcceptance indicates that you are willing to be bound by the
terms of the contract
oOfferor – makes the offer
oOfferee – 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
oSomething that is not binding
oE.g. advertisements in newspapers, displays in stores
oNot an offer – no legal effect
oE.g. auction – only binding when the auctioneer says ‘sold’
Termination of offer
oRevocation
oAt any time before an offer is closed, either party can change
their mind but ONLY IF COMMUNICATED TO THE OTHER PARTY
oRejection
oCounteroffer
oHowever, offer must be open for a reasonable time
oDeath or insanity
Acceptance unqualified
oMust be communicated
oCan be through an agent (e.g. lawyer, real estate agent)
oCan be accepted at any time until its revoked – an offer can
be revoked at any time before it is accepted
oGeographic location is extremely important – differing laws,
timezones (contract closes at 12..where?)
oLed 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
oHowever, 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:
oA gratuitous promise is unenforceable
Gratuitous = one-sided, therefore not a contract
If there is a seal on a contract, consideration is not
required
oConsideration must be specific
oConsideration must have some value (economic)
Famous quote from an old case – “consideration can be
as little as a peppercorn”.