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Lecture

5 Contract Law - Capacity, Legality.docx

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Department
Business
Course
BU231
Professor
Shelley Mc Gill
Semester
Fall

Description
Contract Law – Capacity & Legality Question 2: Can I get out of this contract? Void or Voidable  Getting out of a contract that has offer, acceptance, consideration and intention depends on a Court declaring the contract void or voidable  Void: neutralized it  no longer has an effect o Taking it back to the beginning and saying it never existed o Is not a contract and never was a contract  If this happens the court will grant the remedy of rescission to try to place the parties back into the position they were in before the contract was entered into o Rescind: pull back the things that have been exchanged o Trying to get back to the position before the contract ever happened Capacity  It is presumed that the parties have capacity to contract  The burden of proof is on the party alleging a lack of capacity Diminished capacity issues  Corporations  void/ ultra vires o Legal entity  like a human being  Can go bankrupt, or can contract like humans o But if the corporation doesn’t exist yet, it cannot contract o Ie. the starting date of the corporation must have passed before you can rent office space, buy supplies etc  Labour Union  ratification o Look like a corporation but not  An association of individual people o Don’t have the power to contract on their own without a membership o Must be ratified in order for them to have the ability to contract  Majority rules will ratify it  Enemy Alien  void o Alien: anyone who is a citizen of another country  Types of aliens depends on your status of immigration o Enemy alien: there is a declaration of war  not a terrorist hatred, but an actual declaration of war  The opposing citizen comes and lives in Canada  the 2 countries are at war  Takes away their contractual rights  no one has to do business with you or supply their products to you o Since they might be supplying it back into their country  Ie. Japanese during WW2  Aboriginal  on reserve issues o There are also limitations for Indians to attract  The Indian Act o Aboriginals = a wider group  But applies mostly to Indians  regarding the reserves o Indian Act sets up a very protective relationship with the Federal govt and the Indians living on reserves  They owe a fiduciary duty  turned into a parental model  created hostility  They have set up reserves (land set up by the govt for the band members)  They have entitled use of it but they can’t own it  cannot buy it, sell it, mortgage it  Bankrupt  undischarged o A process that lasts about 9 months  During this period, your contractual rights are suspended  The beginning: make an assignment ( or petitioned to bankruptcy  The trustee will decide what you owe etc.  send notes out to creditors and distribute it  When you come out, you get your contractual rights again  Point: so you don’t get into greater debt  The only things you can make a contract for are the necessities of life  ie. employment contract, house etc.  Insane/ Drugs/ Alcohol  parallel to a minor o Like parallel to minors o The contract they enter is not automatically void  they can make it void o They must prove that they did not intend it o We want them to get their basic necessities so we have to protect businesses o Temporary conditions  going to sober up/ grow up  Minors… o Don’t have the power to contract o Ie. child actor  Since the child is underage, the companies make a contract with their parents  Then the children sue their parents based on fiduciary duty  Each one of these legal groups have a limitation to contract Minors  Age of majority is set Provincially – in Ontario, it is 18  People under the age of 18 are minors  They have limited capacity to contract  Necessaries and beneficial contracts of service are binding no matter what the age o Ie. employment contract, but clothes, buy food o Everything else, you can back out of (minors option, not business)  All others are voidable at the minors option Voidable  Voidable means the contracts exist until set aside by the courts. Ownership can pass during the time it exits o Up to you to exercise the option  Void mean the contract never existed from the beginning. No ownership can pass ever Turning 18
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