Two types of contracts:
1. Formal contract – It might have a seal. Its not very common. You almost never will see this form
of a contract. If you’re buying or selling a deed of land you might see this form of contract. A
power of attorney falls under this category.
Power of attorney can be for money or health care. You designate some to step into your shoes
and give them authority to do something on your behalf.
The government would take charge in cases where there is no power of attorney.
The statute of frauds:
It is an Alberta statute which says that contracts don’t have to be in writing to be used. In some cases
contracts have to be writing to be useful.
They have to be in writing:
1. If someone passes away and an executor promises to pay off that person’s debts this has to be
2. Guarantees – If an institution wants to do business with you but want a guarantee they person
who guarantees on your behalf has to do so in writing.
Ex. If a bank says they want a guarantee they are basically saying they want to reduce the
chance of risk of not being paid back. Therefore, they want a guarantor. With a guaranty the
bank cannot go after the guarantor until the debtor doesn’t default. An indemnity means that
there is a co-borrower.
For businesses the guarantees will be more risky.
3. If you agree to assume someone’s tort liability it has to be in writing. (A salesperson is riding a
bike and runs over someone. The person sues and the company knows this will be bad for their
reputation they take the liability of the salesperson and try to fix the problem/
4. Any contract that has to do with buying, selling, or mortgaging land it has to be in writing.
Parol Evidence Rule:
When you sign a contract the only thing that counts is what’s in the contract. If someone promises you
something that isn’t in the contract you should ask them to state it in the contract. If they do then it
becomes a part of the contract otherwise those promises are invalid.
Exceptions to this rule:
1. The condition precedent – yes we’ve agreed on the contract but it won’t come to life until a
particular thing happens. Ex. If you’re buying a house you should be careful of conditions. If the buyer says it will be sold
on condition that the bank approves the buyer’s mortgage.
2. Sometimes the court might imply things into the contract that aren’t there
Ex. There was a supermarket in a strip mall. The supermarket (safeway) had another branch a
little farther away. They decided to shut down the less profitable one but they continued to pay
the lease so that competition couldn’t come into their area. The landlord was asked by
competition to force the company to operate or leave the area. The landlord took the company
to court and the court said that it was implied in the contract even though it was not specifically
stated that the company must operate during the lease.
3. Collateral contract – It may be refe