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Lecture

ADMS2610-Session2-Ch7.docx

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Department
Administrative Studies
Course Code
ADMS 2610
Professor
Robert Levine

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ADMS2610 Session 2 Chapter 7 (pg. 120-135) Law of Contract Contract - Is an agreement made between two or more persons that is enforceable at law - Freedom of contract, the general ability of the parties to create specific rights and duties that the courts will enforce o Create own laws that they are obliged to follow Historical Development of the Law of Contract - Is essentially an area of law relating to business transactions - Merchant Law o Decline of the feudal system - Ecclesiastic Law o Disputes arising out of informal contracts or agreements of a breach of a solemn promise - Manor Courts o Handled minor cases (breach of contract) th Damages were sometimes awarded for breach of the promise - 17 century development of the bargain theory of contract o Each party to the agreement derived some benefit from the agreement in return for a promise to do or give something in return  Formed the basis of contract law Elements of a Valid Contract - Requirements must be met for a contract to be enforceable by the courts - (1) An intention to create a legal relationship - (2) Offer - (3) Acceptance - (4) Consideration - (5) Capacity to contract - (6) Legality - Certain types of contracts must be in writing - Needs these six elements in order to be valid and binding - Must be free from any form of mistake or misrepresentation or undue influence or duress - Intention to be bound (the assumption at law that strangers intend to be bound by their promises) Intention to Create a Legal Relationship - Concept of a contract is based on the meeting of two parties minds on the terms and conditions that will form their agreement with each other o Each will agree to do or not to do certain things in return for the promise of the other to do something - Essential element is a promise o Consensus ad idem (agreement as to the subject or object of the contract) o Parties must be of one mind and their promises must relate to that subject or object o Promise begins this process - First requirement for a valid contract must be the intention on the part of the promisor to be bound by the promise made o This intention to create a legal relationship is an essential element of a valid contract - Intention to create a legal relationship is a presumption at law o Creation of the intention would be difficult to prove o This presumes that the party intended to be bound by the promise shifts the burden to prove otherwise, if the intention did not exist o If intention is denied, courts will use the conduct of the party at the time that the statements were made as a test and asses such conduct and statements from the point of view of the “reasonable person” - Presumptions in Contract Law o Strangers intend to be bound by their promises o Family members and close friends do not intend to be bound in contracts o Both are presumptions that can be rebutted - Invitation to do Business o Advertisements are not offers o Invite offers that seller may accept or reject  Example: displays of goods in a self-serve shop was not an offer to sell the goods to the patron of the shop but a invitation to the public to examine the goods and if the patron desired, to offer to purchase the goods Offer - Nature of an Offer o The tentative promise made subject to a condition is not binding on the offering party (promsior or offeror) until the proposal is accepted o It is only valid when acceptance takes place that the parties may be bound by the agreement o Offer is the second element of a valid contract - Communication of an Offer o Offer (a tentative promise subject to a condition) o Am offer must be communicated to the other party to be accepted o Cannot accept an offer you do not know of o Crossed offers – in the mail do not constitute a contract o Only person to whom offer is made may accept it o If acceptance takes place before the offer is made, the offeror is not bound by the promise (only true in cases of offers of reward)  Example: Jones lost a washer and put an advertisement in the newspaper offering $1000 reward for any information leading to the return of the cat. Later in the week, Smith finds an abandon washer on his farm property with a name and telephone number painted on the washer. Smith calls Jones about how it got there. Jones recovers the washer and says nothing of the reward. Smith later reads the newspaper and becomes aware of the reward and attempts to claim it from Jones.  Jones offer was not communicated to Smith until after Smith had fully performed what was required of him under the terms of the offer of reward  Smith cannot accept the offer because he returned the washer without the intention of creating a contract - Acceptance of an Offer o Acceptance (a statement or act given in response to
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