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MIDTERM Sheet #7.docx

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Law and Business
LAW 122
Sari Graben

Chapter 7: The Nature and Creation of Contracts Introduction to Contracts • Contract = legally enforceable agreement. • Usually does not have to be in writing. • Elements of a contract: o Intention to create legal relations. o Mutual agreement through offer and acceptance. o Exchange of value: each must give consideration. • Differences between torts and contracts: o Source of primary obligation o Privity o Compensation o Risk management Intention to Create Legal Relations (pg 156) • Parties must intend to create a legally enforceable agreement. • Objective test of intention: o What would a reasonable person believe? • A reasonable person does not take unrealistic or exaggerated proposals seriously. • Presumption in favour of contract where there is a commercial relationship. • Presumptions may be rebutted or disproved. • See Fobasco v. Cogan. Nature of an Offer (pg 158) • Offer = willingness to enter into a contract on certain terms. • Offeror is the party who indicates willingness to enter into contract on defined terms. • Offeree is the party who is entitled to accept or reject the offer. • Offeror is the master of the offer (can set almost any terms desired). • Offer must usually contain the essential terms of the contract. Invitation to Treat (pg 158) • Offers and risk management: o Contract created as soon as offer is accepted. o No particular form is necessary. o Contract does not have to be in writing, unless it falls within one of the special categories (e.g. sale of land). o Mechanism required to reduce risk of liability. • Invitation to treat = willingness to receive an offer: • Offers v. invitations to treat: o Objective reasonable person test o Statement placed in newspaper ad or catalogue presumed to be invitations. Characteristics of an Offer • Offer must be communicated. • Communication may take many forms: o Written document o Oral statement o Conduct • Offer turned into contract by acceptance. • Offer may be terminated before acceptance if: o Revocation o Lapse of time o Death or insanity o Rejection o Counter offer Revocation (pg 160) • Revocation = withdraw by offeror o Offeror generally free to revoke at any time. o Revocation must be communicated to offeree. • Firm offers o Gratuitous promise to not revoke is unenforceable (Dickinson v. Dodds). o It is enforceable and cannot be revoked if:  It is placed under seal; OR  Options: Offeror receives some value, usually money, in return for a binding promise to keep the offer open for a specific period. • Another exception – The Tender Process: o Bidders prohibited from revoking offers. Revocation: The Tender Process • A tender is an offer to undertake a project on particular terms set by the initiating body (usually a public body). • This body usuall
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