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Chapter 7 Exam Notes

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Law and Business
LAW 122
Henry Ojambo

George Nico Business Law (Exam Notes) Chapter 7: The Nature and Creation of Contracts Introduction to Contracts ­ Contract is legally enforceable agreement ­ Promises and contracts o Simple promise is not legally enforceable o Contractual promise is legally enforceable ­ Essential elements of a contract o Intention to create legal relations o Meeting of the minds (offer and acceptance) o Exchange of value (consideration) o Capacity and legality Torts and Contracts ­ Both involve primary and secondary obligation o Breach of primary obligation creates secondary duty  Tort: • Primary duty: do not harm another • Secondary duty: compensatory damages  Contract: • Primary duty: fulfill your promises • Secondary duty: compensatory damages Intention to Create Legal Relations ­ Parties must intend to create legal relations ­ Objective test of intention o What would a reasonable person believe? o Test applied at the time of purported contract ­ Presumption of intent in commercial dealings, but not in social and family context o These presumptions are rebuttable Meeting of the Minds ­ Contract requires a “meeting of the minds” George Nico Business Law (Exam Notes) o A shared decision to enter into a legal transaction ­ Parties must mutually agree to terms o One party proposes terms through an offer o Other party agrees to terms through an acceptance Nature of an Offer ­ Offer: indicating willingness to contract on stated terms o Offeror: party making offer o Offeree: party receiving offer ­ Offers and risk management o Offers creates risk of contract creation through acceptance, while statement short of offer  does not o Need to distinguish between offers and mere “invitations to treat” Invitation to Treat ­ Willingness to receive offers o Person responding to invitation becomes Offeror o Person making invitation becomes Offeree ­ Objective test to determine between offers and invitations o Would a reasonable person believe the person making the statement was prepared to enter  a contract upon receipt of an acceptance?  Presumed invitations: shelf display, advertisements, & catalogues Communication of Offer ­ Requirement of communication o Offer must be communicated  Eg. Offer contained in undelivered letter ineffective o Offer must be communicated as offer  Eg. Offer received as typing assignment ineffective ­ Communication may take many forms o Written document o Oral statement o Conduct The Life of an Offer ­ Offer turned into contract by acceptance ­ Offer may be terminated before acceptance o Revocation o Lapse of time o Death or insanity o Rejection o Counter offer Revocation of Offer George Nico Business Law (Exam Notes) ­ Revocation: withdraw by offender o Offeror normally free to revoke at any time o Revocation must be communicated to Offeree ­ Firm offers o Gratuitous promise to not revoke: unenforceable unless under seal (discussed under  “consideration”) ­ Options o Contractual promise to not revoke: enforceable Revocation and Tender Process ­ Tender process: a common business process o Eg. City wants to construct new library  City needs to attract offers from builders  Potential builders need to prepare offers ­ Parties’ concerns in tendering process o Potential for worse or procedural injustice  City worried about withdrawn bids  Bidders worried about fair selection process The Tender Process ­ Factual process o City calls for tenders (offers) o Builders submit tenders o City selects winning tender ­ Facts (usually) support two sets of contracts o Contract A: contract to select winning tender  Obligations: • Parties required to honour terms of contest • City required to fairly select best bid • Builders prohibited from revoking offers o Co
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