Duplessis.SG.Chapter 6.pdf

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2275A/B
Professor
Henry Meredith
Semester
Winter

Description
PART2CONTRACTS C HAPTER 6 F ORMING C ONTRACTUAL R ELATIONSHIPS Objectives After studying this chapter, you should have an understanding of: • how negotiations lead to a contractual relationship • how negotiations can be terminated • the legal ingredients of a contract • how contracts can be amended or changed Learning Outcomes • Understand how business negotiations can result in the formation of a contract or terminate without legal consequences (page 118/120) • Understand the essential elements of a contract (page 118/120) • Recognize when contracts can be amended and when they cannot (page 135) Chapter Summary A contract comprises four essential elements: an offer, an a cceptance, consideration, and an intention to contract. Before a contract can be formed, one party must make an offer on a complete set of certain terms. An offer can be terminated in a number of ways, including by revocation, lapse, rejection, counteroffer, death, or insanity. Assuming that an offer is on the table, the other party must unconditionally accept all the terms of the offer for the offer to be considered accepted. Each party must give something (called consideration) in exchange for the promise or performance of the other. The parties must intend their bargain to be a contractual one. If any one of these elements is missing, the relationship is non-contractual by definition. There are occasions, however, when the law will enforce a promise that is not supported by consideration. In short, if the pr omise is under seal, meets the requirements of promissory estoppel, or is subject tialized statutory schem e, such as the partial payment of debt, it will be enforceawell, the New Brunswick Court of Appeal is willing to enforce gratu itous contractual variat ions provided there is n o economic duress. Aside from these exceptions, a gratuitous prom ise is not binding, no m atter how seriously it was intended and no matter how much the party may have relied on it. This legal reality is particularly important when varyin g a term in an ct. W hile thea conditions for creating a legal ent m ay seem stringent, they serve an important purpose. Contract law is about creating voluntary agreements and is therefore facilitative. In sum, it helps those in the m arketplace to dete rmine – in advance of litigation – the legal enforceability of commitments they have rece ived, and thereby lets them do business m ore effectively. Copyright © 2011 by Nelson Education Ltd. CHAPTER6:FORMING CONTRACTUAL RELATIONSHIPS Study Outline Use this outline to prepare a complete set of notes for this chapter. The Contract – page 118 ______________________________________________________________________ ______________________________________________________________________ Agreement __________________________________________________________ Complete __________________________________________________________ Deliberate __________________________________________________________ Consideration __________________________________________________________ Offer – page 118 ______________________________________________________________________ ______________________________________________________________________ Certainty of offer__________________________________________________ ______________________________________________________________________ Invitation to treat__________________________________________________ ______________________________________________________________________ Standard form contract _____________________________________________ ______________________________________________________________________ Offeror _________________________________________________________ ______________________________________________________________________ Offeree _________________________________________________________ ______________________________________________________________________ Termination of offer _____________________________________________________ Revocation _________________________________________________________ ______________________________________________________________________ Firm offer _________________________________________________________ Option agreement _________________________________________________ Lapse __________________________________________________________ ______________________________________________________________________ Rejection __________________________________________________________ ______________________________________________________________________ Counteroffer ________________________________________________________ ______________________________________________________________________ Death or Insanity_________________________________________________ ____ ______________________________________________________________________ 85 PART2:CONTRACTS Acceptance – page 126 ______________________________________________________________________ ______________________________________________________________________ Definition of acceptance__________________________________________________ ______________________________________________________________________ Communication of acceptance _____________________________________________ ______________________________________________________________________ Electronic contracting - certainty of offer and acceptance ________________________ ______________________________________________________________________ Formalization _______________________________________________________ ______________________________________________________________________ Consideration – page 133 ______________________________________________________________________ ______________________________________________________________________ The nature of consideration _______________________________________________ ______________________________________________________________________ Gratuitous promise ___________________________________________________ Pre-existing legal duty ___________________________________________________ ______________________________________________________________________ Variation of contracts ____________________________________________________ ______________________________________________________________________ Promises Enforceable without Consideration – page 136 Promise under seal ______________________________________________________ ______________________________________________________________________ Promissory estoppel _____________________________________________________ ______________________________________________________________________ Partial payment of a debt _________________________________________________ ______________________________________________________________________ Intention to Contract – page 140 ______________________________________________________________________ ______________________________________________________________________ Business agreements_____________________________________________________ ______________________________________________________________________ Family agreements ______________________________________________________ ______________________________________________________________________ Copyright © 2011 by Nelson Education Ltd. CHAPTER6FORMING CONTRACTUAL RELATIONSHIPS SELF–ASSESSMENT Key Terms Briefly define each term in the space provided. Offer – page 118 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Invitation to treat – page 119 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Standard form contract – page 120 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Offeror – page 122 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Offeree – page 122 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Revocation – page 122 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Option Agreement – page 125 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Lapse – page 126 ______________________________________________________________________ ______________________________________________________________________ 87 PART2:CONTRACTS Rejection – page 126 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Counteroffer – page 126 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Acceptance – page 126 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Consideration – page 133 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Gratuitous promise – page 133 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Pre-existing legal duty – page 137 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Promissory estoppel – page 140 ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Copyright © 2011 by Nelson Education Ltd. CHAPTER6:FORMING CONTRACTUAL RELATIONSHIPS Matching Match the correct letter of each term in the space provided before each sentence. A Contract B Offer C Counteroffer D Invitation to treat E Revocation F Acceptance G Electronic business H Prom issory estoppel I Considera tion J Gratuitous promise 1. ____ Commercial transactions conducted over the Internet. 2. ____ The rejection of one offer and proposal of a new one. 3. ____ An agreement between two or more parties that is enforceable in a court of law. 4. ____ An expression of willingness to do business that carries no legal repercussions. 5. ____ An unqualified willingness to enter into a contract on the terms in the offer. 6. ____ The withdrawal of an offer. 7. ____ The price paid for a promise. 8. ____ A promise to perform specified acts on certain terms. 9. ____ A promise for which no consideration is given and can be broken without legal repercussions. 10. ____ A doctrine whereby someone who relies on a gratuitous promise may be able to enforce it. Questions Write a short, poin t-form answer for each ques tion in the space prov ided. To assist you in understanding the chapter, it is recommended that you also us e additional paper to write a full and complete essay answer based on your points for each question. 1. What are the basic elements of a contract? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 2. What role does certainty play in an offer to enter into an agreement? ______________________________________________________________________ ______________________________________________________________________ 89 PART2:CONTRACTS ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 3. What is the practical reason that advertisements are not classified in law as offers? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 4. Discuss the standard form contract. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 5. What is the rationale for suggesting standard form contracts are not inherently objectionable? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 6. What is the key factor in deciding whether an offer has been made? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 7. How does Professor Michael Geist describe the Electronic Commerce Protection Act (ECPA)? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 8. What alternative legal remedies are available to Canadians regarding spamming? ______________________________________________________________________ ______________________________________________________________________ Copyright © 2011 by Nelson Education Ltd. CHAPTER6:FORMING CONTRACTUAL RELATIONSHIPS ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 9. What 5 events can terminate an offer? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 10. What is the legal significance of revocation and at what point is it relevant? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 11. Explain what is meant by the term “firm offer” with respect to contractual relations. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 12. What is the purpose of an option agreement? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 13. Explain how an offer can lapse. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 14. What is the impact of a counteroffer on the offer? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 91 PART2:CONTRACTS ______________________________________________________________________ 15. What is the rule on communication of acceptance? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 16. If an offeror dies before an offer is accepted does the offer end? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 17. How does insanity impact the offer process? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ _______________________________________
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