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ACTG 2P40 (8)
Chapter 7

ACTG Chapter 7 Notes .docx

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Tommy Wall

ACTG Chapter 7 Forming a contract, capacity and legality Burden of proving essential elements of contracts: Once a plaintiff shows there was an offer, with acceptance and consideration for the promise, the court will presume there is a legal relationship. The court will also assume two elements are present: the defendant has the capacity to make a contract and that the contract is legal. Capacity to contract: when forming a contract, we assume both parties have the capacity to make a contract and be bound by it.  Legal Capacity: competence to bind oneself legally  Repudiate: reject or declare not to be bound (by the contract) Minors : a person who has not attained the age of majority in the province  Until a person reaches an age of majority they are exempt from binding contracts, although if the other party is not a minority it is still binding to them.  If a minor owns assets or needs to contract their parents or legal guardian may sign on their behalf and look after their affairs  There are exceptions to this, for example if a minor needs necessaries (food, water, clothing, shelter, medicine) and cannot pay, he can enter a contract to repay a vendor at a reasonable price (i.e. the vendor cannot charge more than he would others)  Beneficial contracts of service: contracts of employment or apprenticeship found to be in the minors benefit and not exploitative (i.e. part time job vs child labour)  A minor can always repudiate a contract for non-necessaries  If a minor sells something he can ask for it back only if the money is returned  Vendors can sell non-necessities to minors, but cannot take a promise of future payment or promise of parental payment  If a minor benefits from a contract of non-necessaries, they cannot recover the money already paid but can repudiate for the remaining liability  When a minor attains the age of majority, their liability to pay for necessaries and beneficial contracts of service continue, and they may become liable for obligations that were unenforceable when they were a minor  Voidable contract: a contract that may be rendered non-binding at the option of either parties o If a minor becomes a major he must quickly repudiate the contract promptly or be held liable like any other adult  Ratify: acknowledge and promise to perform o A minority must ratify a contract after reaching age of majority to be held liable to it. Other persons who lack capacity of contract: The law protects these parties the same way it protects minorities, these parties can pay a fair price for necessaries but nothing else is enforceable. These groups include:  The insane or mentally handicapped or elderly people suffering from illnesses  Those under the influence of alcohol or drugs o In this instance, one must prove that he was so intoxicated that he did not know what he was doing o He must also prove that the other party was aware of the condition, which may be hard if he was unable to determine what he himself was doing (thus witnesses are beneficial) o As with a child reaching majority, the repudiation must come quickly after recovering from the influence, waiting too long to repudiate can lead to the loss of that ability Corporations:  The law may give corporations the capacity to enter legal contracts, however legislatures have not granted the widest possible contractual capacity, and they are still restricted by statutes.  Any obligations that are made outside the power granted by statutes will be declared void  Law relating to principal and agent: determines if a person claiming to act on behalf of corporations have the power to bind said corporation in a contract. Labour unions, associations and other organizations: They are not recognized as legal entities until they either incorpor
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