Textbook Notes (367,993)
Canada (161,547)
LAW 122 (618)
Chapter 10

LAW122- Chapter 10- Contractual Defects.docx

5 Pages
Unlock Document

Law and Business
LAW 122
Theresa Miedema

LAW122 - Chapter 10- Contractual Defects In Capacity to Contract  A person cannot enter a contract unless they have the legal power to give consent  To protect specific groups of people, the law has drawn a distinction between those who have the capacity to contract and those who do not  Capacity is the legal power to give consent Personal Incapacity Minors  The law distinguish between minors and those who have reached the age of majority  The age of majority is the age at which a person id held fully accountable in law  Those who have not reached the age of majority are minors  Some contracts are voidable at the minor’s option.  A contract is voidable if a minor is entitled to avoid the legal obligations that the contract would have otherwise created  Some contracts with minors are voidable; the minor may elect to avoid contractual liability. If so, they are relieved of all future liabilities under the contract  A minor who wants to avoid contractual liability should do so as soon as possible  If there is a substantial delay, a court may say boy/girl affirmed the contract and therefore lost the right to avoid it  Once a person reaches the age of majority they must decide within a reasonable time, whether they want to avoid a contract that they created as a minor  The ability to avoid certain contracts does not mean that minor can take the benefit of a contract and then cancel it with immunity Mental Incapacity  Two situations  First, if a court has declared a person to lack mental capacity, their contracts are void and cannot be enforced at all  Second, even if there is no court declaration, a person may still be considered mentally competent if he or she lacks the mental capacity to contract at the time the contract is formed – if so the contracts are voidable Intoxication  Rules for drunkness are similar to those for mental incapacity  One may enter into a contract while intoxicated. First the person must have been so drunk that they could not know or appreciate what they were doing – OR the other contractual party must have been alerted to that fact  Courts are concerned with fairness *Business Corporations  Corporations are treated as legal persons  Charted corporations are treated the same as individuals who have reached age of majority  If a chartered corporation enters into contract breach of its charter, its charter may be forfeited, but the contracts made in breach of the corporate charter will still be binding  Statutory corporations have limited contractual capacity –limited power given to them through legislation  When a corporation acts ultra vires, it lacks the capacity to contract Associations  Associations are usually unincorporated business organizations, including private clubs, charities, and religious societies. – lack contractual capacity  Therefore some provinces have legislation that gives contractual capacity to associations involved in such activities such as education, religion, and charity Guarantees  A guarantee is a contractual promise by a third party, called a guarantor, to satisfy a debtor’s obligation if that debtor fails to do so  The guarantor gives a conditional promise  A guarantee can be distinguished from an indemnity. An indemnity is an unconditional promise to assume another’s debt completely 1 LAW122 - Chapter 10- Contractual Defects  In a number of provinces, the Statute of Frauds  Ancient English statute  Generally in force except in BC and Manitoba  Contract may need evidence in writing  Guarantee for repayment of debt  Sale of interest in land  Contracts not to be performed within one year Contract for the Sale of an interest in Land  Contracts for sale of an interest in land are unenforceable unless they are evidenced in writing  Other cases are more clear cut I,e, a contract to repair a building need not be evidenced in writing, nor must an agreement for room and board. However long-term lease of land must be clearly evidenced in writing Contracts Not to be Performed Within a Year  Contracts that are not performed within a year of their creation are unenforceable unless they are evidenced in writing Writing Requirements  If a contract falls within the Statue, the court must decide if the writing requirement was satisfied Form and Content of the Note or Memorandum  Enter the contract must be in writing or there must be a note or memorandum that provides evidence of it.  Document does not have to take any particular form, but has to i) provide evidence of the essential elements of the contract and ii)be signed by the party against whom the agreement is being enforced.  Allow the signature requirement to be satisfied by a name on a letter head or an invoice Effect of Non-Compliance  The Statue of Frauds renders some contracts unenforceable unless they are sufficiently evidenced in writing—therefore such contracts cannot support an action for breach of contract where the defendant pleads the Statue of Frauds as defence.  If one party does not perform, the other can demand a remedy  Not foreseeable therefore be used to pass property and may provide a defence  Example: Someone pays you $5000 as a down payment under an oral contract for the sale of land – A down payment acts as part of the purchase price, but it also provides an incentive to perform. If the payor does not go through with the deal, the payee can keep the money  Party refuses to complete the transaction -- Although your contract is unforeseeable, it still needs a valid explanation as to why you do not have to repay $5000 Consumer Protection and Writing Requirements  By writing – the copy of the agreement be provided to the consumer , these laws can help prevent exploitation of consumers and prevent disputes about the terms of the contract  Reducing disputes General Principles  Contracts require a meeting of the minds, or consensus ad idem, which is a shared mutual agreement to enter into an enforceable transaction on a particular basis  Mistakes:  Error affects the basic process of contract formation – the mistake may negate the existence of an agreement between the parties – without agreement, no contract  Mistakes to the very existence of the contracts subject matter – contract may be defective Mistakes Preventing the Creation of Contracts 1. Mistaken Identity 2 LAW122 - Chapter 10- Contractual Defects  Business relationships are based on trust and reliability i.e. people are willing to invest more in institutions that are known to be reliable  The person who was duped under the first transaction may try to recover the goods from the third party on the basis of the mistake – i.e. con-artist obtain goods under contract and selling to third party  The courts are required to weigh the interests of the seller against those of the innocent purchaser. Mistaken identity will therefore not render a contract: i) the mistake was known to the other contractual party, and (ii) the mistake was material  Material mistake is one that matters to the mistaken party in an important way 2. Mistake about Subject Matter  Some mistakes put the parties at cross-purposes and therefore prevent the formation of a contract  Mutually mistaken about the subject matter  Example: Suppose you enter a contract to buy cotton that will arrive on a ship called Peeless in October. There is
More Less

Related notes for LAW 122

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.