B LAW301 Chapter Notes - Chapter 1-10: Posting Rule, Post Box, Fax

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Introduction to Contracts
Contract
A deliberate and complete agreement between two or more competent
persons, not necessarily in writing, but supported by mutual consideration to
do some act voluntarily
An agreement between to parties that is enforceable in a court of law
Agreement
Composed of an offer to enter into a contract and an acceptance of that offer
Meeting of the minds parties have agreed on what their essential
obligations are to each other
Complete
Agreement must be made complete that is certainty
Deliberate
Both parties must want to enter into a contractual relationship also known as
intention to create legal relations
Voluntary
Agreement must be freely chosen and not involve coercion or other forms of
serious unfairness
Between two or more competent persons
Must be two parties to any contract who have legal capacity
Supported by mutual consideration
Contract involves a bargain or exchange between parties
Each party must give something of value for exchange for receiving
something of value from the other party
Not necessarily in writing
As a general rule, even oral contracts are enforceable though it is preferable
for negotiators to get the contract in writing
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More general notes
Once a contract is created it permits both parties to rely on the terms they
have negotiated and plan their business affairs accordingly
Contract law ensures each party gets what it bargained for namely the
performance of the promises made or monetary compensation in its place
Rules governing contracts are based on common law
Contracts are the legal cornerstone of any commercial operation
Contract law is facilitative: allows participants to create their own rights and
duties within a frame work of rules that a judge will later enforce, if called
upon to do so
Contracts are always needed as personnel can change, memories may
become selective and self-serving and genuine differences of opinions may
arise
Figure 5.1
Trackers: make blind promises concerning price, quantity, and delivery of tracking
to coasters
Coasters: makes a blind promise to pay the purchase price to trackers
Case study
Tal v Ontario Lottery Corporation/ Lotto 6/49 OLG:
Plaintiff, David Tal, who was a 74 year old retired business man
Had winning lottery ticket in 6/49 where he matched 4/6 numbers
4/6 numbers was shared among 20 k people who each got 60 dollars
Tal thought he was entitled for the full amount and sued for 3 million in
damages and 35 million in punitive damages
The resolution was in favor of the lottery organization stating that parties
were in a contract that followed: the lottery organization made an offer to the
public to play a game governed by written rules that the plaintiff accepted by
purchasing the ticket. The written rules were therefore part of the contract
and governed this dispute
All the plaintiffs arguments were rejected
Case study
Concert hall cancels alleged contract with maximum fighting:
Winspear center allegedly entered into a contract with maximum fighting
According to press accounts, the hall canceled the booking saying they made
an error
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Winspear spokes person said that the facility was designed for concerts and
not for fighting
The president for MFC responded by suing for 500 k for breach of contract
Legal factors in their business context: Creating the contract
Communication
Most contractual relationships begin with communication in a number of
ways such as through informal contact between individuals in different
businesses who recognize mutual needs, or perhaps through a general
inquiry made to a supplier concerning price and availability of materials
Communication in the form of a contractual negotiations is automatically
laden with legal meaning
Contract law concerns it self with what negotiators say and do, not with what
they think or imagine. For example is someone makes what looks like an
offer the other side is entitled to accept whether there was one or not. This is
the case because contract law is governed by the objective standard test
which asks whether a reasonable person observing the communication that
has occurred between the negotiations would conclude that an offer and
acceptance had occurred
Bargaining Power
The kind of contract a business person makes is very much influenced by
their bargaining power
In business reality negotiating parties rarely have equal bargaining power
(almost always one side will have more experience, knowledge and market
leverage than another)
The greater ones bargaining power, the more favorable the terms will one
will be able to secure
Contract law is constructed on the basic assumption that those who negotiate
and enter into contracts have equal bargaining power, meaning they are
capable of looking out for themselves and will work to maximize their own
self-interest
Courts will no usually assess the fairness or reasonableness both parties
have chosen
Business context: Performing or enforcing the contract
Business relationships
Business people regularly breach contracts
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