ADMS 2610 Ch 7 Notes

Introduction A contract may be defined as an agreement between two or more persons that is enforceable at law. The Elements of a Valid Contract The requirements are referred to as the elements of a valid contract and consist of: 1. An intention to create a legal relationship 2. Offer 3. Acceptance 4. Consideration 5. Capacity to contract 6. Legality - In addition to these six basic elements, to be enforceable, certain types of contracts must be in writing, in an electronic substitute, or take on a special form. - In general, however, all contracts must have the six elements present to be valid and binding. - Contracts must also be free from any vitiating elements, such as mistake, misrepresentation undue influence or duress. The Intention to Create a Legal Relationship - Closely related to the intention of the parties to be bound by their promises is the notion of consensus ad idem or agreement as to the subject or object of the contract. - The first requirement, then for a valid contract, must the intention on the part of the promisor to be bound by the promise made. - This intention to create a legal relationship is an essential element of a valid contract. - The intention to create a legal relationship is a presumption at law, because the creation of the intention would otherwise be difficult to prove. - The reasons for presumption - that strangers who make promises to one another intend to bound by them - is essentially an approach that permits the courts to assume that the promises are binding, unless one or both of the parties can satisfy the courts that they were intended to be so. An Advertisement Creates a Landmark Law - For example, promises made between members of a family would not normally be considered to be an enforceable contract. - As well, generally speaking, advertisements in newspapers, magazines, and other written media are not normally taken as enforceable promises that are binding on the advertiser. - As a general rule, the courts view an advertisement (or for that matter, any display of goods) as a mere intention to do business, rather than an intention to enter into a contract with the public at large. - An advertiser is not normally bound by the claims set out in an advertisement

Offer and Acceptance The Nature of an Offer - The second element of a binding contract deals with promises made by the parties. - Only a promise made with the intention of creating a legal relationship may be enforced. - But in the normal course of negotiations, a person seldom makes such a promise unless some condition is attached to it, requiring the other party (the promissee) to do some act or give a promise in exchange. - An offer is a preliminary promise subject to a situation - Acceptance is a statement or act the provides acceptance of an offer Communication of an Offer - A tentative promise subject to a condition - An offer must be communicated by the offeror to the other party (the offeree) before the offer is capable of being accepted. - From this observation flows the first rule for offer and acceptance: An offer must be communicated by the offeror to the offeree before acceptance may take place. - In some cases, the parties may deal with each other by letter, facsimile, email, or other means of communication. - It is important for the offeror to know when the offeree becomes aware of the offer. - This is so because an offer is not valid until it is received by the offeree, and the offeror is not bound by the offer until such time as it is accepted. - We have the general rule that only the person to whom an offer is made may accept the offer. - If an offer is made to public at large, this rule naturally does not apply; for the offeror is, by either words or conduct, implying in such an offer that the identity of the offeree is not important in the contract. Acceptance of an Offer - It states that the acceptance of the offer must be communicated to the offeror in the manner requested or implied by the offeror in the offer. - A statement or act given in response to and in accordance with an offer - If acceptance is specified to be by oral means, the acceptance would be complete when it is communicated by the offeree either by telephone or when the offeree mees with the offeror and speaks the words of acceptance directly to the offeror. - Rule: acceptance of the offer takes place when the letter of acceptance, properly addressed and the postage paid, is placed in the post-box or post office. - Silence cannot be considered acceptance - Bilateral contract: Acceptance of offer through communication - Unilateral contract: Acceptance of an offer by doing something

Electronic Offer and Acceptance - If the addressee has designated or uses an information system for purpose of receiving information or documents of the type sent, when it enters that information system and becomes capable of being retrieved and processed by the addressee. - If the addressee has not designated or does not use an information system for the purpose of receiving information or documents of the type sent, when the addressee becomes aware of the information or document in the addressee's information system and it becomes capable of being retrieved and processed by the addressee. Effect and Timing of the Click as Offer and Acceptance - The Ontario Superior Court of Justice has recognized the click-wrap agreement - the click box of "I Agree" - as valid acceptance of contractual responsibilities. Lapse of an Offer - When an offeree dies before accepting an offer, the offer lapses, because the deceased's personal representative cannot accept an offer on behalf of a deceased person. - An offer will also lapse as a result of a direct or indirect response that does not accept the offer unconditionally and in accordance with its terms. - Similarly, any change in the terms of the offer in a purported acceptance will cause the original offer to lapse, as the modified acceptance would constitute a counteroffer. - Offers may also lapse by the passage of time, or the occurrence of a specified event. - Obviously, an offer that must be accepted within a specified period of time or by a stipulated date will lapse if acceptance is not made within the period of time or by the particular date. - An offer may also lapse within a reasonable time if no time of acceptance has been specified. Revocation of an Offer - Revocation, as opposed to lapse, requires an act on the part of the offeror in order to be effective. - Normally, the offeror, must communicate the revocation to the offeree before the offer is accepted; otherwise, the notice of revocation will be ineffective. - An option is a separate promise that obliges the offeror to keep the offer open for a specified period of time, either in return for some compensation or because the promise is made in a formal document under seal. - A second aspect of revocation of an offer is that it need not to be communicated in any special way to be effective. - The only requirement is that the notice of revocation be brought to the attention of the offeree before the offer is accepted.