Chapter 16
What is a valid contract?
 Valid Contract
 Contract
 Types of Contracts
 Express
 Implied
 Simple
 Contracts under seal
Offer
 2 parties
 Offerer-makes the offer
 Offeree-accepts the offer
 In order for an offer to be valid, a meeting of the minds
must take place. Meeting of the minds is when both
parties understand their rights and responsibilities.
Serious Intent
 For an offer to be valid, it must be definite and
seriously intended.
 If an offer is made as a joke or in anger, then it is not
valid.
 An offerer’s words or conduct must indicate both the
clear intention and willingness to carry out the
promise if the offer is accepted.
Definite Terms
 Terms of an offer must be clearly stated.
 If goods are being sold, quantity, price, size, colour,
terms of sale and delivery date must be defined.
 For goods and services, there is usually a standard
price.
 Some terms are implied or assumed to be known.
Invitation to Buy
 Ads, displays and catalogues are invitations by sellers
for customers to make an offer to buy the products.
 New forms of advertising are being used such as
telemarketing and online advertising.
 Federal and provincial governments have passed laws
identifying unfair, deceptive and misleading practices.
 Ads are not considered promises that are legally
binding.
Communicating an Offer
 An offer must be communicated before it is accepted
(mail, courier service, fax etc)
 An offer is not valid until it is received.
 Identical offers that cross in the mail does not count as
a contract because neither party has accepted the
others offer.
Figure 16-5: a lost dog notice
You are not entitled to an offered reward because the
poster is not communicated to you until after you have
returned the award.
Terminating an Offer
 Unless an offer is accepted, no legal rights or obligations
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can arise from it.
An offer may also be terminated by revocation, which
means it is withdrawn before being accepted. (can have
terms saying it cannot be withdrawn for a specific time.)
If an offer includes no deadline, it remains open for a
reasonable length of time before lapsing.
A verbal offer lapses when the parties leave one another.
An offer lapses if one party dies or is declared incapable
before acceptance.
Acceptance
 Can be in either words or by conduct and must follow
certain legal rules.
 Offerer can make a counter-offer which changes one or
more terms of the original offer. The offerer can accept
or deny it.
Communicating Acceptance
 No contract exists until acceptance is communicated
to the offerer.
 It is assumed that the offer and acceptance will be
communicated in the same way.
Acceptance by Mail
 An offer made and accepted by mail is a binding contract.
 It doesn’t matter if the acceptance is lost, it is still valid if
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the offeree can prove it was mailed in time.
If it doesn’t arrive in time, a choice can be made by the
offerer to offer it to someone else.
If it doesn’t specify a method of acceptance a “reasonable
method” of acceptance e must be used.
The contract is not formed unit the acceptance reaches the
offerer.
If the mailed offer states that the acceptance must be
mailed back, the acceptance is only valid if it actually
mailed back.
Electronic Contracts
 Conducted over the internet (E-commerce).
 A digital signature is used. It is personal, verifiable,
and protected by encryption.
 In 2000, legislation was passed to deal with ecommerce.
 Electronic Commerce Act 2000
Silence and Inaction
 An offerer might be tempted to say that if they are not
notified after a certain amount of time, they assume
that you have accepted their offer. This is not legally
valid.
 Acceptance has to be given actively in words or actions.
 One exception: Negative-option marketing
A consumer must take action in order not to receive an
item or service.
Unsolicited goods and services
 If you receive an unsolicited credit card you are under no
obligation unless you give written acknowledgement that
you want to accept the card.
 If there is no consumer-protection legislation is in place,
you are only liable if you use the goods.
Consideration
 The exchange of something of value.
 In most contracts, consideration for one party is the
purchase of a particular item or service, and for the
other, it is the money paid.
Types of Consideration
 Present consideration
Occurs at the time the contract is formed.
 Future consideration
Occurs when one or both of the parties promise to do
something in the future. (buying on credit)
 Past consideration
A promise by one person to pay another for services that
have already been performed for free (not legally
binding).
Adequacy of Consideration
 Courts do not care about the amount of consideration
exchanged as long as one party gives something to the
other.
 The courts do not regard love, affection, respect or
honour as valuable legal consideration.
Minors
 A minor is any person under the age of majority, the
age at which a person gains full rights and
responsibilities in legal matters including contracts.
Capacity
 The ability to enter into a contract
 All sane and sober adults can enter into a contract.
 There are laws that protect certain groups of people
from being exploited in contract situations.
Minors and Contracts
 Minors are obligated to fulfill contracts for necessities
(goods and services that everyone needs: food,
clothing, shelter, education, and medical services).
 To be considered necessary, a good or service has to do
with your station in life (super rich vs average)
Best Interest of Minors
 If someone enters into a contract with a minor for a
necessity but the terms of the contract are not in the
minor’s best interest, a minor may not be obligated to
pay the contract price.
 Example: $400 jacket
Void Contracts
 Contracts that are not in the minor’s best interest are
void (which means its like they never existed).