Law of contract.ppt

7/24/2019 Law of contract.ppt

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THE LAW OFCONTRACT

PhD. Nguyen Thi Hong Nhung


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WHAT IS A CONTRACT?

A contractcan be defined as an agreementbetween two or more persons or corporations

A contract creates obligations as well as rights

for each of the parties

If one of the parties to a contract does notmeet his or her obligations, the contract is

enforceable by a court


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ELEMENTS OF A VALID CONTRACT

There are six elementsin a valid contract:1.Intention to create a legal relationship

2.Offer

3.Acceptance

.!onsideration

".!apacity to contract

#.$egality

%ome, but not all, contracts must be in writing,such as contracts for the purchase of land


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INTENTION TO CREATE A LEGALRELATIONSHIP

An intentionto create a contract that islegally binding is an essential first step incontract formation

&here is a presumption at law that promises ina business contract are intended to be binding,a presumption which does not e'ist forcontracts of a social nature

Advertisements are not enforceable promisesbut rather invitations to do business


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OFFER

An offeris a tentative promise to performsub(ect to a certain condition or conditions

)ntil it is accepted, an offer is not enforceable

An offer must be communicated by the offerorto a specific offeree, since an offer is not validuntil it is received by the offeree

In other words, an offeree cannot agree to anoffer of which he or she is unaware


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ACCEPTANCE

Only the specific offereeto whom an offer ismade can accept it, and acceptance must beunconditional * on the e'act terms of the offer

Acceptance must, in turn, be communicated tothe offeror in the manner specified or implied atthe time the offer was made

&he time of acceptance is when the offeror ismade aware of the acceptance, or alternativelyat the moment when the offeree places a letterof acceptance to the offeror into the mailbo'


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ELECTRONIC CONTRACTS

An offer made over the Internetwill, unlessotherwise specified by the parties, become anenforceable contract in the (urisdiction wherethe offeror conducts business, and at the timehe or she receives the acceptance

&he offeree+s action of clicing on the clic bo'containing the words -I agree constitutes

acceptance and the instant formation of anenforceable contract


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COUNTER OFFER

A counter offer ends an offer

Anything less than unconditional acceptance ofan offer is either a counter offer or an in/uiry

A counter offer is really a fresh offer from theofferee which the original offeror may accept

0ollowing a counter offer, the only way theoriginal offer from the original offeror can comebac into e'istence is if the offeror revives it


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SILENCE AND FORM OF ACCEPTANCE

Silenceon the part of the offeree cannot beconstrued as acceptance

&here is no obligation on an offeree to refuse

or re(ect an offer unless there is a previousarrangement to that effect between the parties

&he form or method of acceptance may be

verbal or written, but may also be by conductsuch as a handshae, nod of the head or theraising of a numbered card during an auction


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UNILATERAL AGREEMENTS AND LAPSE

A unilateral agreementcalls for the offereeto actually complete or perform his or her partof the contract as a way to signify acceptanceof an offer

&his performance by the offeree taes theplace of written or verbal acceptance

An offer will lapse within a reasonable time ifno specified date for acceptance is provided,and will lapse upon the death of either party


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REVOCATION OF AN OFFER

If an offeror decides to withdraw an offerhe or she may do so at any time before theoffer is accepted

&he offeror must communicate the revocationdirectly or indirectly to the offeree

An offeree who wishes to ensure an offer

remains open for a specified time must createan option agreement with the offeror, eitherunder seal or for consideration


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CONSIDERATION

Consideration is the e'change of somethingof value or benefit between a promisor and apromisee

!onsideration in e'change for a promise ofperformance is often money, but need not be

Alternative types of consideration include a

promise by the promisee notto do something,a relin/uishment of the right to sue, a deliveryof goods, or a seal affi'ed on a contract


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ADEQUACY OF CONSIDERATION

The amount of considerationor fairness of itdoes not concern the courts, so long as theconsideration is something of value or benefite'changed in return for a promise

&he timing of a discussion about considerationis significant: to be valid, consideration mustarise out of the negotiations between the

promisor and promisee to create a contract,not out of a pre e'isting obligation and notafter the fact when performance has alreadybeen completed


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TENDERS

A call for tendersby a government or privatecompany communicates a re/uest for goods orservices and is an offer to negotiate a contract

&enderers respond to the offer by maing bids,and a deposit or bid bond is often re/uired to

underscore the commitment of the tenderer toperform if his or her bid is selected

If the tenderer selected ultimately declines toe'ecute the contract with the government orprivate company, the deposit is forfeited


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EQUITABLE OR PROMISSORYESTOPPEL

A gratuitous promiseis unenforceable due tolac of consideration

ut if a fact is asserted and someone relies on it

to his or her detriment, the person who madethe statement cannot later deny it

stoppel creates a defence against a promisor+s

claim for enforcement of a contract against apromisee when the promisee relied, to his or herdetriment, upon a gratuitous promise from thepromisor


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CAPACITY TO CONTRACT

Public policydictates that, in general, personsunder the age of ma(ority, persons with mentaldisabilities, and persons impaired by alcohol ordrugs may be unable to appreciate the natureof contractual obligations

!ontracts they enter may not be enforceableagainst them for e'ample, impaired persons

who immediately repudiate a contract uponbecoming sober and show that the other partyshould have reali4ed their lac of capacity mayavoid obligation under a contract


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RESTRICTIONS UPON CAPACITY

Corporations, labour unions and banruptpersonsmay have restrictions placed upontheir ability to contract

A company+s incorporating documents may limitthe sub(ect matter or monetary limits ofcontracts its officers may enter on its behalf

)nions may be restricted to entering collectiveagreements on behalf of employees, and anundischarged banrupt person may only beallowed to purchase necessaries


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THE REQUIREMENT OF LEGALITY

A contract with an illegal purposeisunenforceable by a court

%imilarly, a tradesperson or professional who is

re/uired by law to be licenced but who is notlicenced cannot as a court to enforce a contractagainst a client who does not pay

!ontracts which are against public policy such asthose that impair the integrity of our marets orcorrupt governance are not enforceable


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CONTRACTS IN RESTRAINT OF TRADE

A restrictive agreementconcerning the sale ofa business attempting to protect goodwill mustnot be too broad geographically or too long induration otherwise a court may sever therestrictive clause from the contract

5estrictive covenants in employment contractswill not be enforced unless the employer candemonstrate the lielihood of significant harm

6ublic policy favours the economic freedom ofthe employee over the employer+s interest


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ASSIGNMENT OF CONTRACTUALRIGHTS

The privity of contract rulestates that onlythe parties to a contract can enforce thecontract or be liable under it

There are exceptions to the privity rule such aspartnership contracts in which one partner cancreate liability for another; the acceptance ofland or goods with conditions negotiated by

others; the doctrine of constructive trust inwhich a court finds a contract will benefit athird party; and statutory enforcement of third

party rights such as a life insurance policy


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NOVATION

A third party may acquire rightsunder a contractthrough a novation, where his or her name issubstituted for the name of one of the original partiesto the agreement by consent

Alternatively, a fresh agreement can be created inwhich the third party becomes one of the twocontracting parties, terminating the original contract

Vicarious performance allows an employee orcontractor to perform an employers duties


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STATUTORY ASSIGNMENT

An assignee of contractual rightscan sue inhis or her own name if

1The assignment is in writing, signed by theassignor

!The assignment is absolute

"#xpress notice is given to the party whose debtis assigned, with title ta$ing effect on the date ofthe notice

%Title to the assignment is ta$en sub&ect to anye'uities between the original parties to thecontract

There is a ris$ the debtor may claim a set(off


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ASSIGNMENTS BY LAW

Upon the death or bankruptcyof a party toa contract, a number of assignments areautomatically engaged

)pon death, a deceaseds rights andobligations under contracts are assigned to hisor her executor

*imilarly, following a voluntary assignment intoban$ruptcy, the ban$rupts rights andobligations pass to the trustee in ban$ruptcy

NATURE AND EXTENT OF


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NATURE AND EXTENT OFPERFORMANCE

Less than complete performance of acontract is a failure to respect its terms

+f performance of the promise is not exact and

precise, the contract may not be discharged

ffering to perform a promise is formally calledtender of performance and may arise by either

1Tender of payment, or

!Tender of performance of an act described inthe contract


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Tender of paymentoccurs when the debtorformally offers payment to the creditor in theexact amount due, at the re'uired time, and inthe proper place

+f anything other than legal tender is to be usedto pay, there must be prior arrangements in thecontract permitting payment by che'ue, creditcard or bill of exchange

+nterest ceases to run after the tender ofpayment, whether it is accepted or not

TENDER OF PAYMENT


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TENDER OF PERFORMANCE

Performance of a promised actcreates theexpectation of tender of payment

The performance must be in accordance with

the contract terms, including the appointedtime and place for delivery of goods, transferof land, or accomplishment of a service

A failure to perform is a breach, entitling theother party to damages or specific performancein the case of land or uni'ue goods


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DISCHARGE BY OTHER MEANS

Full and satisfactory performanceby bothparties is the ideal way to discharge a contract,but discharge may also occur by other means

The option to terminate gives each of the partiesthe opportunity to end the contract by providingthe other party with a specific period of notice

*imilarly, a condition subse'uent specified inthe contract may, when it occurs, discharge allcontractual rights and duties


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ACT OF GOD AND FRUSTRATION

An act of God is a manifestation of the forceof nature which could not have been precludedby human intervention and which prevents theperformance of a contract

The doctrine of frustration is the inability todischarge a contract by performance due tounforeseen circumstances beyond the control

of both of the parties, and is often thedestruction of something critical toperformance of the contract


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CONDITION PRECEDENT

The opposite of a condition subsequent, acondition precedent delays or prevents aprepared and signed contract from coming intoforce and effect until the happening of aspecified event

+f the specified event never occurs, both partiesto the contract are discharged from any duty toperform

-ithout the fulfillment of the conditionprecedent, no enforceable contract ever exists


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OPERATION OF LAW

A change in the lawis another method bywhich a contract may be discharged

The sub&ect matter of a contract may, for

example, become illegal, or the .an$ruptcy and+nsolvency Act may absolve one of the parties toa contract from indebtedness

/urther, if a limitation period for filing a lawsuitunder a provincial or territorial limitation actexpires, a remedy for a breach of contract maybe statute barred


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MERGER

nformal contractsare sometimes replacedby a formal agreement made under seal

As long as the content or substance of the

written agreement remains the same, theoriginal informal contract can be said to bedischarged when it is merged or incorporatedinto a formal contract having an identical effect


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AGREEMENT

Parties who mutually agreeto abandontheir rights and obligations under a contractcan offer each other, as consideration for theirpromises, a waiver of their right to enforce acontract

*imilarly, both parties can agree to dischargean existing agreement and, by process of

novation, enter a new one with fresh terms ordifferent parties if they so choose


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MATERIAL ALTERATION OF TERMS

!hen a change goes to the rootof thecontract, it is $nown as a material alterationwhich can be said to alter the character of theagreement

*uch a change has the legal effect ofdischarging the original contract and giving riseto a new agreement containing the material

term


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BREACH OF CONTRACT

A breach of contractis a failure by one of theparties to honour and complete an express orimplied term

This conduct results in the entitlement of theinnocent person to commence an action fordamages and to treat the contract, in somecircumstances, as discharged


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TYPES OF BREACH OF CONTRACT

"#press repudiationis the refusal verbally, inwriting, or by conduct to perform contractualduties; and anticipatory breach occurs beforethe performance is actually due when itbecomes apparent that one party is not li$ely

to perform

The doctrine of substantial performanceprotects a party who breaches some aspect ofa contract after completing all essential termsassociated with its purpose from an attempt bythe other party to avoid performance


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BREACH OF WARRANTY

!here a repudiation is of a subsidiarypromise rather than of an essential term, thereis a breach of warranty

The breach of a minor term which is not acondition entitles the victim to damages butnot to rescission of the contract

A victim of a breach of warranty, in otherwords, must nevertheless fulfill his or her partof the contract


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IMPLIED REPUDIATION

Unlike an e#press repudiation, an impliedrepudiation must be discerned from the conductof one of the parties or from various statementshe or she ma$es prior to the time whenperformance is due

+mplied repudiation is the most difficult type ofanticipatory breach to identify

+f a condition in a contract has been breached,the non performance may entitle the innocentparty to treat the contract as ended


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FUNDAMENTAL BREACH

A fundamental breachis one that is soserious that it goes to the very root of thecontract, allowing the innocent party to escapehis or her obligations to perform

An exemption clause generally attempts to limitthe liability of someone who has breached acontract; however if the breach is of afundamental nature, courts will construe theexemption clause strictly against the personwho drafted it to the extent that the clausemay provide no protection at all


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REMEDIES FOR BREACH OF CONTRACT


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REMEDIES FOR BREACH OF CONTRACT

$ompensation for lossfor breach of contractis available to the in&ured party, but the lossmust be proven to the court

The goal of damages is to place the victim ofthe breach in the same position he or shewould have been in if the contract had beenperformed as initially contemplated

0emedies besides damages include specificperformance and 'uantum meruit

THE EXTENT OF LIABILITY FOR LOSS


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THE EXTENT OF LIABILITY FOR LOSS

A whole series of contractsmay beadversely affected when someone commits asingle breach of contract that causes a chainreaction

The defence of remoteness may be raised by adefendant, but any damages actually causedby a breach of any $ind of contract arerecoverable, providing that when the contractwas made such damage was reasonablyforeseeable as liable to result from the breach234arni$ow v 5oufos, 617889 ! -:0 1"7


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DUTY TO MITIGATE & LIQUIDATEDDAMAGES

%easonable steps to lessen the lossmust beta$en by the victim of a breach of contract

A defendant who can show that a plaintiff didnothing to mitigate loss may have the amount ofhis or her liability reduced according to thedegree of neglect by the plaintiff

:i'uidated damages represent an authenticestimate, at the time a contract is entered into,of what the amount of damages will be upon abreach and may be inserted as a clause

RESCISSION & SPECIAL REMEDIES


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RESCISSION & SPECIAL REMEDIES

%escissionsets aside an agreement, restoringthe parties to their pre(contractual positions

*pecific performance is an e'uitable remedyre'uiring the defendant to carry out his or herpromises under the contract when damages areinappropriate

An in&unction is a preventative remedy whichre'uires the defendant to refrain fromcommitting certain future acts adverse to thepurpose of the contract

SUMMARY


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SUMMARY

Contracts in businessinclude those foremployment, the sale of goods, and private orgovernment calls for tender of services

&o create a valid contract, there must be anintention to do so, offer and acceptance, ane'change of consideration, capacity to enter anenforceable contract, and a legal purpose

usinesses must be nowledgeable about theiraccountability in the gathering and saving ofclient information

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Law of contract.ppt

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