Prepared by Douglas Prepared by Douglas Peterson, University of Peterson, University of Alberta Alberta 7- 7-1 Part 3 – The Law of Part 3 – The Law of Contract Contract Chapter 7 Chapter 7 An Introduction to An Introduction to the Legal the Legal Relationship Relationship
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Prepared by Douglas Peterson, University of Alberta 7-1 Part 3 – The Law of Contract Chapter 7 An Introduction to the Legal Relationship.
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Prepared by Douglas Peterson, Prepared by Douglas Peterson, University of AlbertaUniversity of Alberta 7-7-11
Part 3 – The Law of ContractPart 3 – The Law of Contract
Chapter 7Chapter 7
An Introduction to the An Introduction to the Legal RelationshipLegal Relationship
ContractContract An agreement made between two or more persons that An agreement made between two or more persons that
is enforceable at lawis enforceable at law Freedom of contract, the general ability of the parties to Freedom of contract, the general ability of the parties to
create specific rights and dutiescreate specific rights and duties
Merchant law Merchant law Ecclesiastic lawEcclesiastic law Manor courtsManor courts 1717thth century development of the bargain theory of century development of the bargain theory of
ContractContract Meeting of the minds (consensual agreement)Meeting of the minds (consensual agreement) Consensus to subject and object of the contractConsensus to subject and object of the contract Essential element is a promiseEssential element is a promise
Party intended to be bound by promise madeParty intended to be bound by promise made Intention is a presumption at lawIntention is a presumption at law
Presumptions in contract lawPresumptions in contract law Strangers intend to be bound by their promisesStrangers intend to be bound by their promises Family members and close friends do not intend to be Family members and close friends do not intend to be
bound in contractsbound in contracts Both are presumptions can be rebuttedBoth are presumptions can be rebutted
Invitation to do BusinessInvitation to do Business Advertisements are not offersAdvertisements are not offers Invite offers that seller may accept or rejectInvite offers that seller may accept or reject
Nature of an OfferNature of an Offer A tentative promise subject to a conditionA tentative promise subject to a condition
Communication of an OfferCommunication of an Offer An offer must be communicated to the other party to be An offer must be communicated to the other party to be
acceptedaccepted Cannot accept an offer you do not know ofCannot accept an offer you do not know of Crossed offers – in the mail do not constitute a contractCrossed offers – in the mail do not constitute a contract Only person to whom offer is made may accept it.Only person to whom offer is made may accept it.
Acceptance by postAcceptance by post Acceptance takes place when the letter, properly Acceptance takes place when the letter, properly
addressed and postage paid, is placed in the postboxaddressed and postage paid, is placed in the postbox Acceptance effective where placed in the postboxAcceptance effective where placed in the postbox Governing law, unless otherwise stated, is the law of the Governing law, unless otherwise stated, is the law of the
place where the letter is postedplace where the letter is posted Postal acceptance allowed even if not specifically stated Postal acceptance allowed even if not specifically stated
if it is the normal or usual mode of acceptanceif it is the normal or usual mode of acceptance
Other Modes of AcceptanceOther Modes of Acceptance
All other modesAll other modes Acceptance not complete until offeror made aware of Acceptance not complete until offeror made aware of
acceptanceacceptance Until it reaches offerorUntil it reaches offeror Acceptance complete when and where receivedAcceptance complete when and where received
Must be clear and unconditionalMust be clear and unconditional Counteroffer is a rejection of an offer and a new offerCounteroffer is a rejection of an offer and a new offer Silence is not acceptance unless pre-existing agreement Silence is not acceptance unless pre-existing agreement
to this effect existsto this effect exists Exception: party assented to the contractException: party assented to the contract Consumer protection reinforces common law rule of Consumer protection reinforces common law rule of
silence is not acceptancesilence is not acceptance
RulesRules If a method of acceptance is stated, offeree must If a method of acceptance is stated, offeree must
comply with requirementscomply with requirements If only preference for a particular method of acceptance If only preference for a particular method of acceptance
is stated then:is stated then: If a method other than the method mentioned in the offer If a method other than the method mentioned in the offer
is selected, the acceptance would only be effective when it is selected, the acceptance would only be effective when it was received by the offerorwas received by the offeror
Unilateral OffersUnilateral Offers An offer made to the world at largeAn offer made to the world at large The performance of the act is acceptanceThe performance of the act is acceptance Offeror cannot revoke offer so long as offeree is in the Offeror cannot revoke offer so long as offeree is in the
course of performing their partcourse of performing their part
LapseLapse The termination of an unaccepted offer by the passage The termination of an unaccepted offer by the passage
of time, a counteroffer, or the death of a partyof time, a counteroffer, or the death of a party Rejection of an offer: offer cannot be accepted later Rejection of an offer: offer cannot be accepted later
unless the original offer is revivedunless the original offer is revived
Passage of timePassage of time Offer lapses after:Offer lapses after:
Stated time in the offer expiresStated time in the offer expires If not stated period of time, after a reasonable period of If not stated period of time, after a reasonable period of
timetime Reasonable period depends on subject matter and Reasonable period depends on subject matter and
circumstances of the transactioncircumstances of the transaction
RevocationRevocation The termination of an offer by notice communicated to The termination of an offer by notice communicated to
the offeree before acceptancethe offeree before acceptance Offers can be revoked anytime before acceptance Offers can be revoked anytime before acceptance
unless there is an optionunless there is an option Revocation must be communicated to the offereeRevocation must be communicated to the offeree Revocation can be communicated in any form as long as Revocation can be communicated in any form as long as
ContractsContracts Promises enforced by the courtsPromises enforced by the courts
RequirementsRequirements Intention to create legal relationshipIntention to create legal relationship
Presumptions certain people intend to contract and certain Presumptions certain people intend to contract and certain people do not intend to contractpeople do not intend to contract
OfferOffer Must be communicated to offeree and only one who offer Must be communicated to offeree and only one who offer
is communicated to can acceptis communicated to can accept
AcceptanceAcceptance Must be communicated in manner requested by offerorMust be communicated in manner requested by offeror Postal rule – acceptance is valid when and where placed Postal rule – acceptance is valid when and where placed
in post boxin post box Other forms – when and where acceptance received by Other forms – when and where acceptance received by
offerorofferor Counteroffers – rejection and new offerCounteroffers – rejection and new offer