Capacity
legally capable of understanding
Minors and contracts
Minors (or infants): under age of majority, are not bound by their
agreements, though adults are bound by their agreements with minors
Contracts that are binding to minors:
- For the acquisition of necessaries
- Contracts of employment
- Services that benefit the minor
Parents Liability
Parents are not responsible for minors’ contracts, exceptions:
- Legislation creating responsibility in many jurisdictions
- When the minor is acting as an agent having the appropriate
authority to bind the parent in contract - Parent guaranteed minors’ obligations
Insanity
Must Show:
- The person had no understanding of the nature of the transaction; and
- The other party knew or ought to have known of insanity.
Drunk
Treated like insanity
- So intoxicated they didn’t understand the nature of the transaction
- the other party knew or ought to have known.
Legality
object and consideration involved in the agreement must be legal
Contracts performed illegally
If contract is performed illegally or against public policy, the Court may order:
- Contract is void and restore parties to their original positions
- Severance of the illegal performance
- Enforcement, if violation is procedural and not substantive
Contracts formed illegally
The contract itself is illegal = void
- Courts may sever the illegal provisions of the contract, leaving the balance of the contract enforceable to avoid inequitable judgments
Restrictive Covenants
Goodwill needs to be preserved upon
- Sale of Business
- Change of Employment
- Leaving a professional partnership
- like non-compete after employment
Intention
must intend that legally enforceable obligations will result from contract
Reasonable-person test
Would a reasonable person have
thought that the person making
the promise was serious and that
the agreement was legally binding?
Carlill v Carbolic Smoke Ball
Company [1893]
Facts: The defendants manufactured a product that they claimed would protect users from influenza. They offered 100 pounds to anyone who used their product as prescribed and still contracted influenza. They stated in an advertisement, that 1000 pounds had been deposited in the Alliance Bank, Regent Street and this showed their sincerity in the matter. Carlill used the product, got influenza and claimed the money. The company refused, stating that the advertisement was mere puffery and not intended to be taken seriously.
Held: by depositing money into a bank account to back up the claim
took it out of the category of advertisement puff. A reasonable
person would have thought the advertisement was serious.
Form of the Contract
There is no general rule that a contract must take a certain form
Requirement of writing
Types of contracts generally included under the Statute of Frauds
and required to be in writing:
- Longer than one year
- Land transactions
- Guarantees and indemnities
- When goods are sold over a specific value
- Promises in consideration of marriage
- Promises of an executor to pay a debt of deceased from the
executor’s own assets
What constitutes writing
Essential terms must be in writing:
- Indication of the parties, the subject matter of the contract, and the
consideration to be paid
- Other terms may become essential depending on the nature of the contract
- Can be actual agreement, receipt, note, email
- May be created after the fact
- The document(s) must be signed or initialed but only by the person
denying the existence of the contract
Statute of Frauds
The Statute of Frauds is a legal doctrine that requires certain types of contracts to be in writing to be enforceable in a court of law. The purpose of the statute is to prevent fraud and perjury by requiring written evidence of important agreements.
Electronic Documents
Electronic records and communications have become more common
- In many situations, a signed, printed document is needed to provide
evidence in writing - Electronic documents have legal effect and are enforceable
- Federal and provincial legislation passed to recognize electronic
documents and signatures - Does not apply to wills, trusts, powers of attorneys, land transfers, or negotiable instruments
