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Law 410 CONTRACTS BUCKWOLD

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Law 410 CONTRACTS BUCKWOLD Law 410 CONTRACTS BUCKWOLD 1 FORMATION: Is there a contract? In order to have a contract, you must have: o Capacity to contract: Note that minors can enforce a contract against adults, but adults cannot enforce against minors. o Consensus ad idem – ie “meeting of the minds”: Parties must be in agreement to the same terms. Offer & acceptance . Certainty as to terms o Consideration: Parties must have exchanged value not necessarily money, but what they deem to be value. 2 types of contract: o Bilateral: promissory offer by X + acceptance by Y entailing a reciprocal promise . E.g. X offers to sell car to Y for $5000 (offer). Y agrees to by the car (acceptance) = Contract! Which includes: Express terms (e.g. price, model, payment, etc.) Implied terms (implied on basis of presumed intention) o Unilateral: promissory offer by X + acceptance by Y through performance of requested act(s) . E.g. X offers to give Y a sandwich if Y dusts X‟s house (offer). Y dusts (acceptance) = Contract! Which includes: Express terms Implied terms (see above) TERMS OF CONTRACT Note: As a general rule, terms of a contract are those expressly established by the offer plus terms that may be implied. (See MJB Enterprises for more on implied terms) Does lack of subjective knowledge of the terms of an offer preclude recognition and enforcement of an unknown term? No. If the terms are readily accessible, then signing the contract (or clicking “I accept”) constitutes agreeing to them. Rudder v. Microsoft Corp Class action lawsuit against Microsoft; Microsoft said that they can only be sued in Washington due to a clause in the member agreement Contract was online clicking of „I agree‟ Rudder argued that anything that must be scrolled down to see is akin to fine print in a contract and needed to have emphasis Issue: Was this term enforcable? Decision: Yes! Ratio: Clicking in an electronic contract „I accept‟ constitutes consensus even if the contract was not read, provided that the terms are readily accessible Reasons: The term was readily available and plainly written, not hidden away. Scrolling is like turning pages. Anyone clicking „I accept‟ should know that they are agreeing to the terms Policy: Commercial certainty 2 What approach to identification of terms may be taken where inconsistent form documents exchanged between parties are interpreted on a ‘holistic’ basis? A party cannot rely on a term that was not drawn to the attention of the other party See Tywood Industries below (pg. 7). OFFER Is the statement an offer or invitation to treat? o If it is an invitation to treat, there is no contract unless it is followed by offer + acceptance o If it is an offer, then the acceptance of it is a contract Is the statement an offer to be bound upon performance of an act? Potentially. If a reasonable person would read the statement as a contract, then the court is likely to consider it a unilateral contract. The consideration of the plaintiff is established by the performance of the act. Canadian Dyers Association Ltd. v. Burton CD alleges that Burton formed a contract with them to sell land; they want performance Bartering on price, CD sends B a cheque for $500 with request for preparation of deed Deed prepped by B‟s lawyer, who indicated willingness to close in several days (nov. 1); on nov. 5, B‟s lawyer contacted CD claiming that there was no contract Issue: Was there an offer to contract & was it accepted? Date of contract is oct. 21, when B replied saying that a price was the lowest he was prepared to accept – so is this a contract or an invitation to treat? Traditional principle a price quote is an invitation to treat, not a contract Decision: Court decided that in this case, there was a contract, and the general rule does not apply Reasons: Depends on intention depends on the language used and the circumstances of the particular case. In context of previous communications, and the fact that B cashed the cheque from CD, it was an offer Ratio: Rules of offer & acceptance are not always followed. The court often considers other factors and circumstances. It must be determined objectively. This is a bilateral contract exchange of promises, but no immediate performance on either side (exchange of promises is consideration) Carlill v. Carbolic Smoke Ball Co. C purchased a smoke ball from a drugstore; ball was made by CSB In ads, CSB promised 100 pounds if anyone got the flu while properly using the ball also stated that they put 1000 pounds aside for the purpose C got the flu Issue: Does this ad constitute an offer to contract? CSB argued not a contract b/c ad was too vague, and you cannot contract with the whole world – it was a “mere puff”, not intended to be contractually binding Decision: Court deemed it to be a contract. Reasons: Court looked at it from the point of view of someone viewing the advertisement, and determined that it would look like a contract. The fact that 1000 pounds were in the bank supported this. By using the ball (performance), C consented to this contract. In this case, verbal acceptance is not required because it was dispensed with by the offerer. 3 It was important that C bought and used the smoke ball because she believed the ad to be true, and that was the effect that CSB was going for Ratio: Intention may be established objectively, by how a reasonable person would read the potential offer. Consideration is also established by C‟s performance of the act (buying and using the smoke ball). When is an offer effectively communicated? Is an offer capable of acceptance when it is known to the offeree but has not been communicated as an offer? No. A party cannot be bound by an offer unless there is intent to contract. There must be communication showing an intention to be bound Blair v. Western Mutual Benefit Assn. Corporate secretary had been working for a long time, someone suggested at a board meeting that when she retired, she should receive 2 years worth of pay as retirement pay. She was not told directly, but she transcribed the minutes, which were signed by the president of the company Issue: was this an offer? Decision: no Reasons: she was not directly given an offer by the company, so it was not deemed to be contractual. She had no reasonable grounds to think that they were going to follow through. Also, she did not retire on reliance on the offer, so it was not a response to the offer. Ratio: a party cannot be bound by an offer without intention to contract, and merely having the knowledge of an offer is not enough. There must be communication showing intention to be bound. Note: it may have been different if she had resigned as a result of the contract, because then it could be argued that she regarded it as a contract and she accepted it. When does an offer terminate? An offer terminates if it is withdrawn, or if it lapses (either at a time stipulated in the offer, or in a „reasonable time‟) Must withdrawal of an offer be communicated? If so, how? Yes; the offeree must know about the withdrawal Is a withdrawal communicated by mail effective on posting? No. A revocation must be communicated to the offeree to be effective Byrne v. Van Tienhoven Issue: When is the revocation of an offer effective? Revocation was mailed before offer was received, but revocation was received after acceptance was sent Decision: A revocation that is not communicated is not a revocation at all! No revocation by law here. Reasons: Offeree relies on the assumption that his acceptance is effective, so he must be made aware if the offer is revoked. In this case, he sold the tin plates to someone else. Ratio: Postal acceptance rule does not apply for revocation. Note: Relative risk/consideration of offeree is taken into account. 4 Can an offer be accepted once the offeree knows that the offeror no longer intends to contract if withdrawal has not been directly communicated? No; there is no consensus. Dickinson v. Dodds Dodds makes an offer to Dickinson to sell land open for acceptance until Friday morning Dickinson discovers that Dodds has sold land Thursday night, so he sends acceptance Issue: Could the offer be terminated? Decision: Yes. Reasons: Offeree knew that the offerer no longer considered the offer open for acceptance (b/c of his action) Ratio: Cannot accept an offer if you know that the contractor has already contracted with someone else no consensus. If an offer is made open for acceptance until a certain time, it can still be withdrawn before that time, anytime before it is accepted. If an offer stipulates a time for acceptance, can it be withdrawn before the time has arrived? Yes. Can a promise to perform (offer) on the fulfillment of an act (acceptance) be withdrawn after the act has been undertaken but before it is completed? No. As long as there is performance of the requested act, the offer in a unilateral contract cannot be withdrawn Errington v. Errington and Woods Man purchased a house in his own name for his son and daughter-in-law. They were told that the down payment was a gift, and if they paid the mortgage payments, the house would be theirs. The father dies, and the state wanted possession of the house Issue: Was there a contract? Decision: Yes, but they only got the house after the payments were finished.
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