What makes a promise enforceable in the Courts? (two pages)

PowerPoint Slidesto accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
4-1
Chapter 4
Dispute
Resolution
Copyright © 2011 by Nelson Education Ltd.
4-2
Dispute Resolution
OBJECTIVES:
▪
▪
▪
▪
How business activities may lead to legal disputes
The options for resolving a legal dispute
Alternative dispute resolution
The litigation process
Copyright © 2011 by Nelson Education Ltd.
4-3
Business Activities and Legal Disputes
HOW BUSINESS ACTIVITIES MAY LEAD
TO LEGAL DISPUTES
1. Motor vehicle accident
2. Bylaw changes
3. Delinquent customers
4. Dissatisfied customers
5. Damaged goods
6. Problem employees
Copyright © 2011 by Nelson Education Ltd.
4-4
Business Activities and Legal Disputes
▪ not always in the best interest of a business to avoid all
legal conflict at all costs
▪ manage disputes with the express goals of avoiding
time-consuming and expensive litigation
▪ preserving desirable long-term commercial
relationships
Copyright © 2011 by Nelson Education Ltd.
4-5
Resolving Disputes
RESOLVING DISPUTES BY:
▪ Negotiation
▪ Alternative Dispute Resolution
▪ The Litigation Process
Copyright © 2011 by Nelson Education Ltd.
4-6
Negotiation
A PROCESS OF DELIBERATION AND
DISCUSSION USED TO REACH A MUTUALLY
ACCEPTABLE RESOLUTION TO A DISPUTE
▪ Success depends on:
▪
▪
▪
▪
willingness to compromise
nature and significance of dispute
priority parties give to dispute resolution
effectiveness of those involved in negotiations
Copyright © 2011 by Nelson Education Ltd.
4-7
Alternative Dispute Resolution (ADR)
A RANGE OF OPTIONS FOR
RESOLVING DISPUTES AS AN
ALTERNATIVE TO LITIGATION
▪ Mediator – a person who helps the parties to a dispute
reach a compromise
▪ Arbitrator – a person who listens to both sides of a
dispute and makes a ruling that is usually binding on the
parties
▪ Binding – final and enforceable in the courts
Copyright © 2011 by Nelson Education Ltd.
4-8
Alternative Dispute Resolution (ADR)
INTERNATIONAL PERSPECTIVE
▪ favoured form of settlement in international
commercial disputes that wish to continue a business
relationship
▪ arbitration process has been greatly enhanced by
standardized international rules and procedures
▪ provisions for the reciprocal recognition and
enforcement of the arbitral award
Copyright © 2011 by Nelson Education Ltd.
4-9
Alternative Dispute Resolution (ADR)
ADR is usually successful when:
▪ parties interested in considering each other’s position with
compromise as goal
▪ parties wish to maintain a commercial relationship
▪ need a quick resolution to minor problems
▪ litigation likely to be costly
▪ dispute involves sensitive or emotionally charged issues that the
parties wish to keep private or confidential
Copyright © 2011 by Nelson Education Ltd.
4-10
Alternative Dispute Resolution (ADR)
Positives:
▪ parties control the process, timing and selection of facilitator
▪ usually faster and cheaper than litigation
Negatives:
▪ does not always produce resolution resulting in costly trial
▪ long term concern of ADR might result in diminished openness
and accountability of the legal system
Copyright © 2011 by Nelson Education Ltd.
4-11
The Litigation Process
▪
▪
▪
▪
disputes may last years
seriously harm commercial relationships
no guarantee of success
significant investment of money, time, and
commitment
▪ process slow, expensive, and risk ridden
▪ deployed when all feasible methods have failed
Copyright © 2011 by Nelson Education Ltd.
4-12
The Litigation Process
A CRUCIAL SET OF RULES GOVERNS
THE LITIGATION PROCESS
▪Class action – a lawsuit launched by one person who
represents a larger group
▪Limitation Period – the time period specified by
legislation for commencing legal action
▪ a limitation period which is missed usually means the legal
right to sue is lost
Copyright © 2011 by Nelson Education Ltd.
4-13
The Litigation Process
The System of Courts
Supreme Court of Canada
Federal Court of Appeal
Courts of Appeal
Federal Court
Superior Courts
Small Claims Courts
Copyright © 2011 by Nelson Education Ltd.
4-14
The Litigation Process
Stages of a Lawsuit
CLAIM
DEFENCE
COUNTERCLAIM
DISCOVERY
NO DEFENCE
TRIAL
JUDGEMENT
Copyright © 2011 by Nelson Education Ltd.
4-15
The Litigation Process
STAGES OF A LAWSUIT
▪ Pleadings – formal documents concerning basis of the lawsuit
▪ Claim – formal document that initiates litigation by plaintiff
against defendant
▪ Defence – the defendant’s formal response to the plaintiff ’s
allegations
▪ Counterclaim – claim by the defendant against the plaintiff
▪ Discovery – process of disclosing evidence to support the
claims in a lawsuit
Copyright © 2011 by Nelson Education Ltd.
4-16
The Litigation Process
▪ Trial – formal hearing before a judge that results in a binding
decision
▪ Burden of proof – the obligation of the plaintiff to prove its
case
▪ Evidence – proof presented in court to support a claim
▪ Decision – the judgment of the court that specifies which
party is successful and why
▪ Costs – legal expenses the judge orders the loser to pay the
winner
Copyright © 2011 by Nelson Education Ltd.
4-17
The Litigation Process
STAGES OF A LAWSUIT
▪ Enforcement of Judgment – once lawsuit won, the
winner must collect the money owing
▪ Appeals – trial loser may appeal the decision to the
next level of court
▪ usually on points of law not on facts
▪ no new evidence presented
▪ ultimately the Supreme Court of Canada may hear the appeal
after the provincial court of appeal
Copyright © 2011 by Nelson Education Ltd.
4-18
The Litigation Process
INTERNATIONAL PERSPECTIVE:
▪ Litigation in the United States
▪ more litigious society
▪ more lawyers per capita – Americans tend to make use of
legal services
▪ contingency fees more common
▪ more civil jury cases – punitive damages more common
▪ no partial recovery of legal costs by successful party
Copyright © 2011 by Nelson Education Ltd.
4-19
PowerPoint Slides
to accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
5-1
Chapter 5
An Introduction
to Contracts
Copyright © 2011 by Nelson Education Ltd.
5-2
An Introduction to Contracts
OBJECTIVES:
▪ The general concept of a contract
▪ The legal factors in the contractual relationship
▪ The business factors influencing the formation and
performance of contracts
▪ The business factors influencing the formation and
performance of contracts
Copyright © 2011 by Nelson Education Ltd.
5-3
Introduction to Contract Law
DEFINING CONTRACT LAW
▪ Contract – deliberate and complete agreement between
two or more competent persons, not necessarily in
writing, supported by mutual consideration, to do some
act voluntarily, and which agreement is enforceable in a
court of law
Copyright © 2011 by Nelson Education Ltd.
5-4
Elements of a Contract
▪
▪
▪
▪
▪
▪
▪
An agreement
Complete
Deliberate
Voluntary
Between two or more competent persons
Supported by mutual consideration
Not necessarily in writing
Copyright © 2011 by Nelson Education Ltd.
5-5
Key Factors in Contractual
Relationships
KEY FACTORS
▪ communication
▪ start of the contractual relationship
▪ objective standard test – how a ‘reasonable person’
would view the conduct of the parties
Copyright © 2011 by Nelson Education Ltd.
5-6
Key Factors in Contractual
Relationships
KEY FACTORS
▪ Equal bargaining power – legal assumption that
parties to a contract are able to look after their own
interests
▪ courts normally not entitled to assess the fairness or
reasonableness of the contractual terms the business parties
have chosen
▪ occasionally courts will come to the assistance of the weaker
party and set contract aside
Copyright © 2011 by Nelson Education Ltd.
5-7
Contract Law Defined
CONTRACT LAW IN CONTEXT
▪ Contract law is only one relevant factor in a commercial
transaction
▪ The parties must consider the following:
▪ business relationships
▪ economic reality
▪ reputation management
Copyright © 2011 by Nelson Education Ltd.
5-8
PowerPoint Slides
to accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
6-1
Chapter 6
Forming
Contractual
Relations
Copyright © 2011 by Nelson Education Ltd.
6-2
Forming Contractual Relations
OBJECTIVES:
▪
▪
▪
▪
How negotiations lead to a contractual relationship
How negotiations can be terminated
The legal ingredients of a contract
How contracts can be amended or changed
Copyright © 2011 by Nelson Education Ltd.
6-3
Legal Ingredients of a Contract
1. OFFER
2. ACCEPTANCE
CONTRACT
3. CONSIDERATION
4. INTENTION
Copyright © 2011 by Nelson Education Ltd.
6-4
1. OFFER
Legal Ingredients of a Contract
a promise to enter into a contract
on specified terms, as soon as
the offer is accepted
only a complete offer can form the
basis of a contract
a) INVITATION TO TREAT
an expression of willingness to do
business
Copyright © 2011 by Nelson Education Ltd.
6-5
Legal Ingredients of a Contract
Figure 6.1 Legal Analysis of the Retail Purchase
DISPLAY OF GOODS
(invitation to treat)
CUSTOMER TAKES ITEM TO CASH
REGISTER
(offer to purchase at sticker price)
CLERK TAKES PAYMENT
(acceptance of offer)
Copyright © 2011 by Nelson Education Ltd.
6-6
Standard Form Contract
STANDARD FORM CONTRACT
▪ a ‘take it or leave it contract’
▪ customer agrees to a standard set of terms which
favours the other side
▪ the law expects people to take care of themselves.
▪ critical to read and understand the contract before
signing it
Copyright © 2011 by Nelson Education Ltd.
6-7
The Parties to a Contract
OFFEROR
▪ the person who makes an OFFER
OFFEREE
▪ the person to whom an OFFER is made
Copyright © 2011 by Nelson Education Ltd.
6-8
Termination of an Offer
AN OFFER MAY BE TERMINATED BY:
▪ Revocation: withdrawal of an OFFER
▪ Lapse: expiration of an OFFER after a specified or
reasonable period
▪ Rejection: the refusal to accept an OFFER
▪ Counteroffer: turning down an OFFER and proposing
a new one in its place
▪ Death or Insanity
Copyright © 2011 by Nelson Education Ltd.
6-9
Termination of an Offer
REVOCATION
▪ the OFFEROR can revoke an OFFER at any time before
acceptance upon notifying the OFFEREE of withdrawal
▪ upon revocation the OFFER ceases to exist
▪ option Agreements – an agreement, where, in exchange for
payment, an OFFEROR is obligated to keep an OFFER open
for a specified time. It is a separate contract which may or may
not lead to the acceptance of the OFFER.
Copyright © 2011 by Nelson Education Ltd.
6-10
Revocation in the Context of a
Tendering Contract
▪ specialized set of rules governing the tendering process
▪ call for tenders is an offer of a preliminary contract
▪ tender and the owner obligated to follow the rules
governing the tender selection process
▪ everyone who submits a tender is accepting the offer of
a contract to govern the relationship between parties
Copyright © 2011 by Nelson Education Ltd.
6-11
Termination of an Offer
LAPSE
▪ offer may expire on a specified date
▪ offer ends and can no longer be accepted
▪ if no expiry date is specified, then it remains open for a
reasonable time
▪ reasonable time depends on the circumstances of the
case
Copyright © 2011 by Nelson Education Ltd.
6-12
Termination of an Offer
REJECTION
▪ offer is automatically terminated if rejected by offeree
COUNTEROFFER
▪ a form of rejection
▪ it is a rejection of original offer and a proposal of a new offer in
its place
DEATH OR INSANITY
▪ offer generally dies if the offeror or offeree dies
▪ as a general rule, someone who becomes insane would not be
bound
Copyright © 2011 by Nelson Education Ltd.
6-13
Legal Ingredients of a Contract
2. ACCEPTANCE
▪
▪
an unqualified willingness to enter into a contract on
the terms in the offer
communication – unconditional assent to the offer in
its entirety – for example, personally, in writing, or by
fax, e-mail, or telephone, or by conduct
Copyright © 2011 by Nelson Education Ltd.
6-14
Legal Ingredients of a Contract
COMMUNICATION OF ACCEPTANCE
▪ if a method of acceptance is specified then this method
is mandatory
▪ if not specified, then in any manner that is reasonable
in the circumstances
▪ acceptance can be indicated by conduct
▪ see Landmark Case, Carlill v. Carbolic Smoke Ball Co., on page 129
Copyright © 2011 by Nelson Education Ltd.
6-15
Electronic Business Contracts
ELECTRONIC CONTRACTING
▪ governed by the same rules as all contracts
▪ When does Offer and Acceptance occur in the digital
environment?
▪ separate agreement between electronic trading partners solves
this problem
Copyright © 2011 by Nelson Education Ltd.
6-16
Electronic Business Contracts
ELECTRONIC CONTRACTING
▪ Uniform Electronic Commerce Act (UECA)
▪ removes barriers to electronic commerce
▪ basis for provincial and federal electronic commerce
legislation
▪ provides that acceptance of an offer can be made
electronically
Copyright © 2011 by Nelson Education Ltd.
6-17
Electronic Business Contracts
Uniform Electronic Commerce Act is divided
into 3 parts:
1. basic functional equivalency rules
2. special rules for formation and
operation of contracts
3. special provisions for carriage of
goods
Copyright © 2011 by Nelson Education Ltd.
6-18
Electronic Business Contracts
UNIFORM ELECTRONIC COMMERCE
ACT
▪ OFFER – may be expressed electronically
▪ ACCEPTANCE – may be expressed electronically
▪ COMMUNICATION OF ACCEPTANCE – UECA doesn’t
specify when an Acceptance becomes effective
Copyright © 2011 by Nelson Education Ltd.
6-19
Legal Ingredients of a Contract
3. CONSIDERATION
▪ a price must be paid for a promise
▪ each party must give something of value for receiving
something of value from the other
▪ may be other than money, goods for example, as long
as something of value
▪ gratuitous promise – a promise for which no
consideration – no contract
Copyright © 2011 by Nelson Education Ltd.
6-20
Promises Enforceable without
Consideration
PROMISE UNDER SEAL
▪ once a Seal is affixed it is evidence of serious intent and
acknowledgement that the contract is enforceable
▪ no further consideration is necessary
▪ example – Contracts of Guarantee
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6-21
Promises Enforceable without
Consideration
PROMISSORY ESTOPPEL
▪ someone who relies on a gratuitous promise may be
able to enforce it
▪ usable only as a defence to legal claims made by the
promise-breaker
▪ necessary factors – reliance on another’s promise to
change your position, and you are above reproach
Copyright © 2011 by Nelson Education Ltd.
6-22
Promises Enforceable without
Consideration
PARTIAL PAYMENT OF A DEBT
▪ at common law a gratuitous promise to accept a lesser
amount left the creditor free to sue for the balance
▪ in some provinces, this has been altered by statute, so
that creditor cannot sue for balance once a lesser
amount has been accepted
Copyright © 2011 by Nelson Education Ltd.
6-23
Legal Ingredients of a Contract
4. INTENTION TO CONTRACT
promise at issue must have been intended to be a
contractual one
if a business relationship, intention is presumed by the
courts
family arrangements – common law presumes
promises are non-contractual but presumption is
subject to rebuttal
Copyright © 2011 by Nelson Education Ltd.
6-24
PowerPoint Slides
to accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
7-1
Chapter 7
The Terms of a
Contract
Copyright © 2011 by Nelson Education Ltd.
7-2
The Terms of a Contract
OBJECTIVES
▪ The difference between implied and express terms
▪ How judges determine and interpret the content of a
contract
▪ How a party can use terms to protect itself from
liability
Copyright © 2011 by Nelson Education Ltd.
7-3
The Terms of a Contract
TERMS
▪ Express term – a provision of the contract that states
or makes explicit one party’s promise to another
▪ Implied term – a provision that is not expressly
included in a contract but that is necessary to give effect
to the parties’ intention – a judge may imply terms in a
contract to make the contract workable
Copyright © 2011 by Nelson Education Ltd.
7-4
The Terms of a Contract
IMPLIED TERMS
▪
▪
▪
▪
▪
Business Efficacy – to make the contract workable
Customs in the trade of the transaction
Previous dealings between the parties
Statutory requirements
Contractual quantum meruit
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7-5
Interpretation of Contracts
HOW COURTS INTERPRET CONTRACTS
▪ Rules of construction – guiding principles for interpreting or
“constructing” terms of a contract
▪ Parole evidence rule – rule that limits the evidence a party can
introduce concerning the contents of the contract
▪ Business efficacy – judge is entitled to imply terms necessary to
make the contract workable
▪ Contractual quantum meruit – awarding one party a reasonable
sum for the goods and services provided under
Copyright © 2011 by Nelson Education Ltd.
7-6
The Terms of a Contract
TERMS
▪ Previous dealings – if the parties have contracted in the past, it
may be possible to imply that the current contract contains the
same terms
▪ Statutory requirements – Sale of Goods Act makes certain
provisions mandatory in contracts, unless specifically excluded
by the contract
▪ Entire contract clause – term in the contract in which the
parties agree that their contract is complete as written
Copyright © 2011 by Nelson Education Ltd.
7-7
Electronic Contracts
Technology and the Law, page 132
EVIDENCE OF ELECTRONIC
CONTRACTS
▪ UNIFORM ELECTRONIC EVIDENCE ACT
(UEEA)
▪ the person seeking to introduce an electronic record has the
burden of proving its authenticity
Copyright © 2011 by Nelson Education Ltd.
7-8
Contractual Terms to Managing Risks
CHANGED CIRCUMSTANCES
▪ circumstances may arise that prevent a party from performing its contractual
obligations
▪ law permits the use of contractual terms as a buffer against future, uncertain
events to limit liability
CONDITIONAL AGREEMENTS
▪ condition subsequent – a condition that, when it occurs, brings an existing
contract to an end
▪ condition precedent – a condition that, until it occurs, suspends the parties’
contractual obligations to perform their contractual obligations
Copyright © 2011 by Nelson Education Ltd.
7-9
Managing Liability
LIABILITY MAY BE MANAGED BY:
▪ limitation of liability clause – a term of a contract
that limits liability for breach to something less than
what would otherwise be recoverable
▪ exemption clause – a term of a contract that
identifies events causing loss for which there is no
liability
▪ liquidated damages clause – a term of a contract
that specifies how much one party must pay the other
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© 2011 byevent
Nelson Education
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ofLtd.breach
7-10
Terms of a Contract
STANDARD FORM CONTRACTS
▪ a contract in which the main terms cannot be changed
through negotiations
▪ Common for obtaining a credit card, renting a car,
buying insurance or signing a guarantee of another’s
debt
▪ Parties are expected to protect their own interests and
ensure they understand the terms before accepting
them
Copyright © 2011 by Nelson Education Ltd.
7-11
Technology and the Law
SHRINK-WRAP CLICK-WRAP and
BROWSE-WRAP AGREEMENTS
▪ Shrink-wrap agreement – an agreement whose terms are
enclosed with a product such as prepackaged software
▪ Click-wrap agreement – an agreement that appears on a user’s
computer screen when a user attempts to download software or
purchase goods (also referred to as a license)
▪ Browse-wrap agreement – user agrees that-by virtue of
accessing the website-he or she is bound by the terms of use
associated with the website
Copyright © 2011 by Nelson Education Ltd.
7-12
PowerPoint Slides
to accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
8-1
Chapter 8
NonEnforcement of
Contracts
Copyright © 2011 by Nelson Education Ltd.
8-2
Non-Enforcement of Contracts
OBJECTIVES
▪ why enforcement of contracts is the norm
▪ the exceptional circumstances in which contracts are
not enforced
▪ which contracts must be in writing, and why
Copyright © 2011 by Nelson Education Ltd.
8-3
The Importance of Enforcing Contracts
EXCEPTIONS TO THE GENERAL RULE
THAT A CONTRACT IS ENFORCEABLE
▪ an unequal relationship between the parties
▪ misrepresentation or important mistakes
▪ a defect within the contract itself
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8-4
Voidable/Void Contracts
VOIDABLE CONTRACT
▪ a contract that in certain circumstances an aggrieved
party can choose to keep in force or bring to an end
VOID CONTRACT
▪ a contract involving a defect so substantial that the it is
of no force or effect
Copyright © 2011 by Nelson Education Ltd.
8-5
Contracts Based on Unequal
Relationships
LEGAL CAPACITY
▪ the ability to make binding contracts
MINORS
▪ General rule – minors are not obligated by the contracts they
make – usually voidable at the option of the minor alone
▪ minors are obligated by contracts for essentials know as
“necessaries.”
▪ MENTAL INCAPACITY
▪ Parties must understand the nature and consequences of the
agreement. Those impaired through illness, alcohol, or drugs
may not appreciate the nature and consequence of actions.
Copyright © 2011 by Nelson Education Ltd.
8-6
Contracts Based on Unequal
Relationships
DURESS
▪ the threat of physical or economic harm that results in
a contract
UNDUE INFLUENCE
▪ unfair manipulation that compromises someone’s free
will – the contract is voidable at option of the victim
UNCONSCIONABILITY
▪ unfair contract formed when one party takes advantage
of the weakness of another
Copyright © 2011 by Nelson Education Ltd.
8-7
Misrepresentations and Important
Mistakes
MISREPRESENTATION
▪ a false statement of fact that causes someone to enter
into a contract
RESCISSION
▪ the remedy that results in the parties being returned to
their pre-contractual positions
Copyright © 2011 by Nelson Education Ltd.
8-8
Misrepresentations and Important
Mistakes
INGREDIENTS OF ACTIONABLE
MISREPRERESENTATION: IT MUST BE
PROVEN THAT THE STATEMENT IS
▪ False
▪ clear and unambiguous
▪ material to the contract- significant to the decision of
whether or not to enter into the contract
▪ one that actually induces the aggrieved party to enter into
the contract
▪ concerned with a fact and not an opinion
Copyright © 2011 by Nelson Education Ltd.
8-9
Categories of Actionable
Misrepresentations
▪ Fraudulent misrepresentation – speaker has a
deliberate intent to mislead or makes a statement
recklessly without knowing or believing it is true
▪ Negligent misrepresentation – the speaker makes a
statement recklessly without knowing or believing that
it is true
▪ Innocent misrepresentation – the speaker has not
been fraudulent or negligent, but has misrepresented a
fact
Copyright © 2011 by Nelson Education Ltd.
8-10
Remedies for Misrepresentation
Figure 8.2, page 183
TYPE OF
MISREPRESENTATION
REMEDY
Fraudulent
Rescission in contract
Damages in tort
Negligent
Rescission in contract
Damages in tort
Innocent
Rescission in contract
Copyright © 2011 by Nelson Education Ltd.
8-11
Misrepresentations and Important
Mistakes
MISTAKE
▪ an error made by one or both parties that seriously
undermines a contract
▪ rarely proven
▪ the court is entitled to set the contract aside as a
remedy
Copyright © 2011 by Nelson Education Ltd.
8-12
Contracts Based on a Defect
ILLEGAL CONTRACT
▪ a contract that cannot be enforced because it is
contrary to legislation or public policy
ILLEGALITY
▪ a contract is illegal if it:
a) is contrary to a specific statute and/or
b) violates public policy
Copyright © 2011 by Nelson Education Ltd.
8-13
Contracts Based on a Defect
ILLEGAL BY STATUTE
▪ contravenes legislation, for example:
▪ Criminal Code
▪ Competition Act
▪ Real Estate and Business Brokers Act
CONTRARY TO PUBLIC POLICY
▪ contracts that are considered to injure the public interest
▪ International perspective – securing contracts illegally – paying
bribes to a foreign official
Copyright © 2011 by Nelson Education Ltd.
8-14
Writing as a Requirement
STATUTE OF FRAUDS REQUIRES THAT
CERTAIN CONTRACTS MUST BE IN
WRITING TO BE ENFORCEABLE
▪ For example:
▪
▪
▪
▪
guarantees- a promise to pay the debt of someone else
contracts not to be performed within a year
contracts dealing with land
contracts for sale of goods – generally set between $30 and
$50
Copyright © 2011 by Nelson Education Ltd.
8-15
Technology and the Law
E-Signatures
▪ most provinces have provided for electronic signatures
according to various rules
▪ for example – Ontario Electronic Commerce Act, 2000
▪ Federally, PIPEDA provides for a “secure electronic
signature” under the 2005 Secure Electronic Signature
Regulations
Copyright © 2011 by Nelson Education Ltd.
8-16
Internet Contracts
▪ several Provinces have passed legislation reflecting the
consumer protection measures of the Internet Sales
Contract Harmonization Template
▪ applies to consumer purchases of goods and services
over the Internet
▪ requires sellers to clearly disclose certain information to
the buyer before an online transaction is formed
▪ includes seller’s name, address and a fair and accurate
description of the goods and services including all costs
Copyright © 2011 by Nelson Education Ltd.
8-17
Managing the Risks of
Unenforceability
▪ Are the parties to the contract under any legal
incapacities?
▪ Has one party taken unfair advantage of the other?
▪ Has one party misled the other?
▪ Has a substantial mistake been made?
▪ Is the contract contrary to legislation or in violation of
public policy?
▪ Is the contract required to be in writing?
Copyright © 2011 by Nelson Education Ltd.
8-18
PowerPoint Slides
to accompany
Presentation prepared by
John Ebbs
Algonquin College
Copyright © 2011 by Nelson Education Ltd.
9-1
Chapter 9
Termination
and
Enforcement of
Contracts
Copyright © 2011 by Nelson Education Ltd.
9-2
Termination and Enforcement of
Contracts
OBJECTIVES
▪
▪
▪
▪
▪
▪
The termination of a contract by performance
The termination of a contract by agreement
The termination of a contract by frustration
The methods of enforcing contracts
The concept of privity
Remedies for breach of contract
Copyright © 2011 by Nelson Education Ltd.
9-3
Termination and Enforcement of
Contracts
TERMINATION: AN OVERVIEW
▪ through performance – both parties complete their
contractual obligations
▪ through agreement – the parties are always free to
voluntarily bring the contract to an end
▪ through frustration – unforeseen event makes
performance impossible or illegal
▪ through breach – a serious breach can release the
innocent party from continuing with contract
Copyright © 2011 by Nelson Education Ltd.
9-4
Termination through Performance
PERFORMANCE
▪ performance is complete when all implied and express promises
have been fulfilled
▪ does not necessarily mean relationship ends
▪ parties may continue to do business by means of new, continuing
and overlapping contract
PERFORMANCE BY OTHERS
▪ vicarious performance – performance of contractual
obligations through others
Copyright © 2011 by Nelson Education Ltd.
9-5
Termination by Agreement
PARTIES MAY AGREE TO:
▪ parties enter into a whole new contract, known as
novation
▪ Novation – the substitution of parties in a contract or the
replacement of one contract with another
▪ vary certain terms of the contract
▪ parties decide to the contract
▪ substitute a party – transferring one party’s rights and
obligations to someone else; a limited form of novation
Copyright © 2011 by Nelson Education Ltd.
9-6
Transfer of Contractual Rights
Figure 9.1, page 204
ASSIGNMENT OF CONTRACT
▪ the transfer of a contractual right by an assignor to an assignee
Step 1
Creditor – Debtor Relationship
C(creditor)
D(debtor)
Step 2
Assignor-Assignee Relationship
C(assignor)
A(assignee)
Step 3
Assignee – Debtor Relationship
A(assignee)
D(debtor)
Copyright © 2011 by Nelson Education Ltd.
9-7
Termination by Frustration
FRUSTRATION
▪ Termination of a contract by an unexpected event or
change that makes performance functionally impossible
or illegal
▪ Must establish:
▪
▪
▪
▪
was dramatic and unforeseen
neither party had assumed risk of the matter occurring
arose without being either party’s fault
makes performance functionally impossible or illegal
Copyright © 2011 by Nelson Education Ltd.
9-8
International Perspective
Force Majeure Clauses
FORCE MAJEURE
▪ events that would amount to frustration are expressly
deal with in the contract the parties contractually define
for themselves in advance what events would frustrate
the contract
INTERNATIONAL PERSPECTIVE
▪ risk of unforeseen events
▪ a party may terminate the contract for fire, earthquake,
war etc.
Copyright © 2011 by Nelson Education Ltd.
9-9
Enforcement of Contracts
▪ Non-performance of contractual obligations may result
in breach of contract and a lawsuit
▪ BALANCE OF PROBABILITIES – proof that there
is a better than 50% chance that the circumstances of a
contract are as the plaintiff contends
Copyright © 2011 by Nelson Education Ltd.
9-10
Enforcement of Contracts
PLAINTIFF MUST DEMONSTRATE THREE
ELEMENTS ON THE BALANCE OF
PROBABILITIES:
1.
Privity of contract – there is a contract between the parties
▪
2.
3.
only the parties to a contract can enforce the rights and obligations
it contains
Breach of contract – the other party failed to keep a promise
or term in the contract
Entitlement to a remedy – plaintiff must demonstrate he/she
is entitled to the remedy claimed
Copyright © 2011 by Nelson Education Ltd.
9-11
CLASSIFCATION OF THE BREACH
Termination
by
Breach
1. BREACH OF CONTRACT
Condition – an important term, which, if breached, gives the
innocent party the right to terminate the contract and claim
damages
Warranty – a minor term, which, if breached, gives the innocent
party the right to claim damages only
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Termination by Breach
2. BREACH OF CONTRACT
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Innominate term – a term that cannot easily be classified as
either a condition or a warranty
Exemption or limitation of liability clause – clause limiting
or excluding liability for breach
Fundamental breach – a breach of contract that affects the
foundation of the contract – such a breach may render the
entire contract, including the exclusion clause, inoperative
Anticipatory breach – a breach that occurs before the date for
performance
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9-13
Termination by Breach
3. ENTITLEMENT TO A REMEDY
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Damages – monetary compensation for breach of contract or
other actionable wrong
Defendant is responsible for reasonably foreseeable damages
suffered by the plaintiff – pain, suffering, and emotional
distress are not generally accepted as being a consequence of
breach of contract
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9-14
Termination by Breach
RESTRICTIONS ON DAMAGES
▪ Test for remoteness
1. damages could have been anticipated
2. damages reasonably foreseeable
▪ Duty to mitigate – the obligation to take reasonable
steps to minimize the losses resulting from a breach of
contract or other wrong
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9-15
Equitable Remedies
EQUITABLE REMEDIES
▪ Where damages are an inadequate remedy for breach of contract
▪ Specific performance – court order for the party who
breached the contract to do exactly what the contract
obligated him to do
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Equitable Remedies
▪ Injunction – promise not to engage in specified
activities
▪ Interlocutory injunction – order to refrain from doing
something for a limited period of time
▪ Rescission – to restore the parties to the situation they
were in before the contract was formed
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9-17
Equitable Remedies
Restitutionary Remedies
▪ Unjust enrichment – occurs when one party has
undeservedly or unjustly secured a benefit at the other
party’s expense
Restitutionary quantum meruit
▪ An amount that is reasonable given the benefit the
plaintiff has conferred
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9-18
Legal Aspects of Business BUSI 2259 * 16 * 18
Assignment 2
Contract Law
Assigned: October 1
Value: 12.5%
Due: Dropbox on October 18th (midnight)
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Instructions:
Our classes on October 8th and 15th will focus on the information necessary to answer the following
question, as instructed:
What makes a promise enforceable in the Courts?
Please make up a short litigation story – two pages – that demonstrates your understanding of the
answer to this question.
Your story must reflect the existence of the essential elements to a contract, the court’s presumptions,
and the process of Offer, Acceptance and Communication of Acceptance.
Thank you.
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Notes: