Prepared by Douglas Peterson, University of Alberta 10-1 Part 3 – The Law of Contract Chapter 10...

Prepared by Douglas Peterson, Prepared by Douglas Peterson, University of AlbertaUniversity of Alberta 10-10-11

Part 3 – The Law of ContractPart 3 – The Law of Contract

Chapter 10Chapter 10The Requirements of The Requirements of

Form and WritingForm and Writing

© 2006 McGraw-Hill Ryerson © 2006 McGraw-Hill Ryerson LimitedLimited 10-10-22

OverviewOverview

Formal and Simple ContractsFormal and Simple Contracts The Statute of FraudsThe Statute of Frauds

Executors and AdministratorsExecutors and Administrators GuaranteesGuarantees Contracts concerning an interest in landContracts concerning an interest in land


OverviewOverview

Requirements for the Written MemoRequirements for the Written Memo Parol evidenceParol evidence Condition precedentCondition precedent Implied termsImplied terms Collateral agreementsCollateral agreements Subsequent agreementsSubsequent agreements

Reduction to WritingReduction to Writing Sale of Goods Act and CISGSale of Goods Act and CISG


Formal and Simple ContractsFormal and Simple Contracts

2 general classes of contracts2 general classes of contracts1.1. Formal (derives its validity from its form)Formal (derives its validity from its form)

Not commonNot common

2.2. Informal (simple) (most common)Informal (simple) (most common) ImpliedImplied OralOral WrittenWritten


Informal (Written)Informal (Written)

To meet the requirement To meet the requirement of writingof writing, the agreement need , the agreement need not be formal, but it must: not be formal, but it must:

(1) identify the parties, (1) identify the parties, (2) contain the terms of the agreement, (2) contain the terms of the agreement,

and be signed by the party to be charged.and be signed by the party to be charged. Where the Statute of Frauds includes a one year writing Where the Statute of Frauds includes a one year writing

requirement, the courts have stated that if either party requirement, the courts have stated that if either party can fully perform the contract in less than one year, the can fully perform the contract in less than one year, the contract need not be in writing to be enforceable.contract need not be in writing to be enforceable.


Contract Contract


Formal and Simple ContractsFormal and Simple Contracts

Power of AttorneyPower of Attorney A legal document usually signed under seal in which a A legal document usually signed under seal in which a

person appoints another to act as his or her attorney to person appoints another to act as his or her attorney to carry out the contractual or legal acts specified in the carry out the contractual or legal acts specified in the document.document.

Example of a formal contractExample of a formal contract


Statute of FraudsStatute of Frauds

CharacteristicsCharacteristics Introduced from the UK into Canada as a colonyIntroduced from the UK into Canada as a colony Still exists in some provinces, in others it has been Still exists in some provinces, in others it has been

repealed but incorporated into other statutesrepealed but incorporated into other statutes Certain contracts if not in writing are not enforceableCertain contracts if not in writing are not enforceable Still valid and existing contracts for other purposes (not Still valid and existing contracts for other purposes (not

void or prohibited)void or prohibited)


Types of ContractsTypes of Contracts

Following contracts covered by the Statute of FraudsFollowing contracts covered by the Statute of Frauds1.1. Contracts by Executors and AdministratorsContracts by Executors and Administrators

2.2. GuaranteesGuarantees

3.3. Assumed liability for a tortAssumed liability for a tort

4.4. Contracts concerning an interest in landContracts concerning an interest in land


Contracts by Executors/AdministratorsContracts by Executors/Administrators

Executor or administrator of an estate is not generally Executor or administrator of an estate is not generally liable for the debts of the testator (the estate)liable for the debts of the testator (the estate)

Can personally assume such debts but only if such Can personally assume such debts but only if such contract is in writingcontract is in writing


GuaranteesGuarantees

GuaranteeGuarantee A collateral promise (in writing) to answer or the debt of A collateral promise (in writing) to answer or the debt of

another (the principal debtor) if the debtor should another (the principal debtor) if the debtor should default in paymentdefault in payment

3 parties in a guarantee3 parties in a guarantee CreditorCreditor Debtor (Primary liability)Debtor (Primary liability) Guarantor (Secondary liability)Guarantor (Secondary liability)


GuaranteesGuarantees

Consideration required to enforce the guaranteeConsideration required to enforce the guarantee Alberta (Alberta Guarantees Acknowledgment Act) the Alberta (Alberta Guarantees Acknowledgment Act) the

guarantee must also be notarizedguarantee must also be notarized Must distinguish between guarantees and indemnitiesMust distinguish between guarantees and indemnities

Guarantees must be in writingGuarantees must be in writing Indemnities need not be in writingIndemnities need not be in writing


Assumed Liability: TortAssumed Liability: Tort

ConceptConcept Any agreement whereby a third party promises to Any agreement whereby a third party promises to

answer for the tort of anotheranswer for the tort of another Must be in writingMust be in writing Signed by the party to be chargedSigned by the party to be charged


Land ContractsLand Contracts

Land ContractsLand Contracts Contracts concerning an interest in landContracts concerning an interest in land

Vague conceptVague concept Includes sale of land or lease of landIncludes sale of land or lease of land Does not include those things ancillary to the land or Does not include those things ancillary to the land or

remote (repairs, renovations, etc)remote (repairs, renovations, etc) Does not include room and board contractsDoes not include room and board contracts


Land ContractsLand Contracts

Part Performance (equitable doctrine)Part Performance (equitable doctrine) A doctrine that permits the courts to enforce an A doctrine that permits the courts to enforce an

unwritten contract concerning land where certain unwritten contract concerning land where certain conditions have been metconditions have been met

RequirementsRequirements1.1. Acts performed relate to land in questionActs performed relate to land in question2.2. Lack of a written memo would perpetuate a fraud and a Lack of a written memo would perpetuate a fraud and a

hardship on the personhardship on the person3.3. Agreement must relate to an interest in landAgreement must relate to an interest in land4.4. Agreement must be valid and enforceable apart from the Agreement must be valid and enforceable apart from the

requirement of writing and verbal evidence must be requirement of writing and verbal evidence must be available to establish the existence of the agreementavailable to establish the existence of the agreement


Requirements for a Written MemorandumRequirements for a Written Memorandum

RequirementsRequirements Need not be in a formal documentNeed not be in a formal document Need all terms of contract (3 P’s: parties, property, Need all terms of contract (3 P’s: parties, property,

price)price) Can be an exchange of letters – 2 letters together can Can be an exchange of letters – 2 letters together can

constitute an agreement in writingconstitute an agreement in writing Must be signed by the party against whom it is being Must be signed by the party against whom it is being

enforcedenforced


Parol Evidence RuleParol Evidence Rule

RuleRule A rule that prevents a party from introducing evidence A rule that prevents a party from introducing evidence

that would add to or contradict terms of a contractthat would add to or contradict terms of a contract Limits the kinds of evidence that may be used to prove Limits the kinds of evidence that may be used to prove

terms of a contractterms of a contract Cannot contradict a clear unambiguous contractCannot contradict a clear unambiguous contract


integration clauseintegration clause, , oror merger clausemerger clauseExample:Example:

""This Agreement, along with any exhibits, appendices, This Agreement, along with any exhibits, appendices, addendums, schedules, and amendments hereto, addendums, schedules, and amendments hereto, encompasses the entire agreement of the parties, and encompasses the entire agreement of the parties, and supersedes all previous understandings and agreements supersedes all previous understandings and agreements between the Parties, whether oral or written.between the Parties, whether oral or written. The parties The parties hereby acknowledge and represent, by affixing their hands and hereby acknowledge and represent, by affixing their hands and seals hereto, that said parties have not relied on any seals hereto, that said parties have not relied on any representation, assertion, guarantee, warranty, collateral representation, assertion, guarantee, warranty, collateral contract or other assurance, except those set out in this contract or other assurance, except those set out in this Agreement, made by or on behalf of any other party or any other Agreement, made by or on behalf of any other party or any other person or entity whatsoever, prior to the execution of this person or entity whatsoever, prior to the execution of this Agreement. Agreement. The parties hereby waive all rights and The parties hereby waive all rights and remediesremedies, at law or in equity, arising or which may arise as the , at law or in equity, arising or which may arise as the result of a party’s reliance on such representation, assertion, result of a party’s reliance on such representation, assertion, guarantee, warranty, collateral contract or other assurance, guarantee, warranty, collateral contract or other assurance, provided that nothing herein contained shall be construed as a provided that nothing herein contained shall be construed as a restriction or limitation of said party’s right to remedies restriction or limitation of said party’s right to remedies associated with the gross negligence, willful misconduct of fraud associated with the gross negligence, willful misconduct of fraud of any person or party taking place prior to, or of any person or party taking place prior to, or contemporaneously with, the execution of this Agreement."contemporaneously with, the execution of this Agreement."


Exceptions to the Parol Evidence RuleExceptions to the Parol Evidence Rule

Condition PrecedentCondition Precedent A condition that must be satisfied before a contract may A condition that must be satisfied before a contract may

come into effectcome into effect Contract is in a state of postponement until the Contract is in a state of postponement until the

condition is met, not met, or waived by the party who condition is met, not met, or waived by the party who inserted itinserted it

If the condition is not met then the contract is cancelledIf the condition is not met then the contract is cancelled



Doctrine of Implied TermDoctrine of Implied Term The insertion by the court of a standard or customary The insertion by the court of a standard or customary

term omitted by the parties when the contract was term omitted by the parties when the contract was preparedprepared

Implied terms cannot conflict with express termsImplied terms cannot conflict with express terms Usually implied in order to implement the agreementUsually implied in order to implement the agreement



Collateral AgreementCollateral Agreement An agreement that has its own consideration, but An agreement that has its own consideration, but

supports another agreementsupports another agreement Could alter or add to the main agreementCould alter or add to the main agreement Courts usually don’t allow unless one can prove it exists Courts usually don’t allow unless one can prove it exists

as a separate and complete agreement with its own as a separate and complete agreement with its own considerationconsideration


Exceptions to the Parol Evidence ruleExceptions to the Parol Evidence rule

Common FactorCommon Factor All exceptions to the parol evidence rule; the modifying All exceptions to the parol evidence rule; the modifying

term precedes, or is concurrent with the formation of term precedes, or is concurrent with the formation of the written agreementthe written agreement

Subsequent AgreementSubsequent Agreement An agreement made after a written agreement that An agreement made after a written agreement that

alters or cancels the written agreementalters or cancels the written agreement


Court Decision Court Decision Parol Evidence Rule – Collateral Parol Evidence Rule – Collateral

Agreement Agreement Gallen et al. v. Allstate Grain Co. Ltd. et. al. (1984), 9 Gallen et al. v. Allstate Grain Co. Ltd. et. al. (1984), 9

D.L.R. 496 (B.C.) D.L.R. 496 (B.C.) The The Manulife Bank of Canada v. Conlin et alManulife Bank of Canada v. Conlin et al. .

decision illustrates the position of a guarantor of a decision illustrates the position of a guarantor of a mortgage debt and the importance of including the mortgage debt and the importance of including the guarantor in any changes to the debt repayment or guarantor in any changes to the debt repayment or security underlying a debt. In the case, the parties security underlying a debt. In the case, the parties failed to obtain the consent of the guarantor, and failed to obtain the consent of the guarantor, and when default later occurred on the mortgage, the when default later occurred on the mortgage, the court held that the guarantor was released from court held that the guarantor was released from liability because no consent to the changes had been liability because no consent to the changes had been given by the guarantor.given by the guarantor.


Case LawCase Law

Western Dominion Investment Co. Ltd. v. Western Dominion Investment Co. Ltd. v. MacMillanMacMillan. In the case, the judge explains the . In the case, the judge explains the nature of the liability of the debtor and the guarantor, nature of the liability of the debtor and the guarantor, and sets out the conditions under which the guarantor and sets out the conditions under which the guarantor may be absolved from liability. It is important to note may be absolved from liability. It is important to note as well that payment of the debt by the guarantor as well that payment of the debt by the guarantor does not release the debtor from all obligation on the does not release the debtor from all obligation on the debt. When the guarantor has paid the debt, the debt. When the guarantor has paid the debt, the guarantor is entitled to a transfer of the security, and guarantor is entitled to a transfer of the security, and the creditor’s claim for payment. The guarantor then the creditor’s claim for payment. The guarantor then becomes entitled to claim payment from the debtor. becomes entitled to claim payment from the debtor.


Reduction to WritingReduction to Writing

NegotiationsNegotiations Issue of when a contract agreed to orally becomes Issue of when a contract agreed to orally becomes

enforceable if it is never reduced to writingenforceable if it is never reduced to writing Issue of interim enforceability between time of oral Issue of interim enforceability between time of oral

agreement and being put into writingagreement and being put into writing


Sale of Goods ActSale of Goods Act

Writing RequirementWriting Requirement Certain transactions over a certain value if not in writing Certain transactions over a certain value if not in writing

are unenforceableare unenforceable Methods of enforcement (without written requirement)Methods of enforcement (without written requirement)

Payment of a depositPayment of a deposit Acceptance of delivery of part of the goodsAcceptance of delivery of part of the goods Giving of something “in earnest” (such as a trade in)Giving of something “in earnest” (such as a trade in)


SummarySummary

Formal or Informal ContractsFormal or Informal Contracts Most contracts are informalMost contracts are informal

May be in writing, oral or impliedMay be in writing, oral or implied Statute of FraudsStatute of Frauds

Certain type of contracts must be in writing or they are Certain type of contracts must be in writing or they are unenforceableunenforceable

Parol Evidence RuleParol Evidence Rule Several exceptions existSeveral exceptions exist


CISG CISG - Contract - Contract

http://www.uncitral.org/http://www.uncitral.org/ http://www.osgoode.yorku.ca/cisg/http://www.osgoode.yorku.ca/cisg/ UNCITRAL Model Law on Electronic Commerce UNCITRAL Model Law on Electronic Commerce CISGCISG JAMS International Arbitration RuleJAMS International Arbitration Rule


CISGCISG

The CISG applies to contracts for the sale of goods The CISG applies to contracts for the sale of goods between parties whose places of business are in between parties whose places of business are in different countries when both those countries have different countries when both those countries have joined the CISG.joined the CISG. In theory the CISG applies even when In theory the CISG applies even when both countries have not joined the CISG if conflict-of-both countries have not joined the CISG if conflict-of-laws rules lead to the application of the law of a laws rules lead to the application of the law of a country that has. country that has.

The CISG also deals only with contract formation and The CISG also deals only with contract formation and the rights and obligations of the parties. It is expressly the rights and obligations of the parties. It is expressly not concerned with questions of validity, which means not concerned with questions of validity, which means that domestic law continues to govern such issues as that domestic law continues to govern such issues as incapacity, fraud, duress, mistake, and incapacity, fraud, duress, mistake, and unconscionability unconscionability


CISGCISG

Under the common law, an offer is freely revocable, Under the common law, an offer is freely revocable, even if the offeror has promised to hold it open, even if the offeror has promised to hold it open, unless that promise is supported by consideration or unless that promise is supported by consideration or reliance. reliance. Under the civil law, an offer is irrevocable. Under the civil law, an offer is irrevocable.

((Firm OffersFirm Offers are irrevocable)are irrevocable) CISG Article 16 allows an offeror to make a firm offer CISG Article 16 allows an offeror to make a firm offer

without these limitationswithout these limitations. . Article 16 reflects a compromise between the civil law Article 16 reflects a compromise between the civil law

tradition, which presumes that offers are irrevocable, tradition, which presumes that offers are irrevocable, and the common law tradition, which presumes the and the common law tradition, which presumes the opposite opposite


CISG CISG - Contract Art. 16 - Contract Art. 16

CISG Article 16(2) provides CISG Article 16(2) provides (1) Until a contract is concluded an offer may be (1) Until a contract is concluded an offer may be

revoked if the revocation reaches the offeree before revoked if the revocation reaches the offeree before he has dispatched an acceptance. he has dispatched an acceptance.

(2) However, an offer cannot be revoked: (2) However, an offer cannot be revoked: (a) (a) if it indicates, whether by stating a fixed time for if it indicates, whether by stating a fixed time for

acceptance or otherwise, that it is irrevocable; or acceptance or otherwise, that it is irrevocable; or (b) (b) if it was reasonable for the offeree to rely on the if it was reasonable for the offeree to rely on the

offer as being irrevocable and the offeree has acted in offer as being irrevocable and the offeree has acted in reliance on the offer. reliance on the offer.


CISG CISG - Contract Art. 16.2 - Contract Art. 16.2

Article 16(2) is a compromise between the civil law Article 16(2) is a compromise between the civil law conception of the irrevocability of offers in certain conception of the irrevocability of offers in certain circumstances and the common law conception that circumstances and the common law conception that offers are always revocable until accepted unless an offers are always revocable until accepted unless an option contract is concluded. option contract is concluded.

Article 16(2)(b) is most clearly applicable when the Article 16(2)(b) is most clearly applicable when the offeree must spend time and perhaps considerable offeree must spend time and perhaps considerable amount of money to determine whether to accept the amount of money to determine whether to accept the offer or not. It cannot apply to this case since Wine offer or not. It cannot apply to this case since Wine Cooperative did not act in reliance on the offer – Cooperative did not act in reliance on the offer – except to accept it.except to accept it.


UNCITRAL Model Law on Electronic UNCITRAL Model Law on Electronic Commerce 15(2)Commerce 15(2)

UNCITRAL Model Law on Electronic Commerce. It provides in Article UNCITRAL Model Law on Electronic Commerce. It provides in Article 15(2)15(2)

““(2) Unless otherwise agreed between the originator and the addressee,(2) Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows:the time of receipt of a data message is determined as follows: (a) (a) if the addressee has designated an information system for theif the addressee has designated an information system for the purpose of receiving data messages, receipt occurs:purpose of receiving data messages, receipt occurs: (i) at the time when the data message enters the designated(i) at the time when the data message enters the designated information system; orinformation system; or (ii) if the data message is sent to an information system of(ii) if the data message is sent to an information system of the addressee that is not the designated informationthe addressee that is not the designated information system, at the time when the data message is retrievedsystem, at the time when the data message is retrieved by the addressee;by the addressee; (b) (b) if the addressee has not designated an information system,if the addressee has not designated an information system, receipt occurs when the data message enters an information system ofreceipt occurs when the data message enters an information system of the addressee.”the addressee.”


CISG Article 16 (1)CISG Article 16 (1)

CISG Article 16 (1) provides that “[u]ntil a contract is CISG Article 16 (1) provides that “[u]ntil a contract is concluded an offer may be revoked if the revocation concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an reaches the offeree before he has dispatched an acceptance.”acceptance.”


CISG Article 35(2) CISG Article 35(2)

CISG Article 35(2) provides in relevant partCISG Article 35(2) provides in relevant part ““(2) Except where the parties have agreed otherwise, (2) Except where the parties have agreed otherwise,

the goods do not conform with the contract unless the goods do not conform with the contract unless they:they:

* * ** * * (b) are fit for any particular purpose expressly or (b) are fit for any particular purpose expressly or

impliedly made known to the seller at the time of the impliedly made known to the seller at the time of the conclusion of the contract, except where the conclusion of the contract, except where the circumstances show that the buyer did not rely, or circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the that it was unreasonable for him to rely, on the seller’s skill and judgment;”seller’s skill and judgment;”


CISG Article 35 (2)CISG Article 35 (2)

It must be noted that this issue is relevant if, and only It must be noted that this issue is relevant if, and only if, there is a contract. Moreover, it also depends on if, there is a contract. Moreover, it also depends on the arbitral tribunal having jurisdiction.the arbitral tribunal having jurisdiction.


JAMS International Arbitration RulesJAMS International Arbitration Rules

JAMS International Arbitration Rules, Article 18.1 JAMS International Arbitration Rules, Article 18.1 provides thatprovides that

““The Tribunal will decide the merits of the dispute on The Tribunal will decide the merits of the dispute on the basis of the rules of law agreed upon by the the basis of the rules of law agreed upon by the parties. In the absence of such an agreement, the parties. In the absence of such an agreement, the Tribunal will apply the law or rules of law which it Tribunal will apply the law or rules of law which it determines to be most appropriate.”determines to be most appropriate.”


JAMS Rule 17.3.JAMS Rule 17.3.

JAMS Rule 17.3.JAMS Rule 17.3. ““17.317.3 By agreeing to arbitration under these Rules, By agreeing to arbitration under these Rules,

the parties will be treated as having agreed not to the parties will be treated as having agreed not to apply to any court or other judicial authority for any apply to any court or other judicial authority for any relief regarding the Tribunal’s jurisdiction, except with relief regarding the Tribunal’s jurisdiction, except with the agreement in writing of all parties to the the agreement in writing of all parties to the arbitration or the prior authorization of the Tribunal or arbitration or the prior authorization of the Tribunal or following the latter’s ruling on the objection to its following the latter’s ruling on the objection to its jurisdiction.”jurisdiction.”

Article 17.3 is applicable only if there is an agreement Article 17.3 is applicable only if there is an agreement to arbitrate under the JAMS Rulesto arbitrate under the JAMS Rules

Prepared by Douglas Peterson, University of Alberta 10-1 Part 3 – The Law of Contract Chapter 10...

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