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 ActSale of Goods Act


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


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repealed but incorporated into other statutesrepealed but incorporated into other statutes Certain contracts if not in writing are not enforceableCertain contracts if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


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 suspension until the condition is Contract is in a state of suspension until the condition is

met, not met, or waived by the party who inserted itmet, not met, or waived by the party who inserted 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


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

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

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