Guest Blogger: Amber
Bought a cup of coffee? A newspaper? Had new brakes put into your car?
Almost everything we do, whether buying or selling an item, working, renting, all involve contracts. Although contracts pervade our daily lives, we seldom stop to think about what transforms an agreement into a legally enforceable contract.
Many specialized statutes have evolved to deal with the different areas of contract law – provincial landlord and tenant acts, family law acts, employment standards. Nevertheless, all contracts begin with five basic features. Six, if the agreement must be written. These essential ingredients must have been present at the time of entering the agreement to have a valid (legally binding) contract:
CONSENSUS is at the heart of the contract. There must be a “meeting of the minds.” There is no agreement in cases of fraud, misrepresentation, certain types of mistake, duress (threats of harm) or undue influence (a special relationship where one party is in a position of influence over the other party who depends upon them for advice).
The display of items in a store window and the smells wafting out of the bakery shop are not offers, but rather, invitations for you to come in and make an offer to buy. You select an item, take it to the sales desk, offer to purchase it. When your money is accepted the deal is complete.
OFFERs to buy or to sell must be clear and unambiguous. A term may be implied. For example, if time of delivery was not discussed, the Sale of Goods Act will imply it is to be within a reasonable time. A court will not rewrite a contract by filling in missing terms, but could consider the past dealings between the parties to determine whether they were implied. The Sale of Goods Act sets out protections for the buyer such as the goods must match the description (catalogue purchasing), the goods will be merchantable (you can actually wear the underwear) or the item is fit for its purpose (you can actually use a tea pot as a tea pot). Beware of exclusion clauses that state an item is not to be used for certain activities and limit liability.
ACCEPTANCE takes place when the price is rung in and the clerk accepts your money. You now have a binding contract. A sale therefore is final unless store policy permits returns. Store policy is sometimes posted at the entrance or written on the sales slip. If not, it is up to the purchaser to ask whether you may return the item, within what time frame and for what reasons.
CONSIDERATION is usually money. There must be some element of bargaining at the time of entering the contract. Both parties (offeree and offeror) must give up something. Both must gain something. In a simple verbal contract, negotiations may be simply specifying you want a single latte.
Consideration need not necessarily be fair. Caveat emptor (buyer beware). It is the buyer’s responsibility to make sure he or she is not paying too much. The courts may step in if one party was taken advantage of in a situation where there was an inequality in bargaining positions and the contract so unfair as to be unconscionable.
INTENTION You may have an easier time arguing that you had no intention of entering a contract with a family member or friend. That is not to say the presumption that your offer to buy lunch for a friend can’t be rebutted if they flew in to town to accept your offer. You would not be obligated to pay for their flight however.
CAPACITY A contract entered by an individual who is found to have lacked the required legal capacity (mental incapacity, intoxication, under age). Under the BC Infants Act, a minor is anyone under 19. As a general rule, while the infant (minor)can enforce the contract against the adult party or business ,the other party cannot enforce the contract against the infant. “Unenforceable” does not mean the same “void” or “voidable.” An unenforceable contract might become enforceable if the infant affirms the contract when he or she turns 19, or performs the contract in whole or in part within one year after turning 19, or does not repudiate the contract within one year after turning 19, or has made a contract that a statute specifically says will be enforceable such as a student loans agreement, a residential tenancy agreement.
WRITING Did my most recent costly purchase – new brakes for my car – have to be in writing?
Only contracts concerning guarantees or dealings with land must be in writing. A contract concerning land must clearly identify the parties, the property and the price (the three P’s) or will be declared to be unenforceable. Evidence of the contract however, may be found in memos or by producing clear evidence that one party performed his or her end of the deal.
The Sale of Goods Act requires purchases over a certain amount to be in writing. Your receipt is written evidence of the contract. In any event, it is good practice to get an estimate for example, before having work done to your car. There is less potential for surprise and disagreement if the repairs and the costs are written down before the work is performed. It is a good idea to stipulate the garage must get prior approval for additional repairs.
LEGALITY Statutory illegality arises when someone promises to do something that is contrary to legislation (such as to divide land in contravention of a Planning Act.) Believe it or not, there has been a case in which the purchaser tried to get his money back for an inferior illicit drug. He did not succeed.
Common law illegality is concerned primarily with contracts that are contrary to public policy. Obviously the court will not enforce a contract to commit a crime such as arson or share in the proceeds of a robbery. Nor will contracts be enforced that are designed to corrupt public officials, attempt to deny the jurisdiction of the courts, contracts to commit a tort or contracts considered to be of an immoral nature.