V. Introduction to Contract & Tort Law

V. Introduction to Contract Law

General - Contract law is one of the fundamental disciplines of Law.

Contract Law - the "pragmatic common-law subject"

no statutory base (no legislation) to give contents of contracts or direction on what to do if contract is breached

because contract law is based on common law, decisions may contradict

Best contracts are useful tools - clear

- efficient

- plain language

Results and principles beginning in Contract Law are now in

Labour Law - collective agreements

Consumer Law - Sale of Goods

Family Law - matrimonial agreements

Contract Law is important in Health Care especially in B.C. because MoH will contract out services to agencies to delivery them. Regional Boards now will contract to local agencies for services.

Contracts for Services (can also have contracts for things)

Contract Law is aprox. 250 yrs old, developed during the British Industrial Revolution as a tool for business people to manage commercial activities.

Contracts purporting to be contracts are not enforceable as contracts if they are missing essential elements or the underlying assumptions are illegal.

Oral agreements can be contracts.

Contracts will end up in front of a judge when one party says it has been breached.

Definition

"Contracts are those promises which must be kept and which the courts will enforce."

promises - must be mutual promises, each party promises something to the other parties

court will enforce if - there is consideration (things of value were exchanged)

- there is measurable loss if relationship breaks down

- parties intended to enter into a legally binding arrangement

therefore, court does not enforce broken social obligations

court only enforces obligations in commercial context

All contracts are agreements, but not all agreements are contracts

where contract breaks down, usually goes before judge or may go to mediation or arbitration (if that was specified in the contract)

if contract is breached it can ALWAYS be appealed to the courts:

1 - for excess or lack of jurisdiction (on part of arbitrator or mediator)

2 - patently unreasonable decision (clearly irrational)

(eg. Canada v. Public Service)

Purposes of Contracts

"Contracts are meant to assist the parties in ordering/structuring their activities, primarily in the commercial context for specific agreed upon purposes."

commercial context purposes

to provide predictability & permit reliance (contract permits parties to rely on promises of each other)
to bring clarity to the bargain

- expectations ( what is to be done and by whom)

- language - include definition section if use of jargon is necessary

to set standards (how it is to be done - by what means, how well it is to be done, how often)
to provide insurance/create remedies (set consequences for breaching the contract)

- encourages compliance

- provides remedies to party injured by breach

Essential Elements of Contracts

- if any essential elements are missing, contract is not enforceable

- elements can be stated or implied

intention

to create legal relations between parties
to be bound by legal relationship

certainty

sufficient detail & precision (so parties understand obligations)
otherwise contract is "void for lack of certainty"

offer by one party & acceptance (of the offer) by another

usually demonstrated by signed contract
contract can also be offered/accepted by conduct as well as verbally

legal capacity - are allowed to offer/accept under the law

must be a natural person - adult who is mentally capable OR a legal person - legal entity (e.g. society)
Two other sources of legal capacity:

implied authority (by reason or induction)
ostensible authority (when person claims authority to enter into binding contract)

consideration

"Each party gives or promises something in exchange for the act or promise of the other." mutuality - exchange of value
quid pro quo - this for that

court usually won’t make judgment on value or adequate consideration (ie. one side gives more value than other) UNLESS fraud or duress is involved - has to be lawful

Situations where consideration is not necessary:

under seal (corporate seal) - symbolizes that parties carefully considered bargain
statutory provision saying that no consideration is necessary

privity

only parties to contract have rights under contract (only parties can sue in breach of contract)
non parties are strangers to the contract or remote from bargain

may be circumstances where non-parities (strangers) are harmed by breach of contract - may be able to sue in tort

Forms of Contracts

Oral - kind of dangerous may be held to something you didn’t intend to be held for
Letter - business letter form, written by one party, signed by both - letter of agreement
Custom-Drafted - created by lawyer/solicitor tailored to needs - usually takes a long time and is costly
Standard-form - standard provisions for any contract are stated - saves time and money (don’t have to re-do each time), more general (not customized), rigid, might miss important detail (but can amend)

Remedies for Breach of Contract

Specific Performance - judge may order party in breach to complete obligations as in contract

not available for contracts for service (that was ruled as slavery in Warner Brothers Pictures vs. Nelson (Betty Davis))

Damages - pay $ in compensation

doesn’t get job done & have to go to court (time, legal fees)
damages alleged have to be:

real
quantifiable
reducible to $

NB. limitation of damage awards:

injured party obligated to mitigate (keep losses to minimum) - must take all reasonable steps

Case Study - the Case of the Blurred Boundaries

1) could sue New Freedom in breach of contract

could sue Province and/or Mr. Y for harm in tort

"tortious inducement to breach of contract" OR

"tortious interference with contractual relations"

2) Mr. Y doesn’t have capacity to suspend Ms. X

3) Province could have terminated contract with New Freedom for breach of contract

- no appraisal was conducted