Part 3 – The Law of Contracts Chapter 10 – The Requirements of Form, and Writing Prepared by Michael Bozzo, Mohawk College © 2015 McGraw-Hill Ryerson Limited 10-1

 Formal and Simple Contracts  The Statute of Frauds  Executors and Administrators  Guarantees  Contracts concerning an interest in land Overview © 2015 McGraw-Hill Ryerson Limited 10-2

 Requirements for the Written Memo – must contain essential terms of the agreement  Parol Evidence – general rule that oral evidence may not contradict written terms unless Condition precedent Implied terms Collateral agreements Subsequent agreements  Reduction to Writing – Agreements to agree  Sale of Goods Act © 2015 McGraw-Hill Ryerson Limited 10-3 Overview

 Two general classes of contracts 1. Formal (derives its validity from its form)  Not common 2. Informal (simple) (most common)  Implied  Oral  Written Formal and Simple Contracts © 2015 McGraw-Hill Ryerson Limited 10-4

 Power of Attorney  A legal document usually signed under seal in which a person appoints another to act as his or her attorney to carry out the contractual or legal acts specified in the document.  Example of a formal contract Formal and Simple Contracts © 2015 McGraw-Hill Ryerson Limited 10-5

 Characteristics  Introduced from the UK into Canada as a colony  Still exists in some provinces, in others it has been repealed but incorporated into other statutes  Certain contracts if not in writing are not enforceable  Still valid and existing contracts for other purposes (not void or prohibited) Statute of Frauds © 2015 McGraw-Hill Ryerson Limited 10-6

 Following contracts covered by the Statute of Frauds 1. Contracts by Executors and Administrators 2. Guarantees 3. Assumed liability for a tort 4. Contracts concerning an interest in land Types of Contracts © 2015 McGraw-Hill Ryerson Limited 10-7

 Executor or administrator of an estate is not generally liable for the debts of the testator (the estate)  Can personally assume such debts but only if such contract is in writing Contracts by Executors/Administrators © 2015 McGraw-Hill Ryerson Limited 10-8

 Guarantee  A collateral promise (in writing) to answer or the debt of another (the principal debtor) if the debtor should default in payment  3 parties in a guarantee  Creditor  Debtor (Primary liability)  Guarantor (Secondary liability) Guarantees © 2015 McGraw-Hill Ryerson Limited 10-9

 Consideration required to enforce the guarantee  Alberta (Alberta Guarantees Acknowledgment Act) the guarantor must obtain a notarized certificate of independent legal advice for his guarantee to be enforceable by the creditor  Must distinguish between guarantees and indemnities  Guarantees must be in writing  Indemnities need not be in writing Guarantees © 2015 McGraw-Hill Ryerson Limited 10-10

Guarantee Relationship © 2015 McGraw-Hill Ryerson Limited 10-11

 Concept Any agreement whereby a third party promises to answer for the tort of another ○ Must be in writing ○ Signed by the party to be charged Assumed Liability: Tort © 2015 McGraw-Hill Ryerson Limited 10-12

 Land Contracts  Contracts concerning sale or disposition of interests in land  Vague concept  Includes sale of land or lease of land  Does not include those things ancillary to the land or remote (repairs, renovations, etc)  Does not include room and board contracts Land Contracts © 2015 McGraw-Hill Ryerson Limited 10-13

 Part Performance (equitable doctrine)  A doctrine that permits the courts to enforce an unwritten contract concerning land where certain conditions have been met  Requirements 1. Acts performed relate to land in question 2. Lack of a written memo would perpetuate a fraud and a hardship on the person 3. Agreement must relate to an interest in land 4. Agreement must be valid and enforceable apart from the requirement of writing and verbal evidence must be available to establish the existence of the agreement Land Contracts © 2015 McGraw-Hill Ryerson Limited 10-14

 Requirements Need not be in a formal document Need all terms of contract (3 P’s: parties, property, price) Can be an exchange of letters – 2 letters together can constitute an agreement in writing Must be signed by the party against whom it is being enforced Requirements for a Written Memorandum © 2015 McGraw-Hill Ryerson Limited 10-15

 Rule  A rule that prevents a party from introducing evidence that would add to or contradict terms of a contract  Limits the kinds of evidence that may be used to prove terms of a contract  Cannot contradict a clear unambiguous contract Parol Evidence Rule © 2015 McGraw-Hill Ryerson Limited 10-16

 Condition Precedent A condition that must be satisfied before a contract may come into effect Contract is in a state of suspension until the condition is met, not met, or waived by the party who inserted it If the condition is not met then the contract is cancelled Exceptions to the Parol Evidence Rule © 2015 McGraw-Hill Ryerson Limited 10-17

 Doctrine of Implied Term  The insertion by the court of a standard or customary term omitted by the parties when the contract was prepared  Implied terms cannot conflict with express terms  Usually implied in order to implement the agreement Exceptions to the Parol Evidence Rule © 2015 McGraw-Hill Ryerson Limited 10-18

 Collateral Agreement An agreement that has its own consideration, but supports another agreement Could alter or add to the main agreement Courts usually don’t allow unless one can prove it exists as a separate and complete agreement with its own consideration Exceptions to the Parol Evidence Rule © 2015 McGraw-Hill Ryerson Limited 10-19

 Common Factor  All exceptions to the parol evidence rule; the modifying term precedes, or is concurrent with the formation of the written agreement  Subsequent Agreement  An agreement made after a written agreement that alters or cancels the written agreement Exceptions to the Parol Evidence Rule © 2015 McGraw-Hill Ryerson Limited 10-20

 Negotiations  Issue of when a contract agreed to orally becomes enforceable if it is never reduced to writing  Issue of interim enforceability between time of oral agreement and being put into writing Reduction to Writing © 2015 McGraw-Hill Ryerson Limited 10-21

 Writing Requirement Certain transactions over a certain value if not in writing are unenforceable (Sale of Goods Act) Methods of enforcement (without written requirement) ○ Payment of a deposit ○ Acceptance of delivery of part of the goods ○ Giving of something “in earnest” (such as a trade in) Sale of Goods Act © 2015 McGraw-Hill Ryerson Limited 10-22

 Formal or Informal Contracts Most contracts are informal ○ May be in writing, oral or implied  Statute of Frauds Certain type of contracts must be in writing or they are unenforceable  Parol Evidence Rule Several exceptions concerning oral evidence exist SUMMARY © 2015 McGraw-Hill Ryerson Limited 10-23