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

2. © 2006 McGraw-Hill Ryerson Limited 10-2 Overview Formal and Simple Contracts Formal and Simple Contracts The Statute of Frauds The Statute of Frauds Executors and Administrators Executors and Administrators Guarantees Guarantees Contracts concerning an interest in land Contracts concerning an interest in land

3. © 2006 McGraw-Hill Ryerson Limited 10-3 Overview Requirements for the Written Memo Requirements for the Written Memo Parol evidence Parol evidence Condition precedent Condition precedent Implied terms Implied terms Collateral agreements Collateral agreements Subsequent agreements Subsequent agreements Reduction to Writing Reduction to Writing Sale of Goods Act and CISG Sale of Goods Act and CISG

4. © 2006 McGraw-Hill Ryerson Limited 10-4 Formal and Simple Contracts 2 general classes of contracts 2 general classes of contracts 1. Formal (derives its validity from its form) Not common Not common 2. Informal (simple) (most common) Implied Implied Oral Oral Written Written

5. © 2006 McGraw-Hill Ryerson Limited 10-5 Informal (Written) To meet the requirement of writing, the agreement need not be formal, but it must: To meet the requirement of writing, the agreement need not be formal, but it must: (1) identify the parties, (1) identify the parties, (2) contain the terms of the agreement, and be signed by the party to be charged. (2) contain the terms of the agreement, and be signed by the party to be charged. Where the Statute of Frauds includes a one year writing requirement, the courts have stated that if either party can fully perform the contract in less than one year, the contract need not be in writing to be enforceable. Where the Statute of Frauds includes a one year writing requirement, the courts have stated that if either party can fully perform the contract in less than one year, the contract need not be in writing to be enforceable.

6. © 2006 McGraw-Hill Ryerson Limited 10-6 Contract

7. © 2006 McGraw-Hill Ryerson Limited 10-7 Contract

8. © 2006 McGraw-Hill Ryerson Limited 10-8 Formal and Simple Contracts Power of Attorney 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. 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 Example of a formal contract

9. © 2006 McGraw-Hill Ryerson Limited 10-9 Statute of Frauds Characteristics Characteristics Introduced from the UK into Canada as a colony 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 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 Certain contracts if not in writing are not enforceable Still valid and existing contracts for other purposes (not void or prohibited) Still valid and existing contracts for other purposes (not void or prohibited)

10. © 2006 McGraw-Hill Ryerson Limited 10-10 Types of Contracts Following contracts covered by the Statute of Frauds 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

11. © 2006 McGraw-Hill Ryerson Limited 10-11 Contracts by Executors/Administrators Executor or administrator of an estate is not generally liable for the debts of the testator (the estate) 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 Can personally assume such debts but only if such contract is in writing

12. © 2006 McGraw-Hill Ryerson Limited 10-12 Guarantees Guarantee Guarantee A collateral promise (in writing) to answer or the debt of another (the principal debtor) if the debtor should default in payment 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 3 parties in a guarantee Creditor Creditor Debtor (Primary liability) Debtor (Primary liability) Guarantor (Secondary liability) Guarantor (Secondary liability)

13. © 2006 McGraw-Hill Ryerson Limited 10-13 Guarantees Consideration required to enforce the guarantee Consideration required to enforce the guarantee Alberta (Alberta Guarantees Acknowledgment Act) the guarantee must also be notarized Alberta (Alberta Guarantees Acknowledgment Act) the guarantee must also be notarized Must distinguish between guarantees and indemnities Must distinguish between guarantees and indemnities Guarantees must be in writing Guarantees must be in writing Indemnities need not be in writing Indemnities need not be in writing

14. © 2006 McGraw-Hill Ryerson Limited 10-14 Assumed Liability: Tort Concept Concept Any agreement whereby a third party promises to answer for the tort of another Any agreement whereby a third party promises to answer for the tort of another Must be in writing Must be in writing Signed by the party to be charged Signed by the party to be charged

15. © 2006 McGraw-Hill Ryerson Limited 10-15 Land Contracts Land Contracts Land Contracts Contracts concerning an interest in land Contracts concerning an interest in land Vague concept Vague concept Includes sale of land or lease of land 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 those things ancillary to the land or remote (repairs, renovations, etc) Does not include room and board contracts Does not include room and board contracts

16. © 2006 McGraw-Hill Ryerson Limited 10-16 Land Contracts Part Performance (equitable doctrine) Part Performance (equitable doctrine) A doctrine that permits the courts to enforce an unwritten contract concerning land where certain conditions have been met A doctrine that permits the courts to enforce an unwritten contract concerning land where certain conditions have been met Requirements 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

17. © 2006 McGraw-Hill Ryerson Limited 10-17 Requirements for a Written Memorandum Requirements Requirements Need not be in a formal document Need not be in a formal document Need all terms of contract (3 Ps: parties, property, price) Need all terms of contract (3 Ps: parties, property, price) Can be an exchange of letters – 2 letters together can constitute an agreement in writing 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 Must be signed by the party against whom it is being enforced

18. © 2006 McGraw-Hill Ryerson Limited 10-18 Parol Evidence Rule Rule Rule A rule that prevents a party from introducing evidence that would add to or contradict terms of a contract 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 Limits the kinds of evidence that may be used to prove terms of a contract Cannot contradict a clear unambiguous contract Cannot contradict a clear unambiguous contract

19. © 2006 McGraw-Hill Ryerson Limited 10-19 integration clause, or merger clause Example: "This Agreement, along with any exhibits, appendices, addendums, schedules, and amendments hereto, encompasses the entire agreement of the parties, and supersedes all previous understandings and agreements between the Parties, whether oral or written. The parties hereby acknowledge and represent, by affixing their hands and seals hereto, that said parties have not relied on any representation, assertion, guarantee, warranty, collateral contract or other assurance, except those set out in this Agreement, made by or on behalf of any other party or any other person or entity whatsoever, prior to the execution of this Agreement. The parties hereby waive all rights and remedies, at law or in equity, arising or which may arise as the result of a partys reliance on such representation, assertion, guarantee, warranty, collateral contract or other assurance, provided that nothing herein contained shall be construed as a restriction or limitation of said partys right to remedies associated with the gross negligence, willful misconduct of fraud of any person or party taking place prior to, or contemporaneously with, the execution of this Agreement." "This Agreement, along with any exhibits, appendices, addendums, schedules, and amendments hereto, encompasses the entire agreement of the parties, and supersedes all previous understandings and agreements between the Parties, whether oral or written. The parties hereby acknowledge and represent, by affixing their hands and seals hereto, that said parties have not relied on any representation, assertion, guarantee, warranty, collateral contract or other assurance, except those set out in this Agreement, made by or on behalf of any other party or any other person or entity whatsoever, prior to the execution of this Agreement. The parties hereby waive all rights and remedies, at law or in equity, arising or which may arise as the result of a partys reliance on such representation, assertion, guarantee, warranty, collateral contract or other assurance, provided that nothing herein contained shall be construed as a restriction or limitation of said partys right to remedies associated with the gross negligence, willful misconduct of fraud of any person or party taking place prior to, or contemporaneously with, the execution of this Agreement."

20. © 2006 McGraw-Hill Ryerson Limited 10-20 Exceptions to the Parol Evidence Rule Condition Precedent Condition Precedent A condition that must be satisfied before a contract may come into effect A condition that must be satisfied before a contract may come into effect Contract is in a state of postponement until the condition is met, not met, or waived by the party who inserted it Contract is in a state of postponement 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 If the condition is not met then the contract is cancelled

21. © 2006 McGraw-Hill Ryerson Limited 10-21 Exceptions to the Parol Evidence Rule Doctrine of Implied Term Doctrine of Implied Term The insertion by the court of a standard or customary term omitted by the parties when the contract was prepared 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 Implied terms cannot conflict with express terms Usually implied in order to implement the agreement Usually implied in order to implement the agreement

22. © 2006 McGraw-Hill Ryerson Limited 10-22 Exceptions to the Parol Evidence Rule Collateral Agreement Collateral Agreement An agreement that has its own consideration, but supports another agreement An agreement that has its own consideration, but supports another agreement Could alter or add to the main agreement Could alter or add to the main agreement Courts usually dont allow unless one can prove it exists as a separate and complete agreement with its own consideration Courts usually dont allow unless one can prove it exists as a separate and complete agreement with its own consideration

23. © 2006 McGraw-Hill Ryerson Limited 10-23 Exceptions to the Parol Evidence rule Common Factor Common Factor All exceptions to the parol evidence rule; the modifying term precedes, or is concurrent with the formation of the written agreement All exceptions to the parol evidence rule; the modifying term precedes, or is concurrent with the formation of the written agreement Subsequent Agreement Subsequent Agreement An agreement made after a written agreement that alters or cancels the written agreement An agreement made after a written agreement that alters or cancels the written agreement

24. © 2006 McGraw-Hill Ryerson Limited 10-24 Court Decision Parol Evidence Rule – Collateral Agreement Gallen et al. v. Allstate Grain Co. Ltd. et. al. (1984), 9 D.L.R. 496 (B.C.) Gallen et al. v. Allstate Grain Co. Ltd. et. al. (1984), 9 D.L.R. 496 (B.C.) The Manulife Bank of Canada v. Conlin et al. decision illustrates the position of a guarantor of a mortgage debt and the importance of including the guarantor in any changes to the debt repayment or security underlying a debt. In the case, the parties failed to obtain the consent of the guarantor, and when default later occurred on the mortgage, the court held that the guarantor was released from liability because no consent to the changes had been given by the guarantor. The Manulife Bank of Canada v. Conlin et al. decision illustrates the position of a guarantor of a mortgage debt and the importance of including the guarantor in any changes to the debt repayment or security underlying a debt. In the case, the parties failed to obtain the consent of the guarantor, and when default later occurred on the mortgage, the court held that the guarantor was released from liability because no consent to the changes had been given by the guarantor.

25. © 2006 McGraw-Hill Ryerson Limited 10-25 Case Law Western Dominion Investment Co. Ltd. v. MacMillan. In the case, the judge explains the nature of the liability of the debtor and the guarantor, and sets out the conditions under which the guarantor may be absolved from liability. It is important to note as well that payment of the debt by the guarantor does not release the debtor from all obligation on the debt. When the guarantor has paid the debt, the guarantor is entitled to a transfer of the security, and the creditors claim for payment. The guarantor then becomes entitled to claim payment from the debtor. Western Dominion Investment Co. Ltd. v. MacMillan. In the case, the judge explains the nature of the liability of the debtor and the guarantor, and sets out the conditions under which the guarantor may be absolved from liability. It is important to note as well that payment of the debt by the guarantor does not release the debtor from all obligation on the debt. When the guarantor has paid the debt, the guarantor is entitled to a transfer of the security, and the creditors claim for payment. The guarantor then becomes entitled to claim payment from the debtor.

26. © 2006 McGraw-Hill Ryerson Limited 10-26 Reduction to Writing Negotiations Negotiations Issue of when a contract agreed to orally becomes enforceable if it is never reduced to writing 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 Issue of interim enforceability between time of oral agreement and being put into writing

27. © 2006 McGraw-Hill Ryerson Limited 10-27 Sale of Goods Act Writing Requirement Writing Requirement Certain transactions over a certain value if not in writing are unenforceable Certain transactions over a certain value if not in writing are unenforceable Methods of enforcement (without written requirement) Methods of enforcement (without written requirement) Payment of a deposit Payment of a deposit Acceptance of delivery of part of the goods Acceptance 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)

28. © 2006 McGraw-Hill Ryerson Limited 10-28 Summary Formal or Informal Contracts Formal or Informal Contracts Most contracts are informal Most contracts are informal May be in writing, oral or implied May be in writing, oral or implied Statute of Frauds Statute of Frauds Certain type of contracts must be in writing or they are unenforceable Certain type of contracts must be in writing or they are unenforceable Parol Evidence Rule Parol Evidence Rule Several exceptions exist Several exceptions exist

29. © 2006 McGraw-Hill Ryerson Limited 10-29 CISG - Contract http://www.uncitral.org/ http://www.uncitral.org/ http://www.uncitral.org/ http://www.osgoode.yorku.ca/cisg/ http://www.osgoode.yorku.ca/cisg/ http://www.osgoode.yorku.ca/cisg/ UNCITRAL Model Law on Electronic Commerce UNCITRAL Model Law on Electronic Commerce CISG CISG JAMS International Arbitration Rule JAMS International Arbitration Rule

30. © 2006 McGraw-Hill Ryerson Limited 10-30 CISG The CISG applies to contracts for the sale of goods between parties whose places of business are in different countries when both those countries have joined the CISG. In theory the CISG applies even when both countries have not joined the CISG if conflict-of-laws rules lead to the application of the law of a country that has. The CISG applies to contracts for the sale of goods between parties whose places of business are in different countries when both those countries have joined the CISG. In theory the CISG applies even when both countries have not joined the CISG if conflict-of-laws rules lead to the application of the law of a country that has. The CISG also deals only with contract formation and the rights and obligations of the parties. It is expressly not concerned with questions of validity, which means that domestic law continues to govern such issues as incapacity, fraud, duress, mistake, and unconscionability The CISG also deals only with contract formation and the rights and obligations of the parties. It is expressly not concerned with questions of validity, which means that domestic law continues to govern such issues as incapacity, fraud, duress, mistake, and unconscionability

31. © 2006 McGraw-Hill Ryerson Limited 10-31 CISG Under the common law, an offer is freely revocable, even if the offeror has promised to hold it open, unless that promise is supported by consideration or reliance. Under the civil law, an offer is irrevocable. Under the common law, an offer is freely revocable, even if the offeror has promised to hold it open, unless that promise is supported by consideration or reliance. Under the civil law, an offer is irrevocable. (Firm Offers are irrevocable) (Firm Offers are irrevocable) CISG Article 16 allows an offeror to make a firm offer without these limitations. CISG Article 16 allows an offeror to make a firm offer without these limitations. Article 16 reflects a compromise between the civil law tradition, which presumes that offers are irrevocable, and the common law tradition, which presumes the opposite Article 16 reflects a compromise between the civil law tradition, which presumes that offers are irrevocable, and the common law tradition, which presumes the opposite

32. © 2006 McGraw-Hill Ryerson Limited 10-32 CISG - Contract Art. 16 CISG Article 16(2) provides CISG Article 16(2) provides (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. (1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. (2) However, an offer cannot be revoked: (2) However, an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer. (b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.

33. © 2006 McGraw-Hill Ryerson Limited 10-33 CISG - Contract Art. 16.2 Article 16(2) is a compromise between the civil law conception of the irrevocability of offers in certain circumstances and the common law conception that offers are always revocable until accepted unless an option contract is concluded. Article 16(2) is a compromise between the civil law conception of the irrevocability of offers in certain circumstances and the common law conception that offers are always revocable until accepted unless an option contract is concluded. Article 16(2)(b) is most clearly applicable when the offeree must spend time and perhaps considerable amount of money to determine whether to accept the offer or not. It cannot apply to this case since Wine Cooperative did not act in reliance on the offer – except to accept it. Article 16(2)(b) is most clearly applicable when the offeree must spend time and perhaps considerable amount of money to determine whether to accept the offer or not. It cannot apply to this case since Wine Cooperative did not act in reliance on the offer – except to accept it.

34. © 2006 McGraw-Hill Ryerson Limited 10-34 UNCITRAL Model Law on Electronic Commerce 15(2) UNCITRAL Model Law on Electronic Commerce. It provides in Article 15(2) UNCITRAL Model Law on Electronic Commerce. It provides in Article 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) if the addressee has designated an information system for the (a) if 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; or information 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 information the addressee that is not the designated information system, at the time when the data message is retrieved system, at the time when the data message is retrieved by the addressee; by the addressee; (b) if the addressee has not designated an information system, (b) if the addressee has not designated an information system, receipt occurs when the data message enters an information system of receipt occurs when the data message enters an information system of the addressee. the addressee.

35. © 2006 McGraw-Hill Ryerson Limited 10-35 CISG Article 16 (1) CISG Article 16 (1) provides that [u]ntil a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance. CISG Article 16 (1) provides that [u]ntil a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance.

36. © 2006 McGraw-Hill Ryerson Limited 10-36 CISG Article 35(2) CISG Article 35(2) provides in relevant part CISG Article 35(2) provides in relevant part (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: * * * * * * (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the sellers skill and judgment; (b) are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the sellers skill and judgment;

37. © 2006 McGraw-Hill Ryerson Limited 10-37 CISG Article 35 (2) It must be noted that this issue is relevant if, and only if, there is a contract. Moreover, it also depends on the arbitral tribunal having jurisdiction. It must be noted that this issue is relevant if, and only if, there is a contract. Moreover, it also depends on the arbitral tribunal having jurisdiction.

38. © 2006 McGraw-Hill Ryerson Limited 10-38 JAMS International Arbitration Rules JAMS International Arbitration Rules, Article 18.1 provides that JAMS International Arbitration Rules, Article 18.1 provides that The Tribunal will decide the merits of the dispute on the basis of the rules of law agreed upon by the parties. In the absence of such an agreement, the Tribunal will apply the law or rules of law which it determines to be most appropriate. The Tribunal will decide the merits of the dispute on the basis of the rules of law agreed upon by the parties. In the absence of such an agreement, the Tribunal will apply the law or rules of law which it determines to be most appropriate.

39. © 2006 McGraw-Hill Ryerson Limited 10-39 JAMS Rule 17.3. JAMS Rule 17.3. JAMS Rule 17.3. 17.3By agreeing to arbitration under these Rules, the parties will be treated as having agreed not to apply to any court or other judicial authority for any relief regarding the Tribunals jurisdiction, except with the agreement in writing of all parties to the arbitration or the prior authorization of the Tribunal or following the latters ruling on the objection to its jurisdiction. 17.3By agreeing to arbitration under these Rules, the parties will be treated as having agreed not to apply to any court or other judicial authority for any relief regarding the Tribunals jurisdiction, except with the agreement in writing of all parties to the arbitration or the prior authorization of the Tribunal or following the latters ruling on the objection to its jurisdiction. Article 17.3 is applicable only if there is an agreement to arbitrate under the JAMS Rules Article 17.3 is applicable only if there is an agreement to arbitrate under the JAMS Rules