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  The Statute of Frauds  Executors and Administrators  Guarantees  Contracts concerning an interest in land

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

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

5. © 2006 McGraw-Hill Ryerson Limited 10-5 Formal and Simple Contracts  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

6. © 2006 McGraw-Hill Ryerson Limited 10-6 Statute of Frauds  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 Introduced from the UK into Canada as a colony  Still exists in some provinces, in others it has been repealed but incorporated into other statutes  Certain contracts if not in writing are not enforceable  Still valid and existing contracts for other purposes (not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)

7. © 2006 McGraw-Hill Ryerson Limited 10-7 Types of Contracts  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

8. © 2006 McGraw-Hill Ryerson Limited 10-8 Contracts by Executors/Administrators  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

9. © 2006 McGraw-Hill Ryerson Limited 10-9 Guarantees  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)

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

11. © 2006 McGraw-Hill Ryerson Limited 10-11 Assumed Liability: Tort  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

12. © 2006 McGraw-Hill Ryerson Limited 10-12 Land Contracts  Land Contracts  Contracts concerning an interest 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

13. © 2006 McGraw-Hill Ryerson Limited 10-13 Land Contracts  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

14. © 2006 McGraw-Hill Ryerson Limited 10-14 Requirements for a Written Memorandum  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

15. © 2006 McGraw-Hill Ryerson Limited 10-15 Parol Evidence Rule  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

16. © 2006 McGraw-Hill Ryerson Limited 10-16 Exceptions to the Parol Evidence Rule  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

17. © 2006 McGraw-Hill Ryerson Limited 10-17 Exceptions to the Parol Evidence Rule  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

18. © 2006 McGraw-Hill Ryerson Limited 10-18 Exceptions to the Parol Evidence Rule  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

19. © 2006 McGraw-Hill Ryerson Limited 10-19 Exceptions to the Parol Evidence rule  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

20. © 2006 McGraw-Hill Ryerson Limited 10-20 Reduction to Writing  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

21. © 2006 McGraw-Hill Ryerson Limited 10-21 Sale of Goods Act  Writing Requirement  Certain transactions over a certain value if not in writing are unenforceable  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)

22. © 2006 McGraw-Hill Ryerson Limited 10-22 Summary  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 exist