Chapter 7

Question 1

Explain capacity and why it is important for contracting parties to have the capacity to contract.

Answer 1

Parties entering into a contract must be fully conscious of the contract they’re entering into. One party can be vulnerable and taken advantage of by another party leading to an unequal balance in power in the contract.

Question 2

Are Minors (or infants) under the age of majority bound in their contracts?

Answer 2

No. Typically an adult is bonded on behalf of the minor, however the contract is voidable by the minor.

Question 3

When are minors bound in their contracts?

Answer 3

(1) for the acquisition of necessaries (2) contracts of employment (3) services that benefit the minor.

Question 4

Explain parents liability when it comes to a minors contract?

Answer 4

Parents are not obligated to meet the requirements of the minor is obligated to meet them. Parents do however guarantee the minors obligations like making sure your kid pays back a loan on time.

Question 5

How does insanity effect contracts?

Answer 5

There’s no understanding of the nature of the transaction. Person claiming insanity has to prove it to void contract. Have to prove other party knew or ought to have known of insanity. May repudiate when same/after effects wear off.

Question 6

Is drunkenness treated the same as insanity when forming contracts?

Answer 6

Yes.

Question 7

Explain weakened intellect when forming contracts.

Answer 7

Unconscionable transaction/taking advantage of someone who doesn’t know what they’re signing.

Question 8

Corporations have the contracting power of natural persons. True or false?

Answer 8

True however in some jurisdictions the capacity of a corporation can be limited.

Question 9

What happens to contracts when ‘Enemy Aliens’ is taken into consideration.

Answer 9

Contracts are void if detrimental to Canada or suspended for duration of war.

Question 10

How are foreign governments effected in contracts?

Answer 10

Treated as all other parties for simple commercial activities. Foreign diplomats have immunity.

Question 11

Describe the role of the union in terms of contracts.

Answer 11

Contents of contracts should relate to union activities and the capacity of these contracts are governed by legislation.

Question 12

Describe what makes a contract illegal/performed illegally.

Answer 12

Agreements are illegal and contrary to public interest. Involves immoral or unacceptable conduct. Illegal performance of a lawful contract often involves a breach of regulatory legislation that may void the contract.

Question 13

What can the courts do if a contract is performed illegally or against pubic policy?

Answer 13

Courts can void contract and restore parties to their original positions. Severance of the illegal performance. Enforcement if violation is procedural and substantive.

Question 14

Will courts restore parties to original position if one is innocent of wrongdoing? What about both parties guilty?

Answer 14

If one person is innocent of wrongdoing yes, if both parties are found guilty then the courts will not restore the parties to original position.

Question 15

What are some examples of contracts formed illegally?

Answer 15

Contracts to commit a crime or tort, contracts that are bets or wagers, contracts that obstruct justice, contracts that fix prices or reduce competition, contracts that unduly restrain trade.

Question 16

What are restrictive covenants?

Answer 16

Trade restraints placed on an employee after they leave, to protect the legitimate business interest of the employer. For instance customers info and list of customers are part of the goodwill of business and cannot be revealed to anyone not part of that business.

Question 17

Goodwill needs to be preserved upon?

Answer 17

Sale of business, change of employment or leaving a professional partnership.

Question 18

What is the nee fit of restrictive covenants?

Answer 18

Limits the ability to compete for existing customers.

Question 19

Describe what makes a restrictive covenant unreasonable?

Answer 19

The agreement is against public interest when it interferes with free trade, drives up prices, decreases service, or has any other effect whereby the public may be harmed.

Question 20

Explain the capacity of minors to enter into a contract

Answer 20

Minors—typically under 18 but can be under province age majority—generally do not have the capacity to enter into binding contracts.

Question 21

Explain the capacity of the insane and drunk to enter into contracts

Answer 21

Insanity - person legally insane at the time of entering a contract may lack the capacity to understand the implications of the agreement. Drunkenness - treated similar to insanity.

Question 22

Can a drunk person have their contract set aside?

Answer 22

Yes if they can prove they were incapable of understanding the contacts nature while heavily intoxicated.

Question 23

Explain corporations capacity to enter a contract

Answer 23

Their capacity to contract is typically equal to that of a natural person, but can be limited by their charter laws.

Question 24

Explain foreign governments capacity to enter a contract

Answer 24

Treated like any other entity in commercial transactions unless it involves state matters

Question 25

Can a corporation enter into a contract with a clause in its charter?

Answer 25

No this will void the contract

Question 26

What makes a contract illegal?

Answer 26

Contracts that involve illegal actions or are contrary to public policy are void and unenforceable.

Question 27

Describe necessaries in relation to minors entering a contract

Answer 27

Minors are bound by contracts for goods and services that are considered essential.

Question 28

Explain beneficial contracts in relation to minors entering a contract

Answer 28

Employment contracts beneficial to the minor are generally enforceable

Question 29

Explain what ratification is in relation to a minor becoming an adult in a contract

Answer 29

Upon reaching age or majority, a person can ratify (give consent to) contracts made while they were a minor, which makes the contract binding.

Question 30

Explain parents liability when it comes to their child’s contract

Answer 30

Generally parents are not responsible for contracts entered into by their minor children unless specific legislation imposes such liability.

Question 31

Explain insanity and drunkenness making contracts void

Answer 31

Insanity - contracts can be voided if one party was legally insane and unable to understand when it was signed. Drunkenness - contracts can be voided if one party was so intoxicated that they could not understand the contract.

Question 32

Explain illegal formation of a contract

Answer 32

Contracts with an illegal purpose are void

Question 33

Explain what a restrictive covenant is

Answer 33

Customers and customer lists are preserved by the goodwill of a business

Question 34

When does goodwill need to be preserved?

Answer 34

(1) sale of a business (2) change of employment (3) leaving a professional partnership

Question 35

Explain what makes restrictive covenants illegal

Answer 35

(1) against public interest in things such as decreasing services, driving up prices or interferes with free trade. (2) unreasonable geography or time limit.

Question 36

Explain legal intent in terms of contracts

Answer 36

Parties must intend to create *legal relations for a contract to be enforceable.

Question 37

Explain how a contract takes form

Answer 37

There is no general rule that a contract must take a certain form.

Question 38

Explain the limited circumstances where a contract is formed

Answer 38

In some limited circumstances, a contract is required by statute to be in writing to be enforceable—like a transfer of land

Question 39

Types of contracts generally included under the Statute of Frauds

Answer 39

(1) longer than 1 year (2) land transactions (3) when goods are sold over a specific value (4) promises in consideration of marriage

Question 40

Explain Doctrine of Part Performance in relation to contracts

Answer 40

If one party has begun performing under the contract, this can sometimes overcome the requirement for a written contract, specifically in real estate transactions.