Part 3 – The Law of Contracts

Chapter 10 – The

Requirements of Form, and

Writing

Prepared by Michael Bozzo, Mohawk College

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Formal and Simple Contracts The Statute of Frauds

Executors and AdministratorsGuaranteesContracts concerning an interest in

land

Overview

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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 precedentImplied termsCollateral agreementsSubsequent agreements

Reduction to Writing – Agreements to agree Sale of Goods Act

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Overview

Two general classes of contracts1. Formal (derives its validity from its form)

Not common2. Informal (simple) (most common)

Implied Oral Written

Formal and Simple Contracts

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Power of AttorneyA 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

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CharacteristicsIntroduced from the UK into Canada as a colonyStill exists in some provinces, in others it has been

repealed but incorporated into other statutesCertain contracts if not in writing are not

enforceableStill valid and existing contracts for other purposes

(not void or prohibited)

Statute of Frauds

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Following contracts covered by the Statute of Frauds

1. Contracts by Executors and Administrators2. Guarantees3. Assumed liability for a tort4. Contracts concerning an interest in land

Types of Contracts

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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

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GuaranteeA 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

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Consideration required to enforce the guaranteeAlberta (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

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Guarantee Relationship

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ConceptAny 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

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Land ContractsContracts 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

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Part Performance (equitable doctrine) A doctrine that permits the courts to enforce an

unwritten contract concerning land where certain conditions have been met

Requirements1. Acts performed relate to land in question2. Lack of a written memo would perpetuate a fraud and

a hardship on the person3. Agreement must relate to an interest in land4. 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

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RequirementsNeed not be in a formal documentNeed all terms of contract (3 P’s: parties,

property, price)Can be an exchange of letters – 2 letters together

can constitute an agreement in writingMust be signed by the party against whom it is

being enforced

Requirements for a Written Memorandum

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RuleA 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

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Condition PrecedentA condition that must be satisfied before a

contract may come into effectContract 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

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Doctrine of Implied TermThe 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

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Collateral AgreementAn agreement that has its own

consideration, but supports another agreement

Could alter or add to the main agreementCourts 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

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Common FactorAll exceptions to the parol evidence rule; the

modifying term precedes, or is concurrent with the formation of the written agreement

Subsequent AgreementAn agreement made after a written

agreement that alters or cancels the written agreement

Exceptions to the ParolEvidence Rule

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NegotiationsIssue 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

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Writing RequirementCertain 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

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Formal or Informal ContractsMost contracts are informal○May be in writing, oral or implied

Statute of FraudsCertain type of contracts must be in writing or

they are unenforceable Parol Evidence Rule

Several exceptions concerning oral evidence exist

SUMMARY

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