| No matter where you live in North America, you | | | | 'some right, benefit or profit accruing to the |
| must have seen some humoristic vignettes | | | | promissor or some forebearance, detriment, loss |
| depicting a not-so-trustworthy Realtor intent at | | | | or otherwise responsibility suffered by the |
| selling a house to some innocent-looking couple. | | | | promissee' . What this means is that the party |
| My favorite vignette, which still makes me chuckle | | | | trying to enforce the contract must have 'paid' |
| today, goes back to a few years ago when I | | | | something in exchange for the promise of the |
| was practicing real estate at United Realty. It | | | | other party. Consideration must be of real value, |
| involved a Real Estate Agent of Pompeii Realty, | | | | but it does not have to be money. For example, |
| briefcase in hand, in the process of selling a house | | | | a mutual exchange of promises is consideration |
| to an ancient Roman couple sometimes around | | | | per se. |
| 100 BC . The house is overlooking Mt. Vesuvius. | | | | LEGAL INTENTION |
| There is a black, threatening, ominous plume of | | | | For a person to be bound to a contract, he must |
| smoke coming out of the top of the volcano, and | | | | seriously intend to create legal obligations. For |
| the Roman couple looks somewhat startled when | | | | example, inviting a guest for dinner would normally |
| the Real Estate Agent - big smile on his face - | | | | not be considered a contract intended to create |
| delivers the punchline: " Plus, with a view like this | | | | legal obligations. The Law presumes that there is |
| what could possibly go wrong" ! | | | | legal intention in a contract involving total |
| What is it exactly that you do when you sign a | | | | strangers. On the other hand, if the contract is |
| 'contract' . The term 'contract' means a promise | | | | between family members the Law presumes that |
| or a set of promises made by one person to | | | | there is no intention to be so bound (non |
| another, which the Courts will enforce. A contract | | | | arm-length transaction). However, this |
| can contain a number of promises or 'terms' to | | | | presumption can be reversed if there is evidence |
| be performed by either party. The person who | | | | to show otherwise. |
| makes the promise is called the 'promissor' and | | | | CAPACITY |
| the person who can enforce that promise is called | | | | Even when all the foregoing essential elements |
| the 'promissee' . If the contract contains several | | | | exist, a contract can still be void, voidable or illegal. |
| mutual promises, each party will be both a | | | | A void contract is one which is deemed at Law |
| promissor and a promissee. Contracts of | | | | never to have existed. A voidable contract is |
| Purchase and Sale of land and interests in land | | | | slightly different: it exists until it is repudiated by |
| usually have lots of mutual promises. Contracts | | | | one of the parties. An illegal contract is one which |
| are a crucial part of every business transaction, | | | | is made for an illegal purpose, and which is |
| but not nearly as much as in Real Estate. For | | | | therefore always void. Examples of voidable |
| instance, some contracts are made verbally while | | | | contracts are the ones made when one of the |
| others are made by simply exchanging letters or | | | | parties is an infant, i.e. a minor or under the |
| even e-mails. This is not the case in Real Estate, | | | | majority age. In this case the contract can be |
| where it is a requirement at Law that contracts | | | | voided by the infant. Likewise, when one of the |
| be written down in usually lengthy legal forms to | | | | parties is legally insane, the contract is voidable. A |
| avoid uncertainty, ambiguity and to be binding . | | | | special case is a contract stipulated when one of |
| A contract has seven essential elements: | | | | the parties is a limited company or corporation. |
| Offer. | | | | Three questions must be first answered before |
| Acceptance. | | | | the contract can be enforceable: 1) whether the |
| Consideration | | | | corporation does in fact exist and 2) whether it |
| Legal Intent. | | | | has the capacity to enter into the contract and 3) |
| Capacity. | | | | whether the person signing on behalf of the |
| Legal Object. | | | | corporation is, in fact, the authorized signatory. |
| Genuine Consent. | | | | LEGAL OBJECT |
| Each of these elements must be present for a | | | | Quite aside from blatantly illegal contracts such as, |
| contract to be binding and enforceable. Let's | | | | for examples, contracts to commit a crime or |
| examine them individually. | | | | tort until recently here in British Columbia certain |
| OFFER | | | | other types of contracts where considered illegal. |
| An offer is the promise made by one party to | | | | For example, until the mid-80's contracts involving |
| another. Save and except in Real Estate where | | | | the sale of land made on a Sunday were deemed |
| the offer must be in writing, an offer can be | | | | to be a contravention of s.4 of the Lord's Day |
| made in any form. In all circumstances, however, | | | | Act(now repealed) and, thus, illegal and void. Since |
| an offer must be made in clear an unambigous | | | | then, the Supreme Court of Canada has ruled |
| terms. If more than one interpretation can be | | | | that the application of s.4 - in fact the entire |
| given to an offer, neither interpretation will be | | | | Lord's Day Act - is unconstitutional in that it |
| followed by the Courts. There are 'unilateral' and | | | | infringes on the freedom of conscience and |
| 'bilateral' offers. Offers to purchase real property | | | | religion guaranteed by the Canadian Charter of |
| are bilateral, i.e. containing the exchange of mutual | | | | Rights and Freedom. |
| promises. | | | | GENUINE CONSENT |
| An offer is not made forever. Offers can either | | | | If one of the parties makes a misrepresentation |
| be finalized, when all mutual promises are fulfilled. | | | | or if the contract contains an inherent mistake, |
| Or they can expire, if not timely accepted. Or | | | | the contract may still not be binding. A |
| they can be released, if one of the parties does | | | | misrepresentation is, by definition, a statement |
| not - or cannot - deliver on the promise. Offers | | | | which is false and which must have induced one |
| can also be revoked after acceptance, unless a | | | | of the parties to enter into the contract. A |
| term of the offer stipulates that revocation is not | | | | misrepresentation can be innocent, negligent or |
| allowed.- as it is now the case in British Columbia | | | | fraudulent and different remedies are available to |
| for offers involving land. A 'counter-offer' is simply | | | | the party suffering damages because of the |
| an offer from the offeree back to the offeror. | | | | nature of the misrepresentation. If the |
| The legal effect of a counter-offer is to terminate | | | | representation is innocent, the party can sue for |
| the original offer and substitute the offer of the | | | | rescission of the contract. In the case of negligent |
| offeree. What this means in practicality is that if | | | | or fraudulent misrepresentation, the affected |
| the counter-offer is not accepted, the offeree | | | | party can sue for damages as well. Although |
| cannot try to accept the first offer unless it is | | | | misrepresentation requires a statement to be |
| tendered again by the offeror. This is a point | | | | made, in Real Estate silence too can result in |
| often times neglected in Real Estate, which has | | | | some form of misrepresentation. Disclosure of |
| caused several tears to be spilled. | | | | latent defects is one such example: failure to |
| ACCEPTANCE | | | | disclose latent defects on the part of the Seller |
| The acceptance, like the offer, must be given in | | | | will not, by itself, affect the consent of the |
| clear terms. It must be a positive act. For | | | | parties but will have similar consequences as |
| instance, an offer cannot state "If I don't hear | | | | misrepresentation. |
| from you, I will assume you have accepted". | | | | In the case of inherent mistake, true consent of |
| Doing nothing will never be considered legal | | | | the parties does not exist. The logic behind this |
| acceptance. The rule at Law is that where an | | | | notion is that the parties were negotiating for a |
| offer is required by statute to be in writing, then | | | | subject matter other than the one stipulated in |
| also the acceptance must be in writing in order | | | | the contract. A specific type of mistake is |
| for the offer to become a contract binding on | | | | sometimes referred to as 'non est factum' , Latin |
| both parties. Such is the case in Real Estate. An | | | | for 'this is not my deed' . This occurs when a |
| acceptance has no effect until it is communicated | | | | person executes one form of document thinking |
| to the offeror. Communication can be made by | | | | the document is something else. Duress and |
| 'instantaneous means' as in the case of telephone | | | | undue influence both affect the genuine consent |
| or teletype or fax communications, or e-mail or | | | | element of a contract. Duress occurs when a |
| hand-delivery and by 'non-instantaneous means' | | | | person is forced to enter into the contract against |
| such as postal mail. The Law gives the | | | | his will. As a result, the Courts will find the |
| responsibility to the offeror to specify how he | | | | contract voidable at his option. Undue influence, on |
| wants the offer to be accepted. If the offeror | | | | the other hand, is more subtle. Like duress it |
| chooses a method like slow mail, then he | | | | results in one party losing his free will to contract |
| assumes the risks involved in that type of service | | | | out. However it occurs more frequently when a |
| (such as misdelivery). | | | | person is in a superior or dominant position in |
| CONSIDERATION | | | | relation to another and uses this influential position |
| For an offer and acceptance to form a contract | | | | to induce the other to enter into the contract. |
| there must be consideration or the contract must | | | | Again, if undue influence is found, the contract is |
| be signed under seal. Consideration is defined as | | | | voidable at the option of the innocent party. |