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