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GOBC Real Estate • Mortgage • Property Management • Strata Class Notes

3.3
LAW OF CONTRACT

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 3.3 Law of Contract
Release/ Expiry of an Offer
OFFER: Is a Promise made Exceptions to the Offer:
1. Time limit
to a specific person/group 1). Standing Offer- open to many, can be accepted 2. Reasonable time
by anyone 3. Offer rejected
4. Counter offer – terminates the
original offer

Offer 2). Invitation to treat- less than a legal offer,

5. Revoke before acceptance
6. Insanity or death
request for offers 7. Changes to offer by seller

▪ Proper Acceptance:
✓ if the offer specifies how it should be made, the offeree should accept
by that method
Acceptance ✓ if the offer says nothing, the offeree should accept by the same
method as the offer was given
▪ Oral or Written
▪ Considered effective when communicated, not when received
▪ NO Postal Acceptance Rule (stamps)

Family Seal- stands in place of consideration

Consideration ✓
✓
Does Not have to be money
Past consideration is NO consideration

✓ Consideration is NOT an “Option Agreement” (false answer)

– options agreement is a separate consideration, usually $$$,
given to keep the offer open

Legal Object
Capacity Consent
Legal Intention

OBJECT: Legal idea/contract Infant (under 19) Genuine consent

Incorporated Companies Parties are in mutual agreement
INTENT: Must have serious Intoxication & Insanity Have Clear understanding of a
intention to create a contract Foreigners & Illiterates contract

Duress- actual physical act

The party to the contract has
been robbed of the free will Disclosure of Defects Defect Vs. Stigmas
Against your will ✓ Latent defects (Later)- cannot be
discovered upon reasonable inspection A Defect’s impact on a property’s
• Must be disclosed value can be objectively determined
Undue Influence- any improper or • The disclosure must be separate from (through appraisals)
any agreement of Purchase and Sale
wrongful constraint, manipulation, or
persuasion whereby the will of a person
a Stigma’s effect on property value
✓ Patent defects (Present)- should be depends on an individual’s
is overpowered and he is induced to do discoverable upon reasonable inspection subjective considerations (murder,
or refrains from doing an act which he (caveat emptor- Buyer Beware)
hunted, crime, death)
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 3.3 Law of Contract
June 5
June 4 June 6
Contract Signed

Completion
Date

Common Mistake Frustration Contract performed=

C comes before F
Before After closed

Mistakes Termination of a Contract

Where a mistake occurs, the contract may be void or voidable
▪ Frustration
Common – both make the same mistake about the ▪ Performance
fundamental term of the contract
▪ Agreement
Mutual – (innocent) both parties make a mistake, but the
▪ Nonfulfillment of Conditions
mistake is different
Unilateral- (deceit) one party is mistaken, the other party ▪ Breach
is aware but does nothing
Voidable Contract - has an
option to be cancelled
Doctrine of Privity - only the parties to a contract have a
right to sue or be sued under it (no land involved) Void- never existed

Exceptions: Assignment & interest in land

Remedies
Assignment
Common law:
A person can assign away benefits under a contract to a ▪ Damages- (breach of contract)
third party, and the third party can sue to enforce those The injured party does have a duty to mitigate damages (keep losses
benefits. But cannot assign liabilities at a minimum)

Two types: Equitable law: cannot be given if damages are awarded!

▪ Specific performance – a remedy for a breach of contract or if the
▪ Statutory
property is Unique and there is NO substitute. Cannot be given if
▪ Equitable
damages are awarded
Statutory legal requirements: ▪ Injunction- it can stop from doing something (selling property to
✓ in writing
someone else)
✓ for the whole amount
▪ Mandatory Injunction- require to do something
✓ given to promissor
▪ Quantum Meruit – the law implies a promise to pay a reasonable sum.

Promissor Assignor Assignee (3rd Party)

• consent is not needed •original party to the •receives the rights and obligations under
• cannot assign the debt contract the contract, but wasn't an original party to
(liability) •can assign benefits under the contract
• Owes money to Assignor the contract •can sue to enforce the benefits
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 3.3 Law of Contract

Questions
1. The Famous Pen Company places an ad in the newspaper offering to give one of its famous pen to anyone who visits its
retail location on Sunday between 1pm and 3 pm and who can demonstrate how the product works to a large crowd.
Lee arrives at 1:01pm and is ready to demonstrate the famous pen, but finds that she is the second person to arrive and
that the first volunteer is in the middle of his demonstration. Which of the following statements is TRUE?
1) Because the first volunteer accepted the company’s offer, Lee cannot now accept it.
2) Because Lee is responding to an invitation to treat, she will not be able to accept the offer.
3) This is an example of a standing offer which Lee may still accept

2. Alex puts an advertisement in the local newspaper offering to sell his property for $1 million. This advertisement is known
at law as:
(1) Invitation to treat
(2) Standing offer

3. Doug makes a written offer to Ash. Which is the following will NOT release Doug’s offer?
1) Doug discovers later that Ash is illiterate.
2) Ash fails to accept the offer before the expiry of the time limit specified in the offer.
3) Ash makes a counter-offer
4) Doug revokes his offer to Ash via telephone

4. Revocation can be made prior to or after acceptance.

1) True
2) False

5. The method of revocation must be exactly the same as the method used in the offer.
1) True
2) False

6. Unless consideration is paid to keep an offer open for a specific time, revocation can be made at any time prior to
acceptance.
1) True
2) False

7. In which of the following scenarios has a valid acceptance occurred?

1) Veronica sent Chris a letter in the mail asking him if he would like to buy a box of apples for $40. Chris placed a
reply letter in the mailbox agreeing to the sale.
2) Veronica and Chris were on the telephone discussing the sale of apples. Chris offered Veronica $40 for a box of
apples, but Chris cell phone battery died before he could hear Veronica‘s reply. Veronica wanted to accept his
offer

8. In which of the following scenarios has a valid acceptance occurred?

1) Veronica sent Chris a letter in the mail asking him if he would like to buy a box of apples for $40. The letter stated
that, if Chris is Interested, he should send her a letter by mail by 3 PM the next day. Chris sent an email to Veronica
the next day at 1 PM agreeing to the sale.
2) Veronica emailed Chris asking him if he would like to buy a box of apples for $40. Chris has decided that he wants
to accept this offer, however, he has yet to communicate this to Veronica.
3) None of the above

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 3.3 Law of Contract

9. If an offer is made by telegraph and the acceptance is mailed, when is the acceptance effective?
(1) when it is received by the offeree
(2) when it is received by the offeror
(3) when it is posted
(4) from the date and time of the postmark on the envelope

10. Bob and Margaret execute a contract under seal. Because of the seal:
(1) there is no need for written acceptance.
(2) neither party needs to sign the contract.
(3) they do not need the intention to contract.
(4) there is no need for consideration

11. Garry and Andrew who are the best friends, are drafting a contract to document the facts that Garry will purchase Andrew’s
house. The house is worth approximately $100,000. Which of the amounts, items and services could Garry use as
consideration to make the contract enforceable?
A. $1 in American currency
B. Garry’s vintage car, which Andrew has always wanted, worth $90,000
C. A case of beer Garry gave Andrew last week
D. A promise from Garry to repair Andrew’s computer next week.

(1) B only
(2) A and B only
(3) A, B and D only
(4) All of the above

12. When Mike entered into a contract, he was 18 years old. The contract was for a two-year telephone plan with Telus with
the requirements for him to make monthly payments in exchange for telephone service. Telus representative thought that
Mike was 19 years old because he signed up for a plan payable to university students. After reaching 19, Mike keeps
making monthly payments for several months. Assuming that the contract is governed by the laws of BC, which of the
following statements is TRUE?
(1) The contract is void as it was made between an infant and a party who did not know that it was dealing with an infant.
(2) The contract is enforceable as Mike continued to perform it after turning 19.

13. Which of the following statements is TRUE with respect to common law duress?
(1) To successfully claim law duress, the innocent party has to prove that she was physically harmed by the other party.
(2) A finding of common law duress will result in the contract being voidable by the party that was robbed of the free will
to contract.

14. Anna is interested in purchasing Elizabeth’s house. In an attempt to save money, instead of hiring a licensed home
inspector, Anna thoroughly inspects Elizabeth’s house herself and does not find any defects or deficiencies. After the sale
completes, Anna discovers a major issue with the foundation of the house that will cost $55,000 to fix. As a result, Anna
sues Elizabeth for failing to disclose the issue with the foundation. Which of the following is TRUE?
(1) Because the deficiency in the foundation is a major issue, Elizabeth is liable to Anna, even if she did not know about the
defect.
(2) Elizabeth would only be required to disclose this defect if Anna specifically asked about the foundation.
(3) Anna’s claim against Elizabeth for failing to disclose the foundation issue will likely fail if it can be shown that any
qualified home inspector would have identified the issue
(4) The foundation issue is known as a property stigma.

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 3.3 Law of Contract
15. Under the Rules, what must a listing licensee do if the seller instructs them to withhold the disclosure of a material latent
defect to a potential buyer of the property?
1) The listing licensee must follow the seller’s instructions and withhold disclosure to potential buyers.
2) The listing licensee must refuse to provide further trading services to or on behalf of that client in respect of the
trade in real estate.
16. Frustration can only occur after a contract has been made.
1) True
2) False

17. Frustration occurs where both parties to a contract have made a fundamental mistake about the contract, but each makes
a different mistake.
1) True
2) False

18. Raj and Linda enter into a contract of purchase and sale whereby Raj agrees to sell his house to Linda. On the date of
completion, Raj decides that he no longer wants to sell his house; therefore, he refuses to sign the documents to transfer
title to Linda. Linda, still wants to purchase Raj’s house and she sues Raj for breach of contract. Linda obtains a court order
requiring Raj to complete the sale agreed to in the contract. This order is correctly described as which of the following?
1) Damages
2) Injunction
3) Garnishment
4) Specific Performance

19. Which of the following statements is TRUE with respect to damages for breach of contract?
1) A completely innocent party is not required to mitigate his or her damages.
2) Damage awards are intended to punish the party who breached the contract.
3) If the parties to a contract provide for a genuine pre-estimate of foreseeable damages in the contract, that amount
will be enforceable, even if the actual loss is lower or higher.
4) At common law, damages can only be awarded for the breach of a condition.

20. A owes B $1,000. B assigns the debt to C. For this to be a statutory assignment 3 requirements are necessary. Which one of
the following is NOT one of them?
1) The assignment from B to C must be for the entire amount.
2) The assignment from B to C must be in writing
3) The notification from C to A must be in writing.
4) The notification from A to be must be in writing.

21. True or False?

1) An assignment terminates the original contract between the assignor and the third party. (T/ F)
2) A person can assign both the benefits and liabilities under a contract (T/ F)
3) Due to the fact that assignments is an exception to the doctrine of privity of contract, the assignee, despite not
being an original party to the contract, can enforce a properly assigned contract as if he or she was an original
party to that contract. (T/ F)
4) BC’s Law and Equity Act prohibits assignments of contracts which create an interest in land (T/ F)

Answers: 1(3), 2(1), 3(1), 4(2), 5(2), 6(1), 7(1), 8(3), 9(3), 10(4), 11(3), 12(2), 13(2), 14(3), 15(2), 16(1), 17(2), 18(4), 19(3), 20(4),
21(1-F, 2-F, 3-T, 4-F)
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