CHAPTER 4: PRINCIPLES OF CONTRACT LAW

A contract is an agreement of wills by which one or several persons obligate themselves to one
or several other persons to perform a prestation.
Types of prestations in contracts:
- Money
- Property
- Services

5 pairs of contract characteristics:

Each contract will have one of each of the 5 pairs:
- Contract of adhesion: contract in which one side decide the terms and the other
chooses to accept or rejects => NO NEGOCIATION. EX: Airline tickets.
VS.
- Contract by mutual agreements: there are negotiations. Both parties discuss and agree
on all of the conditions of the contract.

- Synallagmatic Contracts: (or bilateral contracts) both parties have to do something both
have an obligation to perform a prestation. Each side agrees on performing an
obligation. EX: “A” gives “B” a book in exchange for $10.
VS.
- Unilateral contract: only one side has an obligation to perform not the other. EX: a will
or a pledge to donate to charity.

- Onerous Contracts: the contract involves value with money. There is a payment in
exchange. Each party receives something in return for undertaking an obligation to the
other party.
VS.
- Gratuitous contracts: free of charges. EX: an agreement to donate to charity, or looking
after a friend’s child

- Commutative contracts: we know the end result of the contract. Both parties know in
detail how much each has to pay, and what each will receive in return. EX: a food
company buys 10,000 bushels of apples and agrees to pay $3 per bushel.
VS.
- Aleatory contracts: you don’t know the end result. Not 100% certain. EX: lottery and
gambling. Contract in which the full extent of the obligations is uncertain at the time the
contract is entered into and will only be established at a later date. EX: a food company
agrees in January to buy all of the apples the farmer will grow during the summer and
pay $3 the bushel; the number of apples to be sold and the amount to be paid will be
known only when the apples are harvested in august.
 - Contracts of Instantaneous performance: one-time interaction and discharge of the
obligations undertaken. EX: a bicycle is sold and delivered, and the price paid is $175.
VS.
- Contracts of successive performance: monthly/yearly/semi-annual payments. Contract
in which the obligation is to continue doing something on a regular basis for a specified
period of time. EX: an employment contract by which the employee goes to work every
day and receives a weekly pay for his/her services.

EX: Hydro Quebec:

- Adhesion
- Synallagmatic
- Onerous
- Aleatory
- Successive performance
-
Consumer contract: in which a natural person (not a business) acquires, for personal use, some
property or service from a business that offers such property or service to the public. Dealt with
under the consumer protection act.

Conditions of formation:

- Exchange (art.1385):
 Exchange of consent: agreement that can be:
 Express (clear indication on the part of a person) or tacit (when nothing is said, but
the person carries out some action to indicate acceptance = by
presumption/assumption)

- Offer and acceptance (art. 1387, 1390):

 If no term = ends in a reasonable time (depends on the circumstances)
 With term = expires on date set
 Death, bankruptcy or protective supervision (becomes mentally unable to perform
decisions) causes offer to lapse (offer dies) before acceptance received.
Acceptance:
o Contract is formed upon acceptance (the moment it is accepted): A contract
comes into existence when the acceptance of the offer has been received.
o If acceptance doesn’t equal offer, then it’s a counteroffer.
o Silence does not equal acceptance

- Capacity:
Minors:
o 14yrs+ can contract for employment or work
o All minors can contract for usual needs (food, transportation)
o Tutors (parent or legal tutor) for the rest
 Adults:
o Inapt adults can’t contract
o Three forms of protective supervision:
1. Permanent (Curator)
2. Temporary (Tutor)
3. Assistance (Advisor)
- Cause:
o A reason needs to exist for the contract
o An illegal reason nulls contract. HAS TO BE LEGAL!!!
o Null contract is different than a cancelled contract. When you nullify a contract,
everything is reimbursed. Cancelled contract is a termination of a past contract,
but you don’t get reimbursed.

- Form:
o No required specific wording or form in contract.
o Exceptions: Marriage, hypothecs, notarial wills, insurances. These have to be
written.

Defects of Acceptance: If the conditions above are not

- Error:
o Must be a real error not personal mistake.
EX: Thought you were buying X but is really Y.

- Fraud:
o Person contracted based on intentionally false information.
o If one knew he/she would not have contracted or contracted for less.

- Fear:
o No contract if done out of fear (physical or authority)

- Lesion:
o Taking financial advantage of person:
 Above market value and not within person’s financial means.
 Only minors and inapt adults can use
Interpretation contracts:

- Number of the articles (1425 to 1438) in the civil Code set out the principles of
interpretation:
 Uncover real intention of parties: even though words used in contracts can be
interpreted in different ways, the courts should try to uncover the real intention or
purpose of the parties when they originally entered the contract. (art. 1425)
 Historical nature of relations between the parties and the circumstances must be
examined when interpreting a contract. (art. 1426)
 Existing clause must have some effect rather than none. Otherwise why include it in
the contract? (art. 1428)
 Multiple meaning words used in a clause must be given a meaning that conforms to
subject matter of the contract. (art. 1429)
 In contracts of adhesion, accepting party is given benefit of doubt.
 Incidental (non-expressed) associated obligations exist and must be recognized by
the courts. (art. 1434)
 Illegible or incomprehensible clause are null and have no effect unless adequately
explained. (art. 1436)
 Abusive clauses, which are excessive or unreasonably detrimental to a consumer or
adhering party are automatically null. (art. 1437)
 A nullified clause does not make the whole contract invalid, if it is possible for the
contract to exist without this clause. (art. 1438)

When Default (violation/fail to complete the contract)?

1) By contract stipulating deadlines: when the debtor fails to perform an obligation by a
stipulated deadline.
2) By extrajudicial demand (writing/warning to perform): by which the creditor sends the
debtor a letter requesting performance within a certain period of time.
3) By operation of law: where the debtor fails to perform an obligation within a useful time
or failed to perform immediately in case of urgency, or where performance becomes
impossible due to the debtor’s fault.

Damages
- Immediate and direct
- Assessing damages
- Future damages
 certain and can assess
- Punitive damages (see chapter 3)
- Penal clauses:
 Penalty for failure to complete
 No need to prove injury
Case Peter v. Fiasche:

 Case facts:

- Plaintiff buys from defendant restaurant called Chez Gino Smokey’s

- Deposits $100 000 + $100 000 after purchase
- Restaurant showing losses, saw 1990 statement
- Plaintiff claims defendant said hides real sales
- Plaintiff said was told two books and registers
- Plaintiff was assured of no tax debt to government
- After purchase, sales did not add up
- Wanted to annul contract due to error by fraud

 Court Decision:

- Can’t argue error based on fraud

- Did find contract was illegal thus null (art. 1411). Illegal to make a contract to steal
money from the government.
- Ordered restitution under art. 1422; everything goes back to the way it was before and
reimbursement.

Giroux v. Malik:

 Case facts:

- Malik sells property to Giroux

- Giroux discovers land unusable to build home
- Malik claims declared problem; French not good
- Had tried to sell it twice before.

 Court decision:

- Found Malik knew but didn’t reveal problem

- Thus, error by fraud due to silence
- Giroux would not have bought
- Thus:
 Annulled contract
 Awarded $10k damages
Richard v. Time Inc:

 Case facts:

- Richard received an “Official Sweepstakes Notification”

- Stated “Jean Marc Richard has won a cash prize of $833,337.00”
- Conditional clauses stipulated required action, such as “return the grand prize-winning
entry in time”
- Richard returned form and ordered magazine
- He got free camera and started getting the magazine
- Called time for prize but told only qualified
- Filed suit for $ 833,337.00 US for misleading representation under the consumer
protection act.

 Decision:

- SCC found mailing was misleading

- Found act was intentional
- Found punitive damages is an exceptional remedy.
- Found punitive damages role was preventive
- Thus, punitive damages may not exceed what is sufficient to teach lesson

TRM Copy v. Copiscope:

 Case facts:

- TRM copy provided copiers to stores

- Stores signed non-competition clause
- Copiscope, similar business, pursued stores to switch arguing clause illegal.
- TRM sued and got temporary injunction against Copiscope (protect the case until it is
heard because it takes approximately 2 years for the case to be heard in court)

 Court decision:

- Appeal court found non-competition clause illegal.

- Found it to be an act of adhesion which must be read in favour of agreeing party.
- Therefore, temporary injunction request does not pass three steps test:
 Serious
 Irreparable damages
 Balance (Injunction has to be balanced between the rights of both sides)