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