A contract refers to an agreement reached by two or more entities creating a legal responsibility or duty. Entities that enter into a contract include companies, organizations, and individual people.
Elements of a Contract
- Subject: A contract should include definite terms that clearly spell out all the details. These details are the subject of the contract.
For example, when you buy a second hand automobile, the subject in this sale contract is the car sales agreement that includes details such as transfer of ownership, warranty, and price.
- Consideration: There should be valid motivation for entering a contract. Consideration is the objective or reason for a contract. In most cases, consideration is money; however, it could also include a promise to refrain from certain activity or accepting liability.
For example, a non-disclosure agreement prohibits sharing of information that would give unfair advantage. In this case, the commitment or promise not to share information is the consideration.
- Competency: A contract is an agreement between competent persons. A competent individual is one who is mentally sound and has attained the age of 18 years or the legal majority age of the jurisdiction where they reside.
Types of Contracts
A contract may be oral or written, depending on the prevailing situation. An oral contract refers to a verbal agreement declared in conversations and is therefore implied. A written contract is one where the subject is expressly stated on a document.
In What Situations are Oral or Written Contracts Used?
When you order a latte at a coffee shop, you have entered into an implied/oral contract with the waiter taking the order. When you ordered the drink, the assumption was that you were going to compensate the waiter for it.
Situations where express contracts are used include the transfer of property, the sale of goods/services, and long-term agreements that require over a year to be completed, for example.
What Laws Govern Contracts?
Contracts are usually governed by the laws and rules of the province where the entities involved made an agreement.
Depending on the subject of the agreement i.e. property lease, sale of goods, etc., a contract may be governed by civil law, common law or Uniform Commercial Code (UCC). Many contracts like leases, employment agreements, and business agreements are governed by civil law in Quebec and common law in other Canadian provinces.
Civil law in Quebec is a set of written rules laid out in the Civil Code of Québec.
Common law is a tradition based on evolving laws passed down by the case law – i.e. court decisions rendered by judges in the provinces and country.
The Uniform Commercial Code (UCC) is a set of guidelines that govern commerce. Contracts involving the sale of goods in the United States are often governed by UCC.
What are Contract Templates?
Due to the high cost of hiring a lawyer to draft a contract, a lot of individuals prefer to complete a contract on their own guided by standard templates.
Contract templates are layouts that can be found online and indicate the fields required in a contract.
For example, a contract template may include fields such as the subject matter, consideration, name of the signatories, and date.
The one drafting a contract will only fill these fields and the parties to the contract will then sign it to make it binding.
You can purchase a contract templates on LawDepot.ca.