Québec The rules governing the formation of a contract under Québecois law are codified in Book Five, Title One, Chapter 2, Division 3 of the Civil Code. Except where a specific provision of law requires otherwise, a contract is formed by the
exchange of consent between persons with the
capacity enter into a contract. Additionally, a valid contract must have a cause and an object. The object of a contract is the
juridical operation (i.e. exchange of one or more legal rights) contemplated by the parties at the time of the contract's formation. An object is only valid if it is not prohibited by law or on grounds of public policy. A contract which does not meet the conditions of its formation may be annulled . The exchange of consent required for the formation of a contract is generally accomplished in the form of an offer and acceptance. An offer to contract is a proposal which contains all the essential elements of the proposed contract and in which the offeror signifies his willingness to be bound if it is accepted. An offer to contract is made by the person who initiates the contract, the determines its content, or presents the last essential element of the proposed contract. An offer to contract may be made to a determinate or an indeterminate person, and a fixed time period for its acceptance may, but is not required to, be included. Where a term is attached, the offer may not be revoked before the period expires; if none is attached, the offer may be revoked at any time before acceptance is received by the offeror. An offer expires if an acceptance is not received by the offeror before the stated time period (if one is provided) or within a reasonable time period (if none is provided), as well as if the offeror receives a rejection or if either the offeror or the offeree die or enter insolvency before an acceptance is received by the offeror. Where a purported acceptance is received either after the expiry of the applicable time period or which substantially modifies the terms of the proposed contract, it instead constitutes a counter-offer. Consent in Québecois contract law may only be given by an individual with the legal capacity to bind themselves, and must be "
free and enlightened". It may be vitiated by error, fear, or lesion (i.e.
unconscionability). Error vitiates the consent of the parties or of one of them where the error relates to the nature of the contract, to the object of the prestation or to any essential element that determined the consent; but inexcusable error may not constitute a defect of consent. Error induced by the other party's
fraud or with the other party's knowledge vitiates a party's consent. Fear of serious injury to the person or property of one of the parties vitiates their consent if the fear is induced by violence or threats exerted or made by or known to the other party or induced by
abuse of power or a threat thereof. Lesion results from the exploitation of one of the parties by the other, which creates a serious disproportion between the prestations of the parties; the fact that there is a serious disproportion creates a presumption of exploitation.
Common law provinces In Canada's common law provinces and territories three components are required for the formation of a valid contract: offer, acceptance, and consideration. Additionally, the parties themselves must have the
legal capacity and the
intention to create legal relations.
Offer and acceptance An offer must be some indication of the offeror to the offeree that he is prepared to form a binding legal agreement. Intention is measured objectively. Commercial deals are presumed to be of a legal nature while an agreement made between family members or in a social engagement is presumed not to be of a legal nature. Acceptance is the promise or act on the part of an offeree indicating a willingness to be bound by the terms and conditions contained in an offer. An acceptance must be an absolute and unqualified acceptance of all the terms of the offer: Sec.7(1). If there is any variation, even on an unimportant point, between the offer and the terms of its acceptance, there is no contract. An acceptance is only contractually valid if the proposal to which response is made is an offer capable of acceptance. Often, when two
companies deal with each other in the course of business, they will use
standard form contracts. Often these standard forms contain terms which conflict (e.g. both parties include a liability waiver in their form). The 'battle of the forms' refers to the resulting legal dispute arising where both parties accept that a legally binding contract exists, but disagree about whose standard terms apply. Such disputes may be resolved by reference to the 'last document rule', i.e. whichever business sent the last document, or 'fired the last shot' (often the seller's delivery note) is held to have issued the final offer and the buyer's organisation is held to have accepted the offer by signing the delivery note or simply accepting and using the delivered goods. An offer must also be distinguished from an
invitation to treat, which is where one party invites another party to consider a deal. Advertisements are also considered invitations. Exceptions are made in circumstances where a
unilateral contract for performance is offered or where the advertisement is sufficiently serious about its promise such as in the famous
Carlill v. Carbolic Smoke Ball Co.. In the similar case of
Goldthorpe v. Logan, [1943] 2 DLR 519 (Ont CA) an "absolute and unqualified" guarantee to safely remove all hair by
electrolysis, was found to be an offer as the
plaintiff paid for the treatment on the basis of the offer. The display of goods in store is typically an invitation. The quotation of the lowest price is also considered an invitation. However, in some circumstances a quotation will be an offer. In
Canadian Dyers Association Ltd. v. Burton, [1920] 47 OLR 259 (HC), a quotation followed by the statement "if it were anyone else I would ask for more" was considered an offer. A
call for tenders is usually considered an invitation. In
R. v. Ron Engineering & Construction Ltd., [1981] 1 S.C.R. 111, however, the Supreme Court found that a call was an offer where there the call was sufficiently "contract-like". Later, in
M.J.B. Enterprises Ltd. v Defence Construction (1951) Ltd., the Court again found a call to be an offer which was accepted with the tender submission (known as
Contract A). In
Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), the trial judge summarised the factors to be considered in deciding whether a matter constitutes a call for tenders or a non-binding
request for proposals: The label or name of the tender document is not a determinative factor. Neither is the requirement for a security deposit or the existence of established timelines.
Consideration In common law jurisdictions,
consideration is required for simple contracts but not for special contracts (contracts by
deed). This means that each party to a contract is required to exchange something of value and that a gratuitous contract is not valid in Canada's common law provinces and territories. Where one party retains discretion over the performance of an obligation under a contract, that obligation constitutes a "
mere option" and therefore cannot serve as valid consideration. The requirement for consideration is the most significant difference between contract law in Québec and the common law provinces. At the international level, it is expressly rejected by the
UNIDROIT Principles of International Commercial Contracts on the grounds that it yields uncertainty and unnecessary litigation, thereby hindering international trade. Similarly, the
United Nations Convention on Contracts for the International Sale of Goods does not require consideration for a contract to be valid, thereby excluding the doctrine with regard to contracts covered by the convention even in common law jurisdictions where it would otherwise apply. Consequently, the continued existence of the doctrine in common law jurisdictions is controversial. In Canadian common law jurisdictions, like in
England and Wales but unlike in
India, the performance of pre-existing duties has not traditionally been regarded as good consideration. This can create uncertainty where parties to a contract agree to amend its terms after it has been concluded since such post-contractual modifications may run afoul of the requirement for fresh consideration. Court rulings in New Brunswick and British Columbia have abrogated this rule with regard to post-contractual modifications, while courts in Ontario have continued to require fresh consideration. Unless
expressly excluded by the contract, the convention is automatically incorporated into the
domestic laws of Contracting States. Consequently, the criteria for the creation of contracts for the international sale of goods are substantially harmonised among civil, common, and mixed law jurisdictions around the world. The CISG applies to contracts of the sale of goods between parties whose places of business are in different States, when the States are Contracting States (
United Nations Convention on Contracts for the International Sale of Goods, Article 1(1)(a)). Given the significant number of Contracting States, this is the usual path to the CISG's applicability. The CISG also applies if the parties are situated in different countries (which need not be Contracting States) and the conflict of law rules lead to the application of the law of a Contracting State. For example, a contract between a Japanese trader and a Brazilian trader may contain a clause that arbitration will be in Toronto under Ontarian law with the consequence that the CISG would apply. While a number of States have declared they will not be bound by this condition, Canada has not. The CISG is intended to apply to commercial goods and products only. With some limited exceptions, it does not apply to personal, family, or household goods, nor does it apply to auctions, ships, aircraft, or intangibles and services. The position of computer software is 'controversial' and will depend upon various conditions and situations. Importantly, parties to a contract may exclude or vary the application of the CISG. Under the CISG, an offer to contract must be addressed to a person, be sufficiently definite – that is, describe the goods, quantity, and price – and indicate an intention for the offeror to be bound on acceptance. The CISG does not appear to recognise
common law unilateral contracts but, subject to clear indication by the offeror, treats any proposal not addressed to a specific person as only an invitation to make an offer. Further, where there is no explicit price or procedure to implicitly determine price, then the parties are assumed to have agreed upon a price based upon that 'generally charged at the time of the conclusion of the contract for such goods sold under comparable circumstances'. Generally, an offer may be revoked provided the withdrawal reaches the offeree before or at the same time as the offer, or before the offeree has sent an acceptance. Some offers may not be revoked; for example when the offeree reasonably relied upon the offer as being irrevocable. The CISG requires a positive act to indicate acceptance; silence or inactivity are not an acceptance. The CISG attempts to resolve the common situation where an offeree's reply to an offer accepts the original offer, but attempts to change the conditions. The CISG says that any change to the original conditions is a rejection of the offer—it is a
counter-offer—unless the modified terms do not materially alter the terms of the offer. Changes to price, payment, quality, quantity, delivery, liability of the parties, and
arbitration conditions may all materially alter the terms of the offer.
Maritime law Canadian maritime law is a distinct jurisdiction and area of law within the legislative purview of Parliament rather than the provincial legislatures and, as such, is uniform across the country. Consequently;
contracts of carriage,
maritime insurance contracts, and other contracts related to maritime transportation are subject to a distinct legal system derived from English
admiralty law. In Ordon Estate v. Grail, the Supreme Court of Canada stated that "the substantive content of Canadian maritime law is...the body of law administered in England by the High Court on its Admiralty side in 1934, as that body of law has been amended by the Canadian Parliament and as it has developed by judicial precedent", and that "most of Canadian maritime law with respect to issues of tort, contract, agency and
bailment is founded upon the English common law" but nevertheless that "English admiralty law as incorporated into Canadian law in 1934 was an amalgam of principles deriving in large part from both the common law and the civilian tradition". The formation of contracts under Canadian maritime law thus functions similarly but not identically to the formation of contracts in the country's common law provinces; furthermore, the implementation of rules derived from international conventions subject maritime contracts to distinct rules often derived from international norms.
Bills of exchange and promissory notes Bills of exchange and promissory notes are two distinct types of contractual instrument subject to a distinct legal framework under which the rules governing their formation, validity, and nature is governed by federal rather than provincial law, and are thus harmonised between Québec and the common law provinces. A bill of exchange is "an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay, on demand or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to bearer". A bill of exchange requires three parties: the drawer, the drawee, and the payee. The drawer gives the order to pay money to the third party while the drawee, whose identity must be "indicated...with reasonable certainty", is the person to whom the bill is addressed and who is ordered to pay. The drawee becomes an acceptor when they indicate their willingness to pay the bill, and the drawee's acceptance is required in order for the contract represented by the bill of exchange to come into existence. The payee is the person in whose favour the bill is drawn or is payable. The parties need not all be distinct persons. The most common type of bill of exchange used by the general public is the
cheque, defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to their bank to pay the bearer a specific sum on a specific date. A promissory note, on the other hand, is a
legal instrument (more particularly, a financing instrument and a
debt instrument), in which one party (the
maker or
issuer) makes an unconditional to pay a determinate sum of
money to the other (the
payee), either at a fixed or determinable future time or on demand of the payee, under specific terms and conditions. Although possibly non-negotiable, a
promissory note may be a negotiable instrument if it is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the
payee, or at fixed or determinable future time, a sum certain in money, to order or to bearer.
Banknotes are often regarded as promissory notes. The
Bills of Exchange Act codifies the rules of formation and validity of both bills of exchange and promissory notes in Canada. A bill of exchange or a promissory note may be either negotiable or non-negotiable, with negotiable instruments being indefinitely
assignable and associated contractual performance (i.e. payment) guaranteed to the
holder in due course. The holder in due course of a bill of exchange or a promissory note has the following rights protected under the act which are distinct from and qualitatively superior to those of parties to ordinary contracts: As Canadian law regarding bills of exchange and promissory notes is derived from English common law,
consideration is required for the issue of a valid bill of exchange or promissory note. The
Bills of Exchange Act provides that the requirement for consideration may be satisfied either by "any consideration sufficient to support a simple contract" in the country's common law provinces and territories or by "an antecedent debt or liability". While only a party with
legal capacity is able to incur liability under a bill of exchange or promissory note, legal capacity under the
Bills of Exchange Act is defined as being "coextensive with capacity to contract" under the most relevant provincial or territorial law. Similarly, the capacity of a corporation to do so is determined by the law under which it is incorporated, which may be the federal
Canada Business Corporations Act (in which case the relevant provincial or territorial law may be determined with reference to the location of the corporation's registered office) or a provincial act. Consequently, questions of capacity are largely determined under the contract law of the relevant province or territory. The following chart shows the main differences between bills of exchange and promissory notes: ==Duties and equitable doctrines==