A contract is a legally enforceable agreement. Technically, a contract is not required to be in written form (contracts may be verbal), but a written contract serves as proof of the terms of an agreement and may be relied upon in the case of a contract dispute or potential breach of an agreement. Thus, a contract is meant to define and protect the expectations of the parties.
*Note: In British Columbia, notaries and lawyers almost exclusively require a written contract to sell/purchase “real property” (land) before they will facilitate a property conveyance.
Essential Terms of Contracts
All contracts must have clearly defined parties (people or corporations), property (real property or chattels) and price (consideration).
Legalities of Contracts
At the most basic level, a contract must be: (1) entered into voluntarily (2) by adults who meet the age of majority – 19 years old in BC – and (3) have legal capacity (absence of mental impairment preventing understanding).
Fundamentals of Contracts
- A contract must comprise a bargain promise, meaning that it cannot be gratuitous or one-way, but must consist of an exchange.
- For example, Aladdin promises to take Jasmine on a magic carpet ride. This is a gratuitous promise (and not a contract) because Jasmine is not paying, trading or providing value to Aladdin. However, if Jasmine promises Aladdin something in exchange for the carpet ride, then the trade of services or exchange of products constitutes a bargain promise.
- A contract must also have consideration; something of value must be exchanged. It can money, an object or service, or even a promise to fulfil or abstain from a specific future action.
- For example, Jasmine could provide Aladdin any form of consideration in exchange for the carpet ride: $10, or an overnight stay at her palace, or a meet-and-greet with her exotic pet tiger, Rajah.
- A contract gives rise to specific expectation(s) of the parties and, thus, is interpreted in a manner that gives effect to what can be reasonably forecasted or predicted as a result of the bargain promises made.
In the event that one of the parties fails to complete the contract (hold up their end of the bargain promise), the non-compliance constitutes a breach of contract and may be remedied by awarding monetary damages (compensation) to the other party, or in some extenuating circumstances, by ordering the breaching party to complete the transaction (specific performance) or by ordering the contract be undone (recission – bringing the parties back to their original positions, pre-bargain).
Contracts in the Context of Real Estate
In British Columbia, most residential conveyances use a standard contract of purchase and sale (although use of the standardized contract is not a legal requirement to make an enforceable contract), which has designated spaces for buyer and seller names, property information (civic address and PID), price, completion, possession and adjustment dates, included and excluded fixtures, subjects and other pertinent details.
Looking to buy property? Realtors often help facilitate real estate purchase offers using the standard contract of purchase and sale. But, if you need legal advice about your contract (before you remove subjects), a Notary or lawyer can assist you. Give us a call!
