Gavin Howe
Contracts are a legally binding agreement between two or more parties for a particular purpose. They are pivotal in a variety of transactions, from buying a home to commercial transactions, and they govern a diverse array of activities. In Canada and the United States, contract law is composed of two parallel systems: common law and civil law. Common law jurisdictions require consideration for simple contracts, meaning that each party to a contract must exchange something of value. In contrast, civil law systems are generally more prescriptive, and contracts may contain mandatory notice periods before termination for breach of contract that cannot be avoided or overridden. While contracts typically follow common law or civil law, it is possible for a contract to override common law in certain circumstances.
| Characteristics | Values |
|---|---|
| Can a contract override common law? | In the US, private agreements between non-governmental parties can sometimes supersede statutory rules and common law precedents. |
| Contract law in Canada | Canadian contract law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. |
| Contracts in all Canadian jurisdictions | Contracts are interpreted in a manner that balances giving the fullest possible effect to the intent of the parties while protecting the public interest and contracting parties with less bargaining power. |
| Common law jurisdictions | In common law jurisdictions, consideration is required for simple contracts but not for special contracts (contracts by deed). |
| Civil law system | A civil law system is generally more prescriptive than a common law system. |
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What You'll Learn
Contracts in Canada
Canadian contract law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. Outside Québec, Canadian contract law is derived from English contract law, though it has evolved since Canadian Confederation in 1867. Québecois contract law was originally derived from French civil law at the time of Québec's annexation into the British Empire, but it was later overhauled and codified in the Civil Code of Lower Canada and, later, in the Civil Code of Quebec.
In Canada, a contract is a legally binding promise. If one party fails or refuses to fulfil its promise without a valid reason recognised by law, the other party may call upon the courts to force the defaulting party to carry out its promise or to demand compensation. Quebec civil law and Canadian common law generally follow similar rules in this regard: a contract legally entered into represents a legal bond between the parties.
For a contract to be valid and therefore legally binding, five conditions must be met. Firstly, there must be the mutual consent of both parties. No one can be held to a promise involuntarily made. When consent is given by error, under physical or moral duress, or as a result of fraudulent practices, the contract may be declared null and void at the request of the aggrieved party. Secondly, there must be an offer. Thirdly, the contract should have an object or a purpose. It must concern a specific and agreed-upon good or service. Fourthly, there must be a "'valuable consideration" in common law, meaning that each party to a contract is required to exchange something of value. In civil law, this is known as "lawful cause". Finally, the fifth condition, which is not required in all cases, is the compliance in certain circumstances with formalities provided by law, such as a valid written instrument.
In Canada, as in most jurisdictions, the Convention on Contracts for the International Sale of Goods (CISG) governs contracts concerning the international sale of goods. The CISG facilitates international trade by removing legal barriers among state parties and providing uniform rules that govern most aspects of commercial transactions, such as contract formation.
In general, a contract cannot override a binding, non-waiveable law and is void and unenforceable as a matter of public policy. However, a contract can do things that appear to be contrary to the "most common situation" fact sheet representation, but it does not override the law itself. For example, in the US, some salaried positions are exempt from laws governing overtime pay, and there may be a similar provision in Canada.
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Common law in the US
In the US, common law is derived from judicial decisions instead of statutes. American courts initially based their common law rules on English common law. However, as the American legal system matured, it began to create its own common law rules through direct precedent or by drawing parallels with similar areas of decided law. While most common law is found at the state level, there is also a limited body of federal common law, which is created and applied by federal courts in the absence of a controlling federal statute.
Federal common lawmaking is reserved for situations where it is deemed "necessary to protect uniquely federal interests". An example of this is the 2020 Supreme Court opinion Rodriguez v. FDIC, where a federal common law rule was struck down. At the state level, legislatures often codify common law rules from the courts of their state, either to give the rule more permanence, modify it, or replace it with legislation. For instance, in 2018, the California Supreme Court's decision in Dynamex Operations West, Inc. v. Superior Court led to the creation of a new section of the Labor Code, which codified and expanded on the Dynamex holding.
In the US, common law also refers to a form of irregular marriage known as common-law marriage, sui juris marriage, informal marriage, marriage by habit and repute, or marriage in fact. As of 2022, common-law marriages are recognised in Colorado, Iowa, Kansas, Montana, Rhode Island, Oklahoma, Texas, and the District of Columbia. Utah and New Hampshire have limited recognition of common-law marriage. The origins of common-law marriage are uncertain, but it is believed to have emerged in colonial America due to the scarcity of clerics or civil officials to perform ceremonial marriages.
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Quebec's civil law
Canada's legal system is based on a combination of common law and civil law. Common law is not written down as legislation but is instead a system of rules based on precedent. Civil law, on the other hand, is based on a comprehensive statement of rules found in a civil code. Quebec is the only province in Canada with a civil code, which is derived mainly from French civil law.
While Quebec's civil law and Canadian common law generally follow similar rules regarding contracts, there are some areas where they overlap or contradict each other. For example, marriage ceremonies in Quebec are solemnized according to the Civil Code of Quebec, while divorce proceedings may apply federal laws and common law concepts. Additionally, while Quebec's civil law governs civil private law matters, areas of law under federal jurisdiction, such as trade and commerce, are governed by common law.
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Contracts and consumer law
In Canada, contract law is administered through common law and, in Quebec, civil law. A contract is a legally binding agreement between two or more parties for a specific purpose, typically involving the economic exchange of goods and services. While parties to a valid contract are bound by law to fulfil their promises, certain restrictions are imposed by legislation and accepted ethics. For instance, contracts contrary to statutory laws, such as the Canadian Criminal Code, are null and void.
Consumer contracts, specifically, are agreements between traders and consumers, requiring the consent of at least two parties. These contracts are legally binding and pertain to the sale of goods or digital content or the provision of services. Consumer contracts are governed by stricter regulations than standard contracts between merchants to prevent merchants from exploiting consumers' relative naivete and ensure consumers understand the contents of their contract.
Various consumer protection laws have been enacted to safeguard consumers from unfair practices. For instance, the Consumer Review Fairness Act (CRFA) prohibits merchants from including provisions in consumer contracts that restrict consumers' ability to review products or impose penalties for negative reviews. Additionally, anti-price gouging measures in consumer contract laws prevent merchants from charging "unconscionably excessive" prices by taking advantage of changed market conditions.
The form and structure of consumer contracts are also regulated to ensure they are easily comprehensible to consumers. State consumer protection laws may dictate specific font sizes and presentation formats for consumer contracts. Furthermore, certain information must be provided to consumers before a contract is made, and failing to do so may result in a breach of contract claim.
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Common law and private agreements
In common law jurisdictions, contracts are legally binding agreements between two or more parties for a specific purpose. They are pivotal in various transactions, such as real estate deals or commercial exchanges, ensuring that parties fulfil their obligations. To form a valid contract, elements like offer, acceptance, consideration, and mutuality are essential. Consideration requires each party to exchange something of value, ensuring that a gratuitous contract is not valid. While contracts in common law provinces require consideration, Quebec's civil law system does not, creating a notable difference between the two.
The relationship between common law and private agreements is complex. While common law provides a framework for contract law, private agreements between non-governmental entities can occasionally supersede statutory rules and common law precedents. This highlights the dynamic nature of the law, where private agreements have the potential to shape and influence legal outcomes. However, it is important to note that certain restrictions apply. For instance, contracts that violate statutory laws, such as criminal codes, are null and void.
Additionally, the "default rule project" in common law aims to fill gaps in incomplete contracts using a set of default rules. These rules, developed over centuries, can be applied independently of context, such as the market damages rule. Courts utilise these rules to complete missing terms in sales contracts, creating a transcontextual judicial rule accepted by parties in various commercial contexts. However, the project has faced challenges due to the context-dependent nature of contract terms, which are influenced by the unique circumstances of the parties or the trade.
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Frequently asked questions
It depends on the jurisdiction. In Canada, for example, Quebec's contract law is based on civil law, while the rest of the country follows common law. In the United States, most contracts are governed by a combination of common law and statutory law, but private agreements between non-governmental parties can sometimes supersede statutory rules and common-law precedents.
Countries following a common law system are typically former British colonies or protectorates, such as the United States and Canada (outside of Quebec). Common law is less prescriptive than civil law, and a civil law system is generally more prescriptive than a common law system. In a civil law system, there are more implied provisions in a contract, and less importance is placed on setting out all the terms governing the relationship between the parties in the contract itself.
The key elements of a contract are offer, acceptance, and consideration. In common law jurisdictions, consideration is required for simple contracts, but not for special contracts. This means that each party to a contract is required to exchange something of value, and a gratuitous contract is not valid in common law provinces and territories.
