Construction of a Contract (General Principles)

Metro Rehabilitation Centre Inc. v Mclean, 2010 CanLII 101087 (ON SCSM)

ELEMENTS OF A VALID CONTRACT

[42] A contract is an exchange of promises between the contracting parties. Although generally expressed in writing, it can be reached verbally between the parties as well. But at its heart are two or more parties exchanging such promises.

[43] As the authors of Business Law in Canada (9th Ed.) state:

“not all agreements are contracts. To qualify as a valid contract, an agreement must contain certain elements. They are:

1. Consensus. Parties to a contract must have reached a mutual agreement to commit themselves to a certain transaction. They are assumed to have negotiated the agreement from equal bargaining positions. The process by which the agreement is reached usually involves an offer and an acceptance, although consensus can be implied.

2. Consideration. There must be a commitment by each party to do something or to abstain from doing something. The consideration is the price each is willing to pay to participate in the contract.

3. Capacity. Parties to a contract must be legally capable of understanding and entering into the agreement…

4. Legality. The object and consideration involved in the agreement must be legal and not against public policy.

5. Intention. Both parties must be serious when making the agreement, and both must intend that legally enforceable obligations will result from it.”

[44] The absence of any of these elements renders an agreement unenforceable in law.