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 developed distinctly since Canadian Confederation in 1867. While Québecois contract law was originally derived from that which existed in France at the time of Québec's annexation into the British Empire, it was overhauled and codified first in the Civil Code of Lower Canada and later in the current Civil Code of Quebec, which codifies most elements of contract law as part of its provisions on the broader law of obligations. Individual common law provinces have codified certain contractual rules in a Sale of Goods Act, resembling equivalent statutes elsewhere in the Commonwealth. As most aspects of contract law in Canada are the subject of provincial jurisdiction under the Canadian Constitution, contract law may differ even between the country's common law provinces and territories. Conversely; as the law regarding bills of exchange and promissory notes, trade and commerce (including competition law), maritime law, and banking among other related areas is governed by federal law under Section 91 of the Constitution Act, 1867; aspects of contract law pertaining to these topics (particularly in the field of international shipping and transportation) are harmonised between Québec and the common law provinces.
Interpretation Contracts in all Canadian jurisdictions are generally 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. Canadian courts, particularly each province's superior court, are responsible for the interpretation of contracts in legal disputes. Outside Québec, the rules of contractual interpretation are established by judicial precedent and broadly resemble those in other Commonwealth jurisdictions. Within Québec, the rules of contractual interpretation are codified in the civil code.
In Québec, the civil code provides several specific rules regarding contractual interpretation in Book Five, Title One, Chapter 2, Division 4. Section 1425 provides that the common intention of the contracting parties shall be prioritised over the literal meaning of the words in a written document purporting to embody the contractBook Five, Title One of the Civil Code of Quebec – Section 1425 Section 1426 requires courts to take into account a contract's nature, the circumstances in which it was formed, customs and usages, and any prior interpretation it may have received.Book Five, Title One of the Civil Code of Quebec – Section 1426 Each clause of a contract is required by section 1427 to be interpreted in the context of the others so that each is given a meaning derived from the contract as a whole.Book Five, Title One of the Civil Code of Quebec – Section 1427 While section 1430 provides that a clause intended to eliminate doubt as to the application of the contract to a specific situation does not restrict the scope of a contract otherwise expressed in general terms,Book Five, Title One of the Civil Code of Quebec – Section 1430 section 1431 provides that the clauses of a contract cover only what it appears that the parties intended to include, however general the terms used.Book Five, Title One of the Civil Code of Quebec – Section 1431 Section 1432 codifies the English doctrine of contra proferentem.Book Five, Title One of the Civil Code of Quebec – Section 1432
Formation and validity
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.Book Five, Title One of the Civil Code of Quebec – Section 1385 Additionally, a valid contract must have a cause and an object. The cause of a contract is the reason that determines each of the parties to enter into the contract, and does not need to be explicitly expressed in the contract.Book Five, Title One of the Civil Code of Quebec – Section 1410 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.Book Five, Title One of the Civil Code of Quebec – Section 1412 An object is only valid if it is not prohibited by law or on grounds of public policy.Book Five, Title One of the Civil Code of Quebec – Section 1413 A contract which does not meet the conditions of its formation may be annulled .Book Five, Title One of the Civil Code of Quebec – Section 1416
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.Book Five, Title One of the Civil Code of Quebec – Section 1388 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.Book Five, Title One of the Civil Code of Quebec – Section 1389 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.Book Five, Title One of the Civil Code of Quebec – Section 1390 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. Where the offeree receives a revocation before the offer, the offer lapses, even though a term is attached to it.Book Five, Title One of the Civil Code of Quebec – Section 1391 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.Book Five, Title One of the Civil Code of Quebec – Section 1392 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.Book Five, Title One of the Civil Code of Quebec – Section 1393
Consent in Québecois contract law may only be given by an individual with the legal capacity to bind themselves,Book Five, Title One of the Civil Code of Quebec – Section 1398 and must be "free and enlightened".Book Five, Title One of the Civil Code of Quebec – Section 1399 It may be vitiated by error, fear, or lesion (i.e. unconscionability). A person whose consent is vitiated has the right to apply for annulment of the contract; in the case of error occasioned by fraud, of fear or of lesion, he may, in addition to annulment, also claim damages or, where he prefers that the contract be maintained, apply for a reduction of his obligation equivalent to the damages he would be justified in claiming.Book Five, Title One of the Civil Code of Quebec – Section 1407 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.Book Five, Title One of the Civil Code of Quebec – Section 1400 Error induced by the other party's fraud or with the other party's knowledge vitiates a party's consent.Book Five, Title One of the Civil Code of Quebec – Section 1401 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 partyBook Five, Title One of the Civil Code of Quebec – Section 1402 or induced by abuse of power or a threat thereof.Book Five, Title One of the Civil Code of Quebec – Section 1403 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. In cases involving a minor or a protected person of full age, lesion may also result from an obligation that is considered to be excessive in view of the patrimonial situation of the person, the advantages he gains from the contract and the circumstances as a whole.Book Five, Title One of the Civil Code of Quebec – Section 1406
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.Grant v. Province of New Brunswick, 35 D.L.R. (3d) 141 (NBCA) Commercial deals are presumed to be of a legal natureEdwards v. Skyways Ltd., 1 All E.R. 494 (QBD) while an agreement made between family members or in a social engagement is presumed not to be of a legal nature.See Jones v. Padavatton, 2 All E.R. 616 (CA) and Balfour v Balfour, 2 K.B. 571 (CA) 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.