A text by Grégory Lancop, a lawyer specializing in business law
This is the first article in a series where we’ll be helping you gain a better understanding of contracts.
- Performing a service
- Coming to an agreement
- Some contracts must be in writing
- Various types of contracts
A contract is a method for two parties to express their wishes. It is an agreement in which at least one person makes a commitment to another person to perform a service (i.e. to do or refrain from doing something). It’s also possible for more than two people to make a commitment under a contract.
The agreement is binding, which means it must be followed or else there may be consequences such as legal action.
A service is an obligatory action or non-action. In other words, performing a service (“prestation” in the Quebec Civil Code) means doing or refraining from doing something.
For example, I could sell you a product (a computer) or render a service (provide tech support). In return, I would ask you for monetary compensation. In this case, my “prestation” is either the product or the service.
According to the Civil Code, a contract is an “agreement of wills” that can be created verbally or in writing. You can therefore enter into a contract simply by having a discussion with someone or by writing the terms on a napkin!
Even though it’s legal to enter into a contract verbally, there are advantages to a written (detailed) contract that’s been signed by all the parties. If there are issues with any of the contracting parties, you can more easily prove what was agreed if everything is in writing and signed.
A contract exists when the parties agree on the essential elements. In a future article, we’ll take a closer look at the minimum elements that must be included in a contract.
By law, in certain exceptional cases, the contracts must be in writing.
An example would be a real estate purchase (buying a home). For that transaction, you need a signed, notarized sales contract.
Contracts with your cable TV or Internet provider (“contracts of successive performance”) where the services are delivered remotely must also be in writing when they involve you as a consumer as well as a service provider (the company).
Usually when we talk about contracts, we’re referring to sales contracts (“contracts of sale”). That would be the case if you’re selling products to your customers.
When you take out a subscription with an Internet service provider for your office, you’re entering into a service contract. Under that type of agreement, the company makes a commitment to provide you with a service in return for a compulsory payment at the designated price.
When you sign a lease for your office, you’re entering into a rental contract (or lease agreement). When you rent a vehicle to visit a customer in another city, you’re also entering into a rental contract.
Even when you get married, you can negotiate and sign a marriage contract (or prenup).
In addition, there are many other types of contracts, which we won’t define here. The following are some of the types of contracts mentioned in the Civil Code:
- Contract of adhesion
- Contract by mutual agreement
- Synallagmatic (bilateral) contract
- Unilateral contract
- Contract of instantaneous performance
- Contract of successive performance
- Consumer contract