What’s in a comma? A lot of zeroes, sometimes — Law 204/704 developer Peter Kissick joins us to talk about a legendary case involving a comma, utility poles and $2.1 million dollars. That’s a gateway to a broader conversation about contracts: what they are, how they work, and what most of us are getting absolutely wrong.
Contracts govern many aspects of our day-to-day lives—they are one of the fundamental ways that society is ordered. You likely engage in dozens of activities governed by contract every day, usually without considering the legal relationships you are entering into and engaging in.
At its most fundamental level, a contract is an agreement that will be enforced because it represents the communication of a commitment to engage in a reciprocal measured exchange – in other words, the exchange of valuable promises that in turn create obligations to do or not do something.
Communication and exchange are central to the formation of a contract. For a contract to be formed there must be offer and acceptance, and there must be consideration (something of value must be exchanged… contracts are not the same as gratuitous promises, where one of the parties receives no benefit of value).
While there are many more rules that relate to when and how contracts are formed this basic definition can help us understand when we might enter into a contract.
In this post we will discuss some everyday activities you likely engage in, and their contractual nature.
We can consider a few examples from my day today:
The first thing I did when I woke up was to check my phone and respond to emails. I have a contract with my phone company—in consideration for me paying a certain fee every month, they provided me with a phone, as well as with access to their cell towers. I accepted this offer when I signed my phone contract and began using their service.
When I checked my email account, I was in a contractual relationship with Google. When I send or receive content through a Google Service I give Google and its affiliates a worldwide license to use that content for certain purposes, per the Google Terms of Service. As consideration for those licences, Google provides me with access to its Services. Google offers these services publicly and I enter into a contract by creating an account and agreeing to the Google Terms of Service.
Dealing with email is hungry work, so I decided to grab breakfast at a campus coffee shop. I ordered a bagel and a large tea. The cashier told me that the total would be $5.05, which I paid in cash. Two minutes later I was handed a bagel and a large tea.
When I handed the cashier the money, I entered into a contract with the coffee shop. As consideration for a bagel and a large tea, I provided $5.05. I communicated my acceptance of their posted offer to provide tea and a bagel for $5.05 by ordering from the cashier and providing money. They fulfilled the terms of the contract by providing me with my food and beverage.
As you’ve seen, contracts have already been a part of just the very beginning of my day. Take a minute to think about your day so far: what have you done that has involved an offer, acceptance, and consideration? How many contracts have been involved with in the past hour? Can you think of one or more contracts that are allowing you to read these worlds right now?
Contracts are central to the ordering, not only of big businesses, but our everyday lives.
– Isabelle Crew
Is partnership the right business move? Could you be in a partnership without even knowing it? We’re joined by corporate lawyer Peter Kissick, a faculty member here at Queen’s and developer of Law 204/704: Corporate Law for the Certificate in Law. He demystifies one of the central types of business structures, and lays out the advantages — and dangers — of partnership.
Who shares what? Who’s at risk? How can you be in a partnership without meaning to… and how can you get out of it? Peter walks us through all of it in a quick, entertaining overview of what partnerships mean, and why he’s known as the “Angel of Doom” to certain clients, in today’s business context.
Partnership is a foundational element of the law of business organization. To understand a partnership, you have to consider four simple and foundational questions:
When does the partnership exist?
In Ontario the Partnerships Act establishes the basic rules of partnerships. Other provinces and territories have their own partnership regulations, but the principles are usually much the same as Ontario’s. The Partnerships Act defines partnerships as “the relation that subsists between persons carrying on a business in common with a view to profit”. So a few elements must be present for a partnership to exist:
- More than one person must be…
- In a relationship with each other that involves…
- Carrying on a business together…
- With a view to making profit.
This definition is based on the intention of parties, as disclosed by the circumstances. Did two people intend to carry on a business together with a view to making profit? If they did, a partnership will have been created.
The extent of each person’s investment in or, control of the partnership business will not define whether or not the partnership exists.
What is the legal status of the partnership?
A partnership is not recognized as a separate legal entity. It is not legally distinct from the partners that form it. This means…
- Each partner is liable to the full extent of their personal assets for the debts and liabilities of the partnership. This means that if the partnership owes money to a creditor, the creditor can enforce that debt against the personal assets of any partner, not just the assets of the partnership.
- A partner cannot be recognized as an employee of the partnership business. This because no person can enter into a contract with themselves. Because a partnership has no legal existence distinct from the individual partners, it is not possible to be an employee and partner at one firm at the same time because it would involve employing yourself.
- Except in very particular circumstances provided for in the Partnerships Act, a partner can’t be a creditor of their partnership. Again, this is because it isn’t legally possible to contract with yourself, and this includes contracts to lend money.
What are the rights and responsibilities of the partners?
Under the Partnerships Act, there are eight key rights and responsibilities of partners. These rights and responsibilities emanate from the basic assumption that the partners are equal with respect to their capital contributions, rights to participate in the management of the business and rights to share in the profits of the business.
- All partners are entitled to share equally in the capital and profits of the business. They therefore have the responsibility to contribute equally to the losses sustained by the partnership.
- Every partner is entitled to take part in the management of the partnership business.
- New partners may not be added to the partnership without the consent of all the existing partners.
- Changes to the nature of the partnership may not be made without the consent of all the existing partners.
- A partner cannot be removed from the partnership without their consent.
- A partner is jointly liable with other partners for all debts and obligations of the firm as long as they are a partner.
- A partner is an agent of the partnership. This means that they can bind the firm and the other partners when acting in the course of their duties.
- As an extension of their agency, each partner owes a “fiduciary duty” – and duty of good faith – to all other partners.
What are the terms of the partnership?
The rights and responsibilities of a partner as set out above are the baseline rule established by the Partnerships Act. However, one of the most important elements of the law of partnership is that a partnership is a contractual relationship. Partnerships can be as varied as the people who are partners – partners can contract their particular rights and responsibilities, which can be different from the baseline rights and responsibilities established in the Partnerships Act. However, where a partnership contract is silent on a particular issue, the Partnerships Act’s terms for that issue will be implied.
– Isabelle Crew (3L, Faculty of Law, Queen’s University)