8.1 Essential Elements of a Valid Contract

Determine whether the parties reached a bargain

A contract is an agreement that creates legal obligations. Read the parties’ words and conduct objectively. Ask what a reasonable person in the circumstances would understand them to have agreed. A usual bargain requires agreement on sufficiently certain terms, consideration and intention to create legal relations. Check capacity, lawful purpose and any formalities separately. A property advertisement usually invites offers. An offer identifies the terms on which the offeror is prepared to be bound upon acceptance.

An offeree accepts the offered terms. A reply changing a material term normally rejects the original and makes a counteroffer. A request for information may leave the original open. In Livingstone v. Evans, the Alberta court distinguished a counteroffer that rejected the original from a later reply that renewed the original offer. Examine both the actual words and sequence.

Check for lapse at the stated deadline, rejection or communicated revocation before acceptance. A binding option may change the power to revoke. If a party dies or loses capacity during negotiations, stop and have counsel check authority and the effect on the specific offer. For the January 2026 AREA residential form, clauses 13–14, 16.1 and 17.2 require written acceptance and make the accepted contract effective upon personal delivery or sending by fax or email to the correct party or authorized representative. Preserve the signed record, address and transmission evidence. A platform notification or signature alone does not establish the agreed transmission. Check the actual contract before applying general communication rules.

Identify the exchange and distinguish the deposit

Consideration is what is exchanged for a promise. It can be an act, a reciprocal promise or an agreed forbearance, such as undertaking to defer enforcement of a claim. A small bargained-for amount can be legally sufficient even when the exchange is unequal. A past voluntary favour followed by a promise to pay generally lacks a bargained-for exchange. For variations, document the actual agreement and obtain advice if consideration, an existing duty or pressure is in issue. An instrument properly made under seal can make a promise enforceable without consideration. Verify the instrument and execution before relying on that exception.

In the standard residential sale, the buyer promises to pay the purchase price and the seller promises to convey title under the contract. Clause 4 specifies when a deposit is payable and applies it toward the price on completion. If an accepted contract sets the deposit for the following day, absence of the funds at acceptance does not erase the parties’ exchange. A later missed deposit has its own written-notice mechanism under clause 4.5. Check the trust terms before dealing with funds.

Confirm the parties and their capacity

A person reaches Alberta’s age of majority at 18. A minor’s property or contract calls for separate review. Sections 2–3 of the Minors’ Property Act provide routes for court authorization of a disposition and confirmation of a contract, subject to statutory conditions. A parent's relationship alone does not establish authority to sell. If there is doubt about an adult’s ability to understand a transaction, allow time for advice and confirm any power of attorney or court appointment. Capacity and signing authority are separate. Business Corporations Act sections 16 and 19 distinguish corporate capacity and protections for people dealing with a corporation. A director or officer may sign on its behalf when authorized. Check the exact legal name, the instructions and signing authority under the corporate records and applicable law. If title is held by an estate or affected by bankruptcy, obtain counsel’s confirmation of who can deal with it. The Bankruptcy and Insolvency Act’s vesting of estate property concerns control of the asset.

Distinguish privity, assignment and substitution

Privity generally limits contractual rights and obligations to the parties, subject to exceptions. A third person named in a conversation about an offer has no automatic right to enforce it. An assignment can transfer an existing contractual right where the right and agreement permit it. Alberta’s Judicature Act section 20 provides for legal transfer of a debt or other legal chose in action under an absolute written assignment signed by the assignor, with express written notice to the person against whom the right is held and subject to prior equities. Contract restrictions and the character of the right can change the analysis.

Transferring a benefit does not by itself release the original buyer’s duty to complete. Novation involves an agreed substitution that replaces the original obligation and requires evidence of the parties’ agreement. If an accepted buyer wants an incorporated company to take over, identify whether they seek to transfer a right, change the party bound to perform or give a direction about title. Ask counsel to confirm the form, notice, any required consent and the position of the original buyer before preparing any amendment.

Alberta Judicature Act, section 20 · Supreme Court of Canada, Fraser River · Supreme Court of Canada, National Trust

Distinguish legal outcomes

A contract formed on lawful terms may be valid and enforceable. Where parties never agree on an essential term, there may be no contract. A void instrument has no legal effect from the outset. A voidable agreement can be set aside by an entitled party, for example after an actionable inducing misrepresentation, subject to the applicable remedy. A promise to submit a false price to a lender raises illegality and should be refused and escalated to the broker. The legal consequence of an unlawful term depends on the law and the contract. An otherwise formed land agreement may be unenforceable for lack of the writing required by section 4 of the received Statute of Frauds, subject to equitable exceptions. Rule 43 separately requires a signed written residential service agreement when establishing a client relationship.

Supreme Court of Canada, Aga · Alberta Court of Appeal, Roswell Group · AREA January 2026 purchase contract · Minors’ Property Act · RECA Rules