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Making a Contract - Common questions

Common questions

My friend promised to give me a $100 gift. Is this an enforceable contract?

Usually not. The general rule is that a promise to give something in exchange for nothing would be considered a gift under the law. The legal principle of consideration requires both parties to an agreement to give up something of value for the agreement to be enforceable. Your friend agreed to give up $100, but you have not agreed to do anything in return. As a result, your friend’s promise is unenforceable.

However, if you relied on your friend’s promise to your detriment, then you might be able to enforce your friend’s promise. For example, let’s say your friend promised to give you a $100 gift so that you could buy a cellphone, and you relied on the promise, went to the store and bought a $100 cellphone. You might be entitled to enforce your friend’s promise, as you relied to your detriment on his promise in just the way your friend should have foreseen.     

Does a counteroffer cancel out the previous offer?

Yes, a counteroffer cancels out the previous offer. It is then up to the other person whether they want to accept the counteroffer, making a contract, or not. 

Let’s say a car dealer offers to sell you a used car for $12,000. You say yes, but only if the car passes an independent inspection. You have made a counteroffer. If the car dealer rejects your counteroffer, there is no contract. The previous offer made by the dealer to sell you the car for $12,000 without the inspection no longer exists. It is not available to be accepted, unless the dealer makes it again.

Is an estimate a binding contract?

It depends. An estimate is a business’ best guess as to how much certain work will cost. Whether an estimate is a binding contract depends on the intention of the parties and whether the estimate is reasonable.  

Relevant factors to determine the parties’ intention include:

  • whether cost is of overriding importance to the party receiving the estimate
  • whether the party receiving the estimate relied on it
  • the relative expertise of the parties  

When an estimate is found to be a binding contract, there is recognition that estimates are a best guess and not precise. A margin of error of 10% to 20% is commonly applied. In other words, if a contractor estimated a home renovation would cost $10,000, the margin of error could see the contractor invoice $11,000 or even $12,000 and stay within the margin of error.   

Note that regardless of whether an estimate is considered to be a binding contract, it is an unfair practice for a business to provide an estimate that is materially less than the final bill—unless you agree to the higher price before the work is done.

An estimate is a business’ best guess as to how much certain work will cost. The end price could be less—or more. Whether an estimate is a binding contract depends on the intention of the parties and whether the estimate is reasonable. When an estimate is found to be binding, a margin of error of 10% to 20% is commonly accepted. 

A quote is when a business promises to do work at an agreed price. If you accept a quote, the business can’t charge you more than the agreed price. It is a legally binding contract. 

Can people make a contract to do something illegal?

No. A contract that is for an unlawful purpose or is prohibited by law is not enforceable. For example, a contract made with the intent of harming someone is not enforceable.