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Publication

How to Know When You Have Entered into a Contract

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It is good practice to have a written agreement in place before entering into a business relationship. One of the foundational principles of contract law is that contracts form out of a meeting of the minds.

The easiest way to show there is an agreement between two parties is to put it down on paper. But in reality, many contracts are entered into without a written agreement in place.

Unwritten contracts can be formed through verbal agreements but there is also potential that a contract can be created through the actions of the parties. A contract can be implied where a Court is satisfied that the parties agreed to the essential terms of the agreement even though the terms were never discussed.”1 

For example, in a 2019 case, the Ontario Superior Court discussed implied contracts in the decision of Goderich-Exeter Railway Company v. Shantz Station and Parrish & Heimbecker. The railway company argued that it was an industry norm to charge fees for delays in unloading railcars. Even without a written contract, the contract for payment of the fees was implied. The Court found in favour of Parrish & Heimbecker who had expressly stated they would not pay the fees from the outset and, therefore, there was no meeting of the minds and no implied contract existed. Without this implied intent, it would have been open to the Court to find Parrish & Heimbecker liable for payment of the fees.

Whether you need help drafting or enforcing a contract, or determining if you have entered into an unwritten agreement, we are here to help. Feel free to contact any lawyer in our Business Law or Business Litigation groups.

1 GEXR v. Shantz Station and Parrish & Heimbecker, 2019 ONSC 1914, at para. 108

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