 Hello, it's Waylon Chao, and this is module 2a, part a, Law of Contract Formation. In this module, we'll first look at some examples of contracts that you may have entered into, and then examine what exactly is a contract considered to be in law, and also explain the source of contract law, where do we find contract law, where does it come from, and also the three essential elements of formation of a contract. What contracts have you entered into? When most people think about contracts, they think about very formal written contracts that are signed involving large important transactions that many of us enter into in our lives. Contracts such as a home purchase or entering into a two-year, let's say, cell phone contract or any cell phone service contract, buying or selling a business, or even registering for college. When you register for college, the college is agreeing to provide you with an education or a specific program of courses in exchange for the payment of tuition by you. A lot of people don't realize is that many of the transactions that we enter into every day, the small and insignificant transactions, also involve contracts, so it could be things as simple as buying a coffee at Tim Hortons, which involves an agreement by Tim Hortons to provide you with a certain type of coffee, certain size of coffee in exchange for the payment of the purchase price. For any time you buy something at a store or online, that involves a contract, or even just getting onto a bus when you pay a bus fare in exchange for being able to get transportation on the bus. That is a contract. What is a contract in law? A contract is defined as an agreement that is legally enforceable, so there are two components to that definition. The first component is an agreement, and the second component is that the agreement is legally enforceable. What do we mean by legally enforceable? It means that if one party fails to live up to the agreement, in other words, they're in breach of the agreement or in breach of the contract, the other party can sue to have a court enforce the agreement. Before we actually look at contract law, let's get an idea of where contract law come from. What is the source of contract law? Much or most of contract law, including the law of contract formation, which is the subject of this module, was not created by government legislation, but by courts through case law. So over a long period of time, courts in England and Canada have rendered decisions in specific cases, and from those specific cases are legal principles that are then applied in subsequent cases. So that's what we mean by case law. There are three essential elements to have a valid legal contract. The first element is that there has to be an agreement, and an agreement arises when one party makes an offer and the other party accepts that offer or provides acceptance of that offer. We'll look at what is an offer and what is an acceptance in much more detail in this module. The second element is that there has to be an intention to create legal relations. In other words, did the parties reasonably intend to actually create a legally binding contract in the particular circumstances? The third essential element, which we will cover in the subsequent module, where Chapter 8 is covered, is that there has to be an exchange of consideration between the two parties to the contract.