This paper will study a contract, common in business law; but more specifically, this report will analyze a credit card agreement from CIBC Visa. In studying this contract, it will show what a contract is and the legal framework that it implies. In studying the clauses of this contract, one will familiarize oneself with the legal terms and jargon that all contracts consist of. In explaining these clauses, one might be able to divide them into twelve main principles that a contracting agreement should consist of. This paper will then analyze the clauses and any potential flaws or problems, and later suggest changes that should be applied. These can be considerable change, for instance, adding or removing clauses or can be simply a small change, such as changing a few words in a clause or fixing a spelling error. This report will then move on to challenge the legal reasoning of the contract and finally explain the legal corrective measures that are identified at the end of this paper. All of these things will be tied into the general foundation of business law and how they all connect.
Table of contents
1. Executive Summary
2. Introduction
3. Clause-by-Clause Analysis
4. Discussion
5. Recommendation
6. Legal Corrective Measures
7. Conclusion
8. Appendices
9. Works Cited
10. Contract
1. Executive summary
This paper will study a contract, common in business law; but more specifically, this report will analyze a credit card agreement from CIBC Visa. In studying this contract, it will show what a contract is and the legal framework that it implies. In studying the clauses of this contract, one will familiarize oneself with the legal terms and jargon that all contracts consist of. In explaining these clauses, one might be able to divide them into twelve main principles that a contracting agreement should consist of. This paper will then analyze the clauses and any potential flaws or problems, and later suggest changes that should be applied. These can be considerable change, for instance, adding or removing clauses or can be simply a small change, such as changing a few words in a clause or fixing a spelling error. This report will then move on to challenge the legal reasoning of the contract and finally explain the legal corrective measures that are identified at the end of this paper. All of these things will be tied into the general foundation of business law and how they all connect.
2. Introduction
This paper is designed to explain a typical credit card agreement; first, it will explain all clauses and the true meaning behind the legal verbiage. Secondly, this paper will define and apply various legal principles as they apply to the contemporary legal environment. By exposing this information and relaying it in a means that is more comprehensible for everyone, it is eliminating the advantage that big credit companies use when they create long, complicated, and often confusing contracts that are not suited for the average consumer. Obviously, not many people (if any) are bringing a lawyer with them to open a daily bank account or a simple line of credit, for example, so financial organizations know that they can take advantage of the average client in the terms, notes, agreements, appendixes, etc, or herein referred to as the “fine print”. It can be confusing even for legal professionals, as it is sometimes specifically ambiguous; which will be discussed later in this report. By examining a real and current contract with a well-known credit company, this paper will determine how much is actually hidden in the fine print. It will take a clause-by-clause analysis of the credit card agreement and support it with the surrounding legal framework and report and discuss all observations. But before analyzing the credit card agreement, one must become familiar with contract law and how it pertains to everyday applications such as banking.
A credit card agreement is the essential document that outlines all the rules and terms concerning usage, payments, and other vital information that all parties are to sign and agree upon. It is a document including term and conditions that are to be agreed upon beforehand. Every binding agreement (including credit card agreements) starts with an offer by one party followed by acceptance by another party. Offers and acceptances need not be in writing, although it usually is in the credit/banking industry. An offer must be definite enough to be understood by both parties as an invitation to enter a legally binding arrangement. Problems often arise when one party makes an offer, and the other party accepts the offer on different terms; however, counter-offers, which require an additional acceptance in order to create a legal obligation, are rare from credit companies. The big banking ideology largely resembles the cliché “take it or leave it” with regards to fees, services, rates, etc.
The agreement specifically states the amount or extent with regards to these things, such as the interest that the customer must pay on outstanding balances, the minimum balance that must be kept on the card, whether or not the card has overdraft, the maximum credit limit that is made available to the customer, and many more details/characteristics of the account.[1] Thus, whenever a person is about to obtain a credit card, or is about to sign any binding legal document for that matter, he or she must read through the entire document with utmost care in order to avoid any discrepancies.
To be valid, an agreement must have mutual consideration. This means that for an agreement to be legally binding, each party must give something of value, even if only a promise. For example, "I promise to mow your lawn if you promise to pay me $500” is definitely legal agreement. A unilateral promise to make a gift, however, is not legally binding ("I promise to mow your lawn for your birthday"). However, any amount of consideration, no matter how small, will render the agreement legally binding.
A credit card agreement is usually watched over by a legal team and is normally void of “loopholes” or anything that might end up being detrimental to either side but there are sometimes clauses that seem very attractive to customers that end up being rather problematic. For example, a credit card agreement that claims to have a very low interest rate might unduly influence the customer to apply for it while the fine print might say that even if payments are paid on time and the account is in good standing; the bank can change the rate at anytime or even freeze the account. This is why it is very important to read everything before you sign anything.
Several defences exist that can render a contract unenforceable. A contract for drug dealing or any other unlawful activity cannot be upheld. A minor cannot be held liable, nor sued for breach of contract; however, a minor can sue the other party for a breach. People who under the influence of alcohol or drugs, as well as mentally disabled are not considered capable of participating in a legally binding agreement. There are several other possible defences to the formation of a contract, as well as reasons to annul a contract include impossibility of performance or mutual error of a critical fact.
Therefore, an agreement can only occur with an offer and acceptance regarding a mutual consideration; however, there are certain instances where a contract or agreement is rendered unenforceable. Despite this, many people around the world can safely enter into agreements with the belief that the Rule of Law will be enforced. Furthermore, credit lending has become such a big industry that big credit companies have, with the use of credit agreements, created an almost endless supply of credit, as many adults in Canada have several credit cards. But does the average Canadian understand the terms they are agreeing to when they apply for a credit card? This paper will examine a credit card agreement clause-by-clause ensuring that it is a proper agreement by legal standards.
3. Clause-by-Clause Analysis
1. You will continue to receive one Aeroplan Mile/Aventura Point for every dollar you spend at all other locations. The 50% More offer applies only to CIBC Aerogold Visa, Aerogold Visa Infinite and Aventura Visa Infinite card purchases (less returns) at merchants classified in the Visa network as grocery stores, service stations, automated gas dispensers or drugstores (some merchants may sell these products/services, but are classified otherwise). Offer applies only to the first $80,000 in net annual card purchases per CIBC Aerogold/Aventure Account. Terms, conditions and eligible merchant categories may change without notice. Ask for details.
There is a special offer (50% More) which is advertised throughout the contract brochure but only pertains to the more prestigious cards. This clause also states where the offer can be redeemed as well as putting a financial limit on the offer. Furthermore, the clause closes by saying that all if it could change without notice.
2. Aventura Points, Aeroplan Miles or Gold Bonus Points, as applicable, are earned on card purchases, less returns. Points/Miles are not earned on cash advances (including Convenience Cheque), fees, balance transfers, interest or payments. Points/Miles will be awarded after receipt of minimum payment due, subject to the account being in good standing (otherwise, points/miles maybe be cancelled). Reward features and/or Reward Program terms and conditions are subject to change without notice. Taxes, landing and departure fees, and other charges and surcharges may apply to Aventure and/or Aeroplan travel rewards. For more information on reward travel, please refer to the Aventure Program Terms/Aeroplan Member Guide or the Aventure website ( www.CIBCaventura.com ) or Aeroplan website ( www.aeroplan.com ). Aventura Rewards, Aeroplan travel partners and Aventura/Aeroplan Program rules and regulations are subject to change. Aventura Airline Rewards cover up to a maximum ticket cost; any excess cost plus taxes, fees and surcharges must be charged to the card or paid for with points (or, if you are in Quebec, by cheque).
This clause is very long and perhaps too complicated for the average consumer. It is not unusual to see reward programs like these have stipulations that ensure points/miles are only earned on real purchases that are not returned/refunded, and not on balance interests or other conflict-of-interest situations. This clause also states that the account may be closed if it is not in good standing, but does not specifically define what good standing means. Open-ended terms like these can be dangerous. Finally, the clause ensures that any added charges, fees, surcharges, taxes or any other monetary amount not in the original reward program is covered by the individual and not the bank.
3. Aeroplan rules require at least one accumulation or redemption transaction each year in an Aeroplan account or the Aeroplan Miles will expire. CIBC has ensured that this doesn't happen to Aerogold cardholders in good standing. Please note, however, that Aeroplan Miles will expire if they are not redeemed within 7 years from when they were earned (or by Dec. 31, 2013, for Miles earned before 2007). See www.aeroplan.com for details.
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[1] DuPlessis, Dorothy; Enman, Steve; Gunz, Sally; & O'Byrne, Shannon. (2008). Canadian Business and the Law Third Edition. Nelson Education: Toronto. P. 647