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Ryerson University
Law and Business
LAW 122
Sari Graben

Chapter 7 - The three essential elements to the creation of most contracts are • an intention to create legal relations, offer and acceptance, and consideration - Jose and Mei entered into what appeared to be a contract for the sale of an antique automobile. Jose agreed to pay the purchase price and Mei agreed to deliver the car to Jose's garage. Secretly, however, Mei planned to keep the car for herself. Will a court enforce the agreement? • A court will enforce the agreement because a reasonable person would have believed that the parties entered into a contract - Cindy calls Davin to accept his offer to trim her hedges in exchange for a haircut. Cindy is described as the • offeree. - Henrique posts a notice at the racetrack that says he is willing to sell his old horse for $5000. When he returns to the track the next day two people arrive at the same time to buy the horse. A court would most likely say that Henrique • can keep the horse and refuse to sell to either person. - Wessam offers to sell Ivan a bicycle for $100. Ivan asks to think about it for a couple days. The next day, Wessam tells him that she has increased the price to $150. Wessam has. • revoked her original offer - Morris posted a notice promising to pay a $50 reward to anyone who found his lost cat. Morris saw Edna, his neighbour, and drew her attention to the notice. She expressed sympathy, but said that she did not have time to help because she was rushing off to work. When she returned home early that afternoon, however, she went to Morris's house to tell him that she would look for the cat. Although he was not at home, she searched the area, found the animal and returned it to his house. Morris now refuses to pay Edna the $50. A court would most likely say that Edna can • demand payment because a contract was created through her act of acceptance - Joan wants to buy a prime piece of real estate from Guiaumme, but she is waiting to find out whether the bank will give her a loan. In order to make sure that Guiaumme does not sell the land to anyone else, Joan gives him $5000 in exchange for his promise not to sell the land. This type of agreement is called • an option - By submitting a tender, a party can • all of the above - Lori offers to sell her season pass to the ballet for $200. Her co-worker, Alan, says that he will buy the pass for $150. Alan has provided • a counter offer - A battle of the forms usually occurs when • each party claims to have entered into a contract on the basis of its own standard form contract - Regarding a battle of the forms, which one of the following does a court often consider when deciding which contractual form applies? • all of the above - Gordon sends a letter to Thomas that says "I will buy your diesel engine for $7000." At exactly the same time, Thomas sends a letter to Gordon that says "I will sell my diesel engine to you for $7000." Which of the following statements is TRUE • Each letter contains an offer, but neither contains an acceptance - In early March, Mathilde offered to rent her cottage to Tom for the first two weeks of July at a cost of $1200. Mathilde did not impose any restrictions on acceptance. Tom did not yet know when his vacation was scheduled, so he did not immediately respond to Mathilde's offer. Tom learned at the end of June that he was entitled to vacation during the first two weeks of July. He therefore arrived at the cottage on July 1st and told Mathilde for the first time that he was accepting her offer. Which of the following statements is most likely TRUE • Tom does not have the right to stay at the cottage because he let Mathilde's offer lapse - "Contract law represents the pathology of commerce." Which of the following statements fully explains that quotation • none of the above - Which of the following statements is TRUE? • none of the above o When dealing with the intention to create legal relations, courts apply presumptions that cannot be rebutted o An intention to create legal relations always exists in a commercial context o The courts use a subjective test when determining whether or not there is an intention to create legal relations - Which of the following statements best explains why the courts use an objective test to determine whether or not there is an intention to create legal relations • The law of contracts is intended to protect reasonable expectations - ABC Inc and XYZ Ltd entered into a written agreement for the purchase and sale of paper products. That agreement contained a clause that said: "This arrangement is not entered into, nor is this memorandum written, as a formal or legal agreement, and shall not be subject to legal jurisdiction in the Law Courts." ABC Inc wants the paper products, but XYZ Ltd refuses to deliver them. Which of the following statements is most likely TRUE? • The agreement is legally unenforceable because the parties did not intend to create legal relations - Which of the following statements is TRUE? • The courts recognize a difference between an offeree's inquiry and a counter offer - Which of the following statements is TRUE • none of the above o A firm offer can only be revoked in writing o An offeree can generally communicate a revocation in the same way that it communicated its offer o An offer that appeared in a newspaper can only be terminated by a revocation that appears in the same newspaper - An offer can be revoked • if it was a firm offer - Simon believed that he might want to buy certain shares from Melinda in the near future. On June 1st, he therefore paid her $1000 in exchange for an option to purchase 5000 shares in Acme Inc at $10 each on or before October 1st. Which of the following statements is TRUE? • If the market value of the shares immediately increased to $20 each and stayed there throughout the option period, Melinda might be obligated to sell 5000 shares to Simon at half of their market value - The Town of Oxbridge wants to build a new arts centre, but it is not sure which construction company it should hire for the job. Which type of statement is the town most likely to make • a call for tenders - Rabby Inc is an oil exploration company that wants a sophisticated piece of equipment to be designed for its operations in northern Alberta. It therefore wants to receive bids from various engineering companies. In the context of a normal tendering process, which of the following statements is TRUE? • Rabby Inc will provide an offer to enter into a fair bidding process, issue an invitation to treat offers for the design contract, and accept one engineering company's offer to design the equipment - Which of the following statements is TRUE? • A firm offer can be accepted any time before it is terminated - A bilateral contract • can occur as a result of a tendering process - The "master of the offer" • none of the above - On March 1st, Janet, who lives in Edmonton, sent a letter to Tad, who lives in Toronto. The letter said: "I want to buy your car. I'll pay $10 000 for it. If I don't hear anything more from you, I'll assume that I can drive the car away when I'm in Toronto at the beginning of April." When he received that letter on March 5th, Tad phoned Janet. She was not home, but he left a message on her answering machine that said: "I'm willing to sell my car to you, but only if you promise to pay $15 000. I need your answer within one week." Janet listened to that message on March 6th. That same day, she sent a second letter to Tad that said, "I received your message. I'll pay $15 000, but not one cent more." On March 10th, Tad decided that he did not want to sell the car after all. He immediately left a message on Janet's answering machine that said: "The deal is off. I'm keeping my car." An hour later, he received Janet's second letter. Which of the following statements is most likely TRUE? • A contract was created in Edmonton on March 6 th - Bentley sent a letter to Helene that said: "I'll sell 5000 widgets to you for $50 000. This offer is open for acceptance until August 10th." As soon as she received that letter on August 1st, Helene replied with a letter that said: "That sounds like a good deal. I will bring the money to your office on August 15th. I'll also collect the widgets at that time." When Helene arrived at Bentley's office on August 15th, however, he refused to accept the money or hand over the widgets. He explained that he had not yet received her letter. He also said that he was no longer willing to do business with her. Helene's letter finally reached Bentley on August 20th. By that time, the market value of the widgets had increased to $75 000. Applying the general rules, which statement is most likely TRUE? st • A contract was created on August 1 - Eric bought a house for $150 000. He paid $25 000 immediately and promised the seller that he would pay the remainder in monthly instalments over the next ten years. Eric then told his daughter, Naomi, that he would give the house to her if and when she paid all of the monthly payments. Naomi was reluctant to commit herself to that arrangement because she was not sure if she would always have enough money to make the payments. Eric said to her, "Well, let's see how it goes." Naomi made the monthly payments for six years. Unfortunately, she and her father then began to fight. At that point, he told her that the deal was off. Eric has offered to repay Naomi for all of the payments that she had made, but he insists that the house will always belong to him. The market value of the house has recently and unexpectedly increased from $150 000 to $400 000. Which of the following statements is most likely TRUE? • Eric is required to give Naomi an opportunity to finish completing the payments, and if she does so, she is entitled to the house. - The case of Carlill v Carbolic Smoke Ball Co is best known for dealing with the issue of • unilateral contracts - Quality Kitchens Inc operates a store that sells kitchen utensils and gadgets. In an attempt to increase sales, the store ran an advertisement in a newspaper that featured Juicy Brand Blenders for $49.99. Martha rushed to the store with the intention of buying a blender. When she arrived however, she was told that while there were no such blenders in stock, the store did have several Swirl Brand Blenders to sell for $99.99 each. After a bit of investigation, Martha discovered that the store knew that it never had any Juicy Brand Blenders, and that it was simply hoping that shoppers would buy the Swirl Brand Blenders once they got inside the store. Which of the following statements is TRUE • The store is guilty of a bait and switch - The phrase quid pro quo means • something for something - The phrase consensus ad idem means • agreement on that previously mentioned - In late April, Harper Corp placed an advertisement in a newspaper that said: "We cater parties. Up to 150 people for only $3000. No hidden fees or costs." The manager of Martin Inc telephoned Harper and left a voice message that said, "We are calling to place an order to have a party for 150 people on the first of June." The next day, the manager of Harper called Martin and explained that, due to a scheduling conflict, it could not stage a party on the first of June. Martin now says that a contract had been created and that Harper has breached that agreement. Which of the following statements is TRUE? • because an advertisement is presumed to be an invitation to treat, Martin's telephone message probably was not a contractual acceptance - Garfield owns and operates a wholesale business called the Overseas Sporting Goods Store (OSGS). He recently delivered a box of cricket balls to his twenty-year-old son, Imran, and a box of cricket outfits to another sporting goods store called Hit-for-Six. Because Garfield's store went into financial difficulties shortly after making those deliveries to Imran and Hit-for-Six, questions have arisen regarding the nature of those deliveries. Which of the following statements is TRUE? • Depending upon the facts, a court might be persuaded that the delivery to Hit-for- Six was not made with an intention to create legal relations. - An invitation to treat • is a part of most tenders - A firm offer is • freely revocable - Layton Fine Fashions had a shipment of orange ties that it wished to sell. It therefore placed an advertisement, on Monday, in the town newspaper that said, "Fine silk orange ties. The season's hottest fashion trend. This week only - Come to Layton Fine Fashions and we guarantee that you'll pay no more than $35." The advertisement was such a success that the ties were almost entirely sold out within two days. Which of the following statements is TRUE? • Layton's offer will be revoked if it places a notice in the same newspaper that says "Sorry, gentlemen - the orange silk ties are all sold out," even if some disappointed customers failed to read that notice before they came to the store - As Bennie entered The Big Table restaurant, he noticed a sign that said "All-U-Can-Eat - At Our Reasonable Price." Because the restaurant was busy, and because the staff were all tied up with other customers, Bennie found a table for himself and then began eating from the self-serve buffet. After finishing his meal, he paid an appropriate amount to the cashier and left the building. Bennie had not spoken, or been spoken to, at any point. Which of the following statements is TRUE? • If a court was required to decide how much Bennie had to pay for his meal, it would rely on the concept of quantum meruit - Hiram Brody worked as a research assistant for Rheem Shareef, who was one of his professors. Rheem regularly asked Hiram to proofread documents that she had written. Hiram therefore was not especially excited when he was asked to proofread a research proposal that Rheem had drafted in connection with a major project for which she had recently received generous funding from the government . He did, however, become very excited when he read paragraph 14 of the document: "I will offer Hiram Brody the position of joint-investigator. That posiiton will require him to both resign from his present post as my research assistant and take a leave of absence from his current studies. Given the nature of the project and given his outstanding qualifications, Hiram will be paid $8000 per month for a period of eighteen months." After Hiram hurriedly finished proofreading the document, he unsuccessfully tried to contact Rheem to talk about his new position. He learned, however, that she had left town, on very short notice, to be with a sick relative who lived outside of Canada. He then wrote a letter to the Chair of his University Department in which he both resigned as Rheem's research assistant and took a two-year leave of absence from school. He also left a message on Rheem's telephone answering machine in which he said, "I accept. I can't wait to begin working as your joint-investigator." Hiram consequently was very angry when Rheem said, after she had returned from abroad, that she had changed her mind and had hired another person to serve as her joint-investigator. Hiram insists that she cannot do so because he had already accepted her offer. A court, however, would say that Hiram could not create a contract by leaving a telephone message for Rheem because • she had given the document to Hiram as a proofreading assignment, rather than as a contractual offer Chapter 8 - Which of the following statements is TRUE? • none of the above - A gratuitous promise • all of the above - Patricia and Charlie entered into a written agreement. Patricia promised to pay $5000 to Haden, who is Charlie's brother. Charlie placed his seal on the document, but Patricia did not do so. Three days later, Charlie promised that he would design a new computer program for Bethany, Patricia's sister, in exchange for Patricia's promise. Which of the following statements is the most accurate? • Patricia's promise is not enforceable because it was not given in exchange for consideration - Because he was in love with her, Noriel promised to sell his car to Marina for $500. At the time of that agreement, Marina stressed that the deal was purely commercial and made it clear that she did not share Noriel's hopes for an intimate relationship. Before the sale was performed, Noriel fell in love with another woman, Valerie. He therefore now refuses to transfer the car to Marina. The actual market value of the car is $7500. Which of the following statements is TRUE? • none of the above - In exchange for Miles' promise to pay $10 000 to the Society for Prevention of Cruelty to Animals, Fran promised to give up eating meat for one year. Which of the following statements is TRUE? • The facts demonstrate a mutual exchange of value - Which of the following statements is TRUE? • The courts generally do not require adequate consideration because they believe that each person can look after their own interests by deciding how much to demand under a contract - Mohana promised Ian that she would pay $10 000 to him on his birthday. Ian gave nothing in exchange for that promise and neither party placed their seal on the document containing Mohana's promise. Ian demanded payment on his birthday. Mohana refused, primarily on the basis that she had recently become quite annoyed with him. Ian then threatened to start a lawsuit. However, he also offered to settle that lawsuit in exchange for payment of $7500. Mohana agreed in an attempt to avoid paying the full $10 000. Several weeks after paying $7500, however, she learned that her initial promise was not actually legally enforceable. She also learned that Ian, who was a lawyer, was aware of that fact all along. Which of the following statements is the most accurate? • Mohana can recover $7500 from Ian because his threat to sue her for payment of $10 000 was not made honestly - Fred owed a debt of $10 000 to Regina. Because he had lost his job and was experiencing financial difficulties, he hoped that she would take pity on him and would not insist upon payment. Fred therefore said to Tyra, who was Regina's colleague, "If you can get her to drop the matter, I'll make it worth your while." Tyra felt sorry for Fred and said that she would do her best. A week later, she called Fred and explained that Regina had agreed under seal to forgive the $10 000 debt. Fred replied by saying, "Many thanks. Come by my house and I'll pay you $500 for your effort." Which of the following statements is TRUE? • Regina cannot sue under the agreement that was created between Tyra and Fred - Which of the following situations illustrates the concept of gratuitous consideration • none of the above - Parker Inc promised to pay $100 000 cash to Coltrane Ltd in exchange for a shipment of widgets. The widgets were actually delivered on October 1st and the price was to be paid on October 15th. On October 13th, Parker informed Coltrane that it would not be able to afford to pay any more than $75 000. Which of the following statements is TRUE? • Coltrane will not be able to recover the full contract price if it agrees accept $75 000 from Parker on October 14th in complete satisfaction of the $100 000 debt - Sarah was an orphan. Her uncle Rocco agreed to act as her guardian until she became an adult. In that role, he borrowed money to pay for her education. She promised to repay him when she became an adult. Sarah later became an adult and married Stepan. Stepan also promised to repay Rocco for the money that he had spent on Sarah's education. Sarah and Stepan, however, now refuse to pay the money. Rocco has sued Stepan on his promise. Which of the following statements is TRUE? • all of the above - Maria went on vacation in May. She expected that her garden would be fine because May is normally a very rainy month. In fact, it did not rain at all during May. Her neighbour, Hector, therefore watered her garden because he knew that she would not want her plants to die. When she returned from her vacation in early June, she thanked Hector and promised to pay him $200 for his time and effort. Select the best answer. • all of the above - Which of the following situations illustrates a contractually enforceable promise • Suneeta borrowed money from a bank. Under the terms of that agreement, she was required to pay the bank $10 000 cash on June 1st. On May 28th, she explained to the bank that she would not be able to pay the full amount on schedule. On the same day, she also persuaded the bank to accept a cheque for $7500 in satisfaction of the full debt. - Which of the following explains why the courts will not enforce an agreement that was created on the basis of a pre-existing public duty • A promise by a public official is binding only if it is placed under seal - Rande promised to provide a series of lectures on tort law to a group of professional athletes in exchange for payment of $10 000. Shortly before the lectures were scheduled to take place, Rande promised to provide a publishing company with a recorded set of lectures on tort law in exchange for $15 000. The publishing company agreed that Rande's planned lecture for the group of professional athletes would be the subject of the recording. Which of the following statements is TRUE? • If Rande fails to provide the lecture as promised, he may be held liable for breach of contract to both the group of professional and the publishing company - Which of the following statements is TRUE • As a general rule, a creditor's promise to accept a lesser sum in complete discharge of a larger debt is unenforceable - Which of the following propositions is TRUE in the context of the doctrine of promissory estoppel? • The doctrine of promissory estoppel is effective only if the representee relied upon a statement by the representor - JB Inc sold a piece of equipment to SubSurf Ltd for a total price of $240 000. Under the terms of their contract, SubSurf was required to pay $10 000 on the first day of each month for twenty-four months. The contract also stated that if SubSurf was late on any single payment, JB was entitled to demand immediate payment of the entire outstanding amount. SubSurf made the first four payments on time. For the next six months, however, it was habitually late by at least one week. JB did not object to receiving those late payments. However, when SubSurf did not pay the eighth instalment on the first day of the next month, JB demanded immediate payment of the entire outstanding amount. Which of the following statements is TRUE? • The doctrine of promissory estoppel is inapplicable because JB did not make an effective representation - Deecey renovated Reece's shop in exchange for the promise of $75 000. Reece had enough money to pay the entire bill, but simply did not want to do so. Reece also knew that Deecey's financial situation was very weak and that it might be forced into bankruptcy if it did not receive at least $25 000 for its work. Reece therefore offered to pay $25 000 in full satisfaction of the outstanding debt. Because of the circumstances, Deecey accepted that offer and promised that it would not demand payment of the additional $50 000. Reece paid $25 000 to Deecey. However, Deecey now claims that it is entitled to the additional $50 000. Which of the following statements is TRUE? • Reece cannot rely on the principle of promissory estoppel because its own behaviour was inequitable - Bruce and Rosie entered into an agreement. He promised to transfer a necklace to her mother and she promised to deliver a computer to his father. Which of the following statements is most likely to be TRUE? • none of the above - Dunlop sold tires to Mew. The parties' contract prohibited Mew from re-selling the tires unless its sub-buyer agreed to abide by Dunlop's list price for the tires. Mew re-sold the tires to Selfridge. Under its contract with Mew, Selfridge agreed to (i) abide by Dunlop's list price, and (ii) pay $50 to Dunlop for each tire that it sold in violation of that list price. Selfridge re-sold ten of the tires to its own customers for less than Dunlop's list price. Which of the following statements is TRUE? • none of the above - Which of the following statements is TRUE? • An assignment of contractual rights sometimes is created by operation of law and without regard to the assignor's intention - ABC Construction agreed to build a pool for Miranda in exchange for $100 000. The pool was to be built during the month of May, but payment was not due until the end of August. The pool was completed on schedule. However, because it was experiencing financial difficulties, ABC orally assigned its contractual rights against Miranda to Mirth Enterprises in early June. In July, Miranda discovered that the pool leaked. Because ABC denied responsibility, Miranda had the problem fixed by another company at a cost of $20 000. The evidence now indicates that the problem was in fact caused by ABC's breach of contract. ABC failed to use appropriate materials when it constructed the pool. Which of the following statements is TRUE? • The assignment may be equitable, but it cannot be statutory - Bentley Inc operates a sporting goods store. In January, it purchased a shipment of baseball bats from Tadpole Manufacturing Ltd for $20 000. In February, Tadpole orally assigned its rights under that contract to J&H Collections. In May, Bentley purchased a shipment of footballs from Tadpole for $15 000 under a separate contract. Immediately after delivery, Bentley discovered that the footballs were defective. They had been improperly treated with a chemical that completely destroyed their leather exterior. The footballs consequently are completely worthless. Both contracts between Bentley and Tadpole required payment to be made by the end of June. Which of the following statements is TRUE? • none of the above - Which of the following rules applies to an equitable assignment? • none of the above o The assignment must be unconditional o The assignment must be written o The assignment must be placed under seal - Which of the following statements is TRUE? • none of the above o As long as the required formalities are satisfied, a contractual obligation can generally be assigned by using either a statutory assignment or an equitable assignment o If there are two assignees of the same debt, a court will always favour the assignee that received its assignment first. - Carlos entered into a contract with Keisha. He promised to design a computer system for her business and she promised to pay $50 000 to his brother, Mikey. When that contract was created, Keisha agreed that Carlos would receive her promise on trust for Mikey. Which of the following statements is TRUE? • none of the above - The employment exception to the privity doctrine • can be applied in a case the involves vicarious performance - Sentinel Safety Inc entered into a contract with Glengarry Shopping Mall to provide security. The parties' contract contained a clause that said: "Neither Sentinel nor its employees or agents shall be held liable in an amount that exceeds $10 000 for any loss or damage that may be caused in the performance of this agreement." In effect, Glengarry promised that it would not sue the named parties for more than $10 000. Elaine works as a security guard for Sentinel. As part of her job, she regularly patrols the Glengarry Shopping Mall. Which of the following statements is TRUE? • The facts involve the contractual concepts of a stranger, vicarious performance, and sufficient consideration - The decision in London Drugs Ltd v Kuehne & Nagel International Ltd is primarily authority for which of the following propositions • In certain circumstances, an employee is entitled to enforce an exclusion clause that is contained in a contract that was created between an employer and a customer - Which of the following refers to a TRUE exception, rather than an apparent exception, to the privity doctrine, in the sense that a person is entitled to sue on a contract despite the fact that he or she is not a party to that contract? • legal assignment - The word "estop" means • "to prevent." - The traditional doctrine of estoppel, rather than promissory estoppel, requires proof • of a representation regarding a past or present fact - The contractual rule that requires an exchange of value • generally requires proof that each party provided sufficient consideration, but it does not also require proof that each party provided adequate consideration - Lewis is a wealthy entertainer. While watching a telethon that was aimed at raising money for medical research, he was overwhelmed by a sense of grief and sorrow. He consequently picked up the telephone, dialed the number on the screen, and promised to donate $5 000 000 within one month. The volunteer on the other end of the line thanked Lewis and assured him that “the money will be put to good use.” Two days later, before Lewis had sent in a cheque, the telethon organizers announced that, because of the public’s overwhelmingly positive response, and in particular because of Lewis’s generous promise, their organization would be able to build a research facility that they previously believed was beyond their budget. They also announced that they would name the facility the Jerry Medical Research Park, after Thomas Jerry, a local surgeon who recently had died. Lewis became very angry. He had long hated Jerry and he was horrified at the thought of paying for a building named in his enemy’s honour. He therefore informed the telethon organizers that he had changed his mind and that he would not be sending any money. The telethon organizers have now sued for breach of contract. Which of the following statements is TRUE? • none of the above - As a result of her participation in a telemarketing scheme, Susan was charged with several counts of fraud. Because she knew that the courts had recently started to take a much harsher approach to such crimes, and because she already had been convicted for similar offences in the past, she was anxious to "beat the rap." She therefore called Anqwaan, her brother-in-law, who was also a lawyer, and begged for his help. Anqwaan initially hesitated. Anqwaan already was very busy with his practice. Furthermore, although they were related, Anqwaan had met Susan only a few times and he did not know her much at all. He did, nevertheless, eventually agree to take on the case. As a result of his excellent service, Susan was acquitted on all charges. A few days after the trial ended, Anqwaan sent Susan a bill for his legal services: $15 000. As a family courtesy, Anqwaan had, in fact, charged Susan only half of his usual hourly rate. Susan nevertheless was very upset. As she correctly notes, she and Anqwaan had never discussed his fee and she had never actually promised to pay him anything. Which of the following statements is TRUE? • Even though the parties never discussed Anqwaan's fee, the court may find that Susan implicitly promised to pay for Anqwaan's services and that, by taking the case, Anqwaan implicitly accepted that offer - Laetitia agreed to provide certain services to Hans in exchange for a payment of $10 000. Although Laetitia fully performed her side of the agreement, Hans refuses to pay anything. He insists that Laetitia does not have a right to sue for breach of contract because, in performing the services, she was merely doing something that she had become obliged to do even before she entered into her agreement with Hans. Hans' position is correct if Laetitia's pre-existing obligation was • some type of public duty - Gabriel entered into a contract with Paradise Equestrian Services. (PES) The purpose of the contract was to allow Gabriel's son, Archie, to learn to ride horses. The situation was somewhat complicated by the fact that while Gabriel lived in Prince Edward Island, Archie was starting college in British Columbia, where PES was also located. In an attempt to make it easier for Archie to take action on the contract, if any problems arose, Gabriel made sure that the agreement contained Paragraph 13, which says, "The promise given by PES is hereby acquired legally by Gabriel and equitably by Archie." Which of the following statements is TRUE? • As a result of Paragraph 13 of the contract, Archie can properly be classified as trust beneficiary, rather than as a third party beneficiary - Cookie entered into a contract with Muhammad. Muhammad was required to pay $25 000 to Cookie, and he was entitled to have an engine modified and installed in his speedboat. Jane vicariously performed part of the contract. Which of the following statements is TRUE? • Jane almost certainly vicariously performed on behalf of Cookie - Sid and Nancy entered into a contract. Part of that contract was subsequently assigned to Johnny. Which of the following statements may be TRUE • One of the parties assigned the contract to Johnny even though the other party strenuously objected to that development Chapter 9 - A contractual term • is a promissory statement - A pre-contractual representation • can be made by words or conduct - A misrepresentation is • actionable if it induces a contract by falsely characterizing the consequences of a law - Reeni was interested in purchasing a car. After searching the classified ads, she found a car in which she was interested, being sold by Ethan whom she had never met. Ethan knew that his car was in need of new tires, a new muffler, and would soon need a new clutch and a brake job. Consequently, he was hoping that, when they met, Reeni wouldn't ask too many questions. When she wanted to go for a test drive, Ethan gave her the keys and said that he trusted her to go alone and that doing so would allow her to test it in a less inhibited fashion. Really, he just didn't want her to ask about any of the car's problems. Reeni took the car by herself and, on the basis of its performance, bought it at Ethan's listed price, no questions asked. Which of the following statements is most likely TRUE? • Ethan is not required to disclose the car's problems during pre-contractual negotiations - When will silence distort a previous assertion • whenever a change in circumstances does not affect the accuracy of a representation - The possible consequences of actionable misrepresentation include • the remedy of rescission - In order to get Susannah to buy his cottage, Paul tells her that he has recently spent $100 000 in repairs that make its foundations flawless. In love with the cottage and in reliance on Paul's representation, Susannah impulsively trades her condo in the city for the cottage without asking for a home inspection. Two months after she moves into the cottage, Susannah hears a creaking noise during a windy evening. The next morning, she has a home inspector over to take a look. He tells her that there have been no repairs on the house in the last twenty years and that the foundation is in a dangerous state of disrepair. She calls Paul to try to get her condo back but finds out that he has sold the unit and has moved to Bermuda with all of his assets. In seeking an order for restitution • Susannah will most likely fail because courts are unlikely to grant rescission when the rights of third parties are affected - Which of the following cannot result in a damage award? • innocent misrepresentation - Samuel and Ben are negotiating the sale of a sailboat. Samuel expresses an interest in the boat but emails Ben a list of five questions that he wants answered before agreeing to purchase it. Ben responds with full answers to four of the questions. Samuel emails back and says he will buy the boat on Saturday as long as his remaining question (about the state of its hull) checks out okay. Ben promises to check with his boat mechanic and respond before they are scheduled to meet on Saturday. Both men get busy. Ben checks with his mechanic but innocently forgets to report back to Samuel that there is a crack in the hull. Samuel forgets that there was one question outstanding. Saturday comes and the transaction takes place. If it turns out that there is a significant problem with the hull of the boat, which of the following is TRUE? • Ben may have to take the boat back and return Samuel's money - Diamond Dave decides to sell his donut franchise to Fast Freddie. Freddie has a number of questions about the receivables. Diamond Dave says that all of the answers to his questions can be found in the corporate ledger. Instead of inspecting the ledger, Fast Freddie hires an accounting firm to do a forensic audit of the business. Relying on the audit, Freddie buys the business. Which of the following explains why Freddie would fail to obtain rescission if he later decided he did not like the transaction? • all of the above - Contracts of utmost good faith • arise when one party is uniquely situated to know the material facts - Which of the following is an example of a disclosure required by statute • all of the above - Suppose that a term is not the result of a statement expressed by either of two negotiating parties. Which of the following is TRUE? • It could only be a term of a contract between them if it is an implied term - An express term • is a statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation. - Business people often sign written agreements on the assurance that some of the terms will not be enforced. To sign under these conditions is imprudent because of • the parole evidence rule - Ejay wants a court to consider oral evidence about a written contract in order to resolve a dispute about an ambiguous term in one of her client's contracts. She decides that she will characterize the facts as giving rise to a collateral contract. Which of the following is TRUE? • Ejay is an inefficient lawyer because there is a more direct way of having the court consider her oral evidence under the circumstances - An ambiguous contractual term • will always have more than one plausible meaning - Which of the following approaches to contractual interpretation will ONLY SOMETIMES give words their plain, ordinary meaning? • the golden rule - Which of the following is true of the contra proferentum rule • all of the above - Which of the following best describes an implied term • It is sometimes inserted into a contract by a court - Even if a lease does not expressly say that the item leased must come back in the same condition in which it went out (subject to reasonable wear and tear), a court will imply such a term. Courts will do so on the basis that such a term • is in line with industry standards - A court will find an implied term • when it is necessary to bring the contract in line with the presumed intentions of the parties - Denise is a farmer in Prince Edward Island. Recently she purchased a new tractor from her local dealer. Although her contract of sale contained a large number of standard terms and conditions, it did not guarantee that the tractor would function properly. Assume that the tractor malfunctions and Denise tries to sue for breach of contract. Which of the following is most likely TRUE? • none of the above - The Sale of Goods Act in several jurisdiction including Manitoba, Northwest Territories, and the Yukon • implies a term that goods being sold are new unless otherwise described - Standard form agreements • often are well-understood transaction types refined over years of doing business in a particular way - Asha sells bottled spring water. Unlike other water vendors who purify their water, Asha is marketing her product to those who want to drink spring water in its natural state. Although her water source is pure and clean, she is concerned that some consumers might have allergic reactions to trace elements in the unpurified water, so she designs a clause to exclude her company from liability. The clause indicates that, by opening and drinking the water, consumers are indicating that they have read and understood the warning that the water has not been purified and, as such, waive all liability for any allergic reactions resulting from drinking the water.Which of the following is most likely TRUE of Asha's strategy? • Reasonable notice by itself is insufficient. The exclusion clause must also be written in clear and unambiguous language - A contract requires reasonable notice of its terms • none of the above - A ticket contract is • enforceable only if the terms are clear and reasonable notice of the terms was given when the contract was made - Molly decides to sell her house by way of a private sale. After advertising and showing the house, she receives a written offer from an interested purchaser using a standard form document assembled from a do-it-yourself legal kit. Molly studied the offer and wished to change two of its terms. The interested purchaser agreed to the changes and reflected those changes in the document. Molly signed the document and cashed the down payment cheque. Two days later, Molly spotted an extremely onerous and somewhat unusual term that was not brought to her attention when reading the document. As a result, Molly wishes to cancel the contract.Which of the following is most likely TRUE? • Molly will fail because she is bound by her signature - Which of the following is an example of a boilerplate provision? • all of the above - People may be held responsible for misrepresentations, even if they did not say anything, if • all of the above - Which of the following statements is TRUE with respect to misrepresentations? • An innocent misrepresentation may be rescinded - An exception to the parol evidence rule may arise if • additional information is required in order to rectify a mistake - Which of the following statements is TRUE with respect to a contractual clause that protects one party from the consequences of breach? • Depending upon the circumstances, such clauses may be enforced even if the party who wants to sue for breach did not read the clause - Jacqui purchased a business from Dickie. During the pre-contractual negotiations, Dickie said, based on past experience, he expected that the business would earn approximately $1 000 000 per year. After that statement was made, but before the contract was signed, Dickie learned that the manufacturer that supplied his business with the materials that it needed was going out of business. Dickie realized that, because of the need to purchase materials from another manufacturer, his business could only be expected to earn $700 000 per year, regardless of whether it was run by himself or by Jacqui. Afraid that that news would scare off Jacqui, Dickie decided to keep the new information to himself. Jacqui completed the purchase of Dickie's business, but was very disappointed when it earned only $700 000 in its first year. She now wants to sue Dickie. Which of the following statements is TRUE? • none of the above - Leilani purchased a business from Troy. She is now interested in the possibility of taking legal action on the basis of an alleged misrepresentation that occurred during the negotiations leading up to the contract. Which of the following statements is TRUE? • If Troy made a negligent misrepresentation, Leilani may choose to sue in tort rather than rescind the contract - Asif purchased a business from Olga. During negotiations leading up to the contract, Olga made an innocent misrepresentation. As a result of that statement, Asif has discovered that the business is far less valuable than he expected. Which of the following statements is TRUE? • none of the above - Ranjit purchased a complex computer system from Compu-Less. Although Compu-Less had specially manufactured the computer to Ranjit's personal specifications, the sale was created on the basis of a standard form agreement that the company uses when customers buy mass-produced computer units. A dispute has now arisen between Ranjit and Compu-Less. Which of the following statements is TRUE? • The court may refuse to add an implied term to the contract even if that term would make the contract much better - Preetpal purchased a ticket to ride on a train from Toronto to Ottawa. After she had boarded the train, she was asked if she wished to place her outerwear and backpack into a storage unit on the train. Because she did not want to be encumbered during her journey, she accepted the offer. She was given a "small baggage claims" ticket before handing over her coat and belongings. When the train arrived in Ottawa, and Preetpal tried to collect her coat, she was told that it could not be found. When she threatened to sue, the person who was representing the train told Preetpal that the back of the "small baggage claims" ticket she received excluded liability for lost or stolen goods. Regardless of any other facts, Preetpal can be bound by the exclusion clause only if • none of the above - Justice Howe, a member of the Supreme Court of Canada, is deciding a case that deals with a complicated commercial agreement between two sophisticated and experienced companies. The resolution of the case depends upon the interpretation of several clauses in that agreement. Which of the following statements is TRUE? • In order to decide the case, the judge may need to know which party drafted the agreement Chapter 10 - The concept of capacity • all of the above - Which of the following contracts will be enforced whether or not the purchaser has reached the age of majority? • all of the above - Which of the following groups is never able to avoid contractual liability? • adults who have been declared mentally incompetent by the courts - Lawrence and Jane were hammering out a deal over cocktails. Jane thought that Lawrence was totally plastered and was hoping to take advantage of this in their negotiation of the terms. However, Lawrence knew exactly what he was doing. Although quite tipsy, he pretended to be staggering drunk. His plan was to make two deals: one deal that was good for him, the other a bad one. This way he could complete the deal that was to his advantage and, later, walk away from his obligations on the second deal. Which of the following is TRUE? • Both deals are enforceable since Lawrence was only pretending to be drunk. - Which of the following distinguishes a chartered corporation from a statutory corporation? • none of the above - Unincorporated associations • can be given the capacity to contract through the enactment of legislation - Joe is an aboriginal person, born and raised on a native reserve. After reaching the age of majority, Joe decides to move to Calgary to continue his work as an artist. After abandoning the reserve and living in Calgary for several years, Joe is asked to participate in a major art opening. Much of his art depicts life on his reserve. Which of the following is TRUE? • Joe's art could be used as security for a credit transaction - Matt just made a fortune inventing a new piece of software and has generously agreed to support his friend's application for a bank loan. Matt tells his friend he is willing to cover the debt no matter what happens. In order for this promise to be enforceable • Matt's friend needs to get Matt to make that same promise to the bank - The difference between a guarantee and an indemnity is that • a guarantee is a conditional promise whereas an indemnity is not - Which of the following is LEAST LIKELY to be understood by a court as a contract for the sale of an interest in land? • the lease of an apartment - Which of the following is sufficient written evidence to satisfy the Statute of Frauds in most Canadian jurisdictions? • all of the above - Ariel pays Newton a $17 000 deposit as part of an oral contract for the sale of land. According to the terms of their agreement, Ariel is to pay the balance on the day of the closing, failing which Newton is allowed to keep the deposit. Suppose that the deal never closes. Which of the following is TRUE? • Newton has a contractual defence if Ariel seeks to get her deposit back. - Which of the following lists would the Statute of Fraud require ALL THREE contracts to be evidenced in writing pursuant • a two-year commercial property lease agreement; the sale of a house; a two-year landscaping agreement - Raja set up a web site selling tee shirts decorated with original artwork. The web site was marketed under a name very similar to a well-known professional basketball team. Raja had never heard of the site nor had he meant to fool anyone or to infringe anyone's trademark. One day, Liz went to Raja's site and bought a number of tee shirts with her credit card. Thinking that she was getting fan apparel from her favorite ball team, Liz was quite surprised and disappointed when she saw the merchandise that she received in the mail. What should she claim in order to get her money back? • mistaken identity - Which of the following mistakes is most likely to prevent the creation of a contract? • A bean wholesaler ships 5000 cans of golden wax beans to a customer who thought that he was ordering 5000 cans of corn - Which of the following mistakes will most likely render impossible the purpose of the contract? • thinking that the property you bought for your business is zoned commercial but it is, in fact, residential - The doctrine of frustration is invoked when • the contracting parties are both mistaken about some future set of circumstances that prevents them from carrying out their obligations pursuant to the contract - When may the defence of non est factum be raised • when there is a radical difference between what a person signed and what the person thought he was signing - Common law illegality • renders unenforceable agreements that are contrary to public policy - Shelly hires James to steal her neighbour's dog (because it barks a lot and the owners do nothing about it). Shelley paid James according to the terms of the contract, but James did not follow through with his end of the bargain. Can Shelly get her money back? • No. The contract is defective because it is illegal - Which of the following examples of a covenant in restraint of trade is most likely to be against public policy? • An entrepreneur sells his successful home baking business to a supermarket chain. He signs an agreement that bars him from setting up a bakery business in the future - How do courts regard restrictive covenants? • Courts will presume restrictive covenants to be against public policy unless the party seeking to enforce the covenant demonstrates that the restriction is reasonable - Economic duress • all of the above - Duress is distinguishable from undue influence in that • duress is never defined in terms of the parties' relationship wherea
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