Canadian Business And The Law 4th Edition by Duplessis – Test Bank

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Canadian Business And The Law 4th Edition by Duplessis – Test Bank

Chapter 6 Forming Contractual Relationships

 

MULTIPLE CHOICE

 

  1. Which of the following would a court require a disputed agreement to clearly evidence in order for it to be deemed an enforceable contract?

 

a. a mutually favourable intention to create legal relations
b. a promise to enter into a contract on general terms
c. an exchange of mutually adequate consideration
d. a consensus as to each party’s rights and obligations

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   118

MSC:  Analyze

 

  1. Thomas gave Jerron his final sales pitch, offering 10 percent off the list price, 60 days for payment, a delivery date, and delivery terms. Which of the following would an observer to these negotiations be reasonably expected to deduce at this point in the negotiation process?

 

a. A consensus on the parties’ rights and obligations has been reached.
b. A consensus on the terms of the offer between parties was reached.
c. A complete offer has been extended that is now open to acceptance.
d. There has been a mutual expression of willingness to do business.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   118

MSC:  Analyze

 

  1. Sometimes a contract is drafted in such a way that it fails to clearly and precisely express the essential terms of the offer. Which of the following would have the greatest influence on a court’s willingness to interpret the offer and resolve uncertainties?

 

a. the terms that would have resulted from completed negotiations
b. a stated workable formula for determining market price
c. evidence of a clear intention of the parties to create legal relations
d. certain matters in the agreement left to be decided in the future

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   118

MSC:  Analyze

 

  1. What is the difference between the communication of an invitation to treat and the communication of an offer to enter into a contract?

 

a. An offer to enter into a contract is an expression of willingness to do business.
b. An offer to enter into a contract seeks to facilitate commercial profitability.
c. An invitation to treat expresses an inclination to form a business relationship.
d. An invitation to treat is a promise to perform specified acts on certain terms.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   119

MSC:  Understand

 

  1. Madeline, a garment buyer, left Lance with her business card and a clear impression she was very interested in his line of fashion products. Which of the following would a law professor likely identify as the element that would qualify Madeline’s communication as an offer to treat?

 

a. Qualification is dependent upon the speaker’s intention, subjectively assessed.
b. Lance has clearly advertised his products as available for purchase.
c. Qualification is dependent upon an objective assessment of the orator’s intent.
d. Lance has relinquished his option by refusing to complete the transaction.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   119

MSC:  Analyze

 

  1. A consumer conducting business with a bank must accept the standard set of terms expressed in the loan agreement, even though those terms are non-negotiable and typically favour the bank. Why would a modern-day court most likely continue to uphold these contractual “take it or leave it” arrangements?

 

a. the law’s expectation of a bank’s good will toward its customers
b. the agreement does not require further elaboration or clarification
c. the law’s expectation that people take care of themselves
d. consumer acceptance of the bank’s unconditional offer

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   120

MSC:  Understand

 

  1. Which of the following would distinguish an invalid offer from an offer in law?

 

a. a standard set of terms developed over the years by a business
b. a requirement that a contract be read and understood prior to acceptance
c. a suitably broad, clear, detailed offer that readily facilitates acceptance
d. a condition that acceptance is required to be made within the time specified

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   120

MSC:  Analyze

 

  1. What is the meant by the statement that an offer extended by one party to another can only be accepted if it is “alive?”

 

a. that time for acceptance by the offeror is not specified
b. that the offer must be available for acceptance
c. that the offeree has extended a valid offer to treat
d. that rejection of a conditional offer has transpired

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   122

MSC:  Remember

 

  1. On April 2, Tundra Outfitters Ltd. received an offer to purchase from Lakeview Resorts Inc. Lakeview sought 35 canoes for a May 30 delivery, at $300 per canoe. The offer specified acceptance was to be by fax, received by 4 o’clock on April 5. Tundra did not reply. Under these circumstances, why would a court consider that no agreement had come into existence?

 

a. The offer was rejected by the offeror.
b. The offeree took the offer off the table.
c. The offer was revoked prior to its acceptance.
d. The offer is missing because it is no longer alive.

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   122|125|126

MSC:  Understand

 

  1. Which of the following terms relate to the Canadian government’s proposed anti-spam legislation known as the Electronic Commerce Protection Act?

 

a. spyware, phishing, botnets
b. netbots, trolling, spamware
c. botnets, phishing, spamware
d. phishing, netbots, spyware

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   121

MSC:  Remember

 

  1. Which of the following is the commonly used abbreviation of the Canadian government’s legislation extending protection of the privacy of e-mail addresses belonging to a specific person?

 

a. PIPADE
b. PIPEDA
c. PAPEDI
d. PEPIDA

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   122

MSC:  Remember

 

  1. On Tuesday, Jatelle offered to sell one of her racing motorcycles to Rofan for $8,000. Rofan said he needed time to consider her offer. On Friday morning, Jatelle sent Rofan an e-mail message advising the offer was no longer open. After reviewing the e-mail from Jatelle, which of the following actions would allow Rofan to try to complete the purchase of her motorcycle?

 

a. present Jatell with an offer to buy the motorcycle
b. revitalize the offer by communicating a counteroffer
c. immediately communicate a need for further time to Jatelle
d. immediately communicate acceptance of Jatelle’s offer to her

 

 

ANS:  A                    PTS:   1                    DIF:    Medium         REF:   122|125|126

MSC:  Evaluate

 

  1. In the landmark case of Big v. Boyd Gibbons Ltd., [1971] 2 All E.R. 183 (C.A.), the court was asked to consider a disputed matter involving the revocation of a firm offer regarding the sale of land. What is meant by the term “firm offer”?

 

a. the consideration given in return for something to be received
b. an offer that is irrevocable prior to its acceptance
c. the monetary consideration exchanged for an offeree’s promise
d. a promise to keep an offer alive for a set period of time

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   124

MSC:  Understand

 

  1. Which of the following characterizes the method for avoiding the application of the rule established by Dickinson v. Dodds [1876] 2 Ch.D. 463 (C.A.)?

 

a. use of words that imply contract formation
b. agreement by the parties on price
c. enforcement of a gratuitous promise
d. formation of an option agreement

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   124|125

MSC:  Understand

 

  1. Which of the following could you reasonably expect a lawyer to say is a defining characteristic of an option agreement?

 

a. It states that the option will lapse with a reasonable passage of time.
b. It states that acceptance must be presented in written form.
c. It prohibits lapse of the original offer prior to a time set for acceptance.
d. It states written notice is required to revoke the firm offer.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   125

MSC:  Analyze

 

  1. Which of the following elements distinguishes the lapse of an offer from the rejection of an offer?

 

a. An option agreement cannot lapse but it may be rejected.
b. Acceptance of an offer will be subject to rejection.
c. A lapse requires communication of deliberate intent by the offeree.
d. Acceptance has not occurred when an offer lapses.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   125|126

MSC:  Analyze

 

  1. Which of the following is a common distinguishing characteristic that may be attributed to both an option agreement and a counteroffer?

 

a. Both can result in a lawsuit for damages if deliberately rejected by the offeror.
b. Both are subject to revocation by the offeror prior to lapse of a set period of time.
c. Both form a separate contract that may or may not lead to acceptance of an offer.
d. Both serve to prohibit the lapse of an offer before a set time period has expired.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   125|126

MSC:  Analyze

 

  1. An offeror has specified the method of communication to be used by the offeree when accepting the offer. Which of the following principles would a court apply to determine whether acceptance had been perfected?

 

a. The offer must have been made using the same method of communication.
b. The offer cannot be accepted by another method of communication.
c. Acceptance by a specified method of communication must be reasonable.
d. Acceptance by other means is effective when received by the offeror.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   122|126|127

MSC:  Evaluate

 

  1. In the case of R. v. Ron Engineering & Construction Ltd. [1981] 1 S.C.R. 111, the Supreme Court of Canada reformed the legal structure concerning the tendering process in Canada. Which of the following did the Supreme Court state would form an element of the reformed legal structure?

 

a. Every party submitting a tender is accepting the offer of Contract B.
b. The only successful tenderer would enter into a Contract A with the owner.
c. The call for tender offered a preliminary contract called Contract A.
d. The call for tender offered a preliminary contract forming Contract B.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   125

MSC:  Remember

 

  1. Why is it important for the parties involved in contractual negotiations to know that an offer has been rejected?

 

a. The risk in rejecting an offer is that it may not be renewed.
b. A counteroffer is legally recognized as a form of rejection.
c. The distinction between rejection and counteroffer can be unclear.
d. The offer is automatically terminated upon rejection by the offeree.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   126

MSC:  Understand

 

  1. Albert’s mother signed a three-month listing agreement with a real estate agent. Prior to considering or accepting either of two below-listing-price offers the agent brought to Albert’s mother, she suffered a fatal stroke. What would a judge likely decide should the agent and/or the offerees attempt to legally force the mother’s estate to accept one of the offers?

 

a. that someone who makes an offer and then dies would not be bound
b. that the death increased the chance of one of the offers being accepted
c. that the deceased party cannot personally perform, hence her offer also died
d. that the estate is obligated to complete the sale by accepting one of the offers

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   126

MSC:  Analyze

 

  1. Karl, Robin’s champion male German shepherd, has been missing for two days. Robin posted an offer of a $1,000 reward for Karl’s return throughout the two-kilometre radius surrounding his home. Which of the following correctly characterizes the legal term applied to the type of contract Robin has offered to enter into?

 

a. a bilateral contract
b. a unilateral contract
c. a unilingual contract
d. a multilateral contract

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   129

MSC:  Understand

 

 

  1. In his decision, Lord Wilberforce stated, “No universal rule can cover all such cases; they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgment of where the risks should lie….” What legal rule did Lord Wilberforce establish in his ruling on this case?

 

a. the postage rule
b. the postman rule
c. the postbox rule
d. the postoffice rule

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   130

MSC:  Understand

 

  1. A practical application of the rules governing acceptance of an offer has been upheld in a number of decisions of the Canadian courts. If a student were to ask a law professor what the purpose of the practical application of these particular rules by the courts is, how do you think the professor would respond?

 

a. by indicating it ensures the application of the postal rule remains valid across Canada
b. by stating it qualifies any witness to the event who can testify to that effect
c. by stating a party must be aware it may become bound to contractual obligations
d. by indicating it satisfies the need for proof that the necessary events occurred

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    REF:   130

MSC:  Evaluate

 

  1. With respect to electronic contracting, which of the following characterizes the solution the Uniform Law Conference of Canada adopted to provide for electronic acceptance of an electronic offer?

 

a. Clicking an “accept” button.
b. Clicking an “I accept” button.
c. Clicking an “agreed” button.
d. Clicking an “I agree” button.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   132

MSC:  Remember

 

  1. Under what circumstances would a judge determining a remedy to a commercial dispute consider that a contract does not exist even though all of the required elements of reaching an agreement are present?

 

a. A phrase indicates the agreement is subject to formal contract.
b. A contract lacks sufficient consideration for both parties.
c. A contract lacks adequate consideration for both parties.
d. A phrase indicates the agreement is subject to its exact wording..

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   133

MSC:  Remember

 

 

  1. Which of the following is the key ingredient that must be present in order to distinguish a legally enforceable promise from one that is legally unenforceable?

 

a. acceptance
b. formalization
c. consideration
d. revocation

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   132

MSC:  Analyze

 

  1. Which of the following would immediately let you know that a promise is gratuitous?

 

a. the lack of sufficient consideration
b. the absence of consideration
c. the lack of adequate consideration
d. the absence of formalization

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   133

MSC:  Evaluate

 

  1. Which of the following is an element that must be present to enable an innocent party to commence a lawsuit when a promise is broken?

 

a. The price for a promise must be paid.
b. The work must be performed.
c. The consideration must be adequate.
d. The promise must be accepted.

 

 

ANS:  A                    PTS:   1                    DIF:    Medium         REF:   134

MSC:  Analyze

 

  1. Gandrel received an offer to purchase on his home. The offer provided for payment of the asking price but required Gandrel’s new appliances and riding lawnmower to be included in the purchase price. In these circumstances, does Gandrel’s offer to sell his home still have legal substance?

 

a. Yes, the original offer could be conditionally accepted.
b. No, the lapse of time automatically terminates the original offer.
c. Yes, it forms the basis of the purchaser’s counteroffer.
d. No, a counteroffer is a terminal rejection of an original offer.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   126

MSC:  Understand

 

  1. Which of the following is strongly linked to the contractual requirement of consideration?

 

a. the idea that consideration need not be monetary
b. the idea of equality during bargaining
c. the idea that a promise to pay be mutual
d. the idea of freedom of parties to bargain

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   134

MSC:  Remember

 

  1. Caroline agreed to purchase organic hemp fabric from an Ontario manufacturer. While making an inquiry to purchase organic dyes from a Manitoba producer, she learned they offered a superior organic hemp fabric at a much lower price. Knowledge of which of the following legal principles would immediately let Caroline know she made a costly error?

 

a. Parties must be informed as to adequacy of price, as it is usually unopen to challenge.
b. The consideration to be given for each party’s duties is the other party’s duties.
c. Parties must pay the price for a promise before they can sue when it is broken.
d. The traditional perspective that alteration of a pre-existing duty is enforceable.

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   134

MSC:  Evaluate

 

  1. In what way are a contractual promise and a contractual obligation similar to each other?

 

a. Both must be adequate to be enforceable.
b. Both represent a pre-existing duty.
c. Both may be arbitrarily revoked.
d. Both must be present for validity.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   134

MSC:  Understand

 

  1. A cancer hospital called the privately owned medical isotope source hoping to arrange earlier shipment of an urgent order. The private supplier confirmed earlier shipment was possible for a 30 percent surcharge on the contractual price. Due to the desperation of the cancer victims, the hospital faxed written acceptance of the varied terms. What would a New Brunswick court hearing the ensuing dispute arising from the hospital’s subsequent refusal to pay the price increase be most likely to determine?

 

a. Contractual variation supported by pre-existing duties is enforceable.
b. Where there is consent to a gratuitous variation, it is enforceable.
c. Pressure that left no alternative renders the variation unenforceable.
d. Contractual variation unsupported by consideration is enforceable.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   135

MSC:  Analyze

 

  1. Why is placing a seal beside the signature of a guarantor signing a guarantee still enforced in modern-day Canadian society?

 

a. Absence of the seal renders the gratuitous promise in the guarantee unenforceable.
b. Absence of the seal suggests absence of the intention of the parties to contract.
c. Absence of the seal suggests an absence of acceptance of a firm offer.
d. Absence of the seal renders acceptance of the offer of guarantee unenforceable.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   136|137

MSC:  Understand

 

 

  1. The statement “Promissory estoppel may be used as a shield and not as a sword” carries what meaning with respect to the classical application of common law doctrine of promissory estoppel?

 

a. The doctrine is unavailable as a defence in a lawsuit.
b. The doctrine is unavailable as the basis for a lawsuit.
c. The doctrine is unavailable to a person who has made a promise.
d. The doctrine is unavailable to a person who has broken a promise.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   137|138

MSC:  Remember

 

  1. Which of the following would provide a party with an excellent chance of relying on the doctrine of promissory estoppel in a common law court?

 

a. the absence of undue pressure to alter contractual rights
b. the existence of a pre-existing right covering the scenario
c. payment of a smaller amount to satisfy an outstanding debt
d. a promise to rely on pre-existing contractual rights

 

 

ANS:  A                    PTS:   1                    DIF:    Medium         REF:   137|138

MSC:  Analyze

 

  1. Recent legislation in some provincial jurisdictions overrides the common law that governed acceptance of payment of a lesser amount in full satisfaction of the debt. Which of the following would a law professor most likely state was the policy rationale for the legislation?

 

a. to allow debtors to pay by installments over time
b. to promote settlement of debts on a final basis
c. to allow creditors to increase collection of debts
d. to promote a reduction in consumer debt

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   139

MSC:  Analyze

 

  1. Which of the following could you reasonably expect a lawyer to advise a client as being the proper method of leading contrary evidence to challenge a legal presumption favouring one party?

 

a. a rebuttable presumption of the parties’ intent to contract
b. the doctrine of rebuttable inference of refusal to contract
c. the doctrine of rebuttable assumption of pre-existing condition
d. a rebuttable promise for which no consideration is given

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   140

MSC:  Analyze

 

  1. Why would members of a family experience an uphill battle in a common law court with respect to enforcement of contractual obligations owed to one another?

 

a. The law presumes promises between family members are non-contractual.
b. The law presumes all promises between family members are gratuitous.
c. The family members’ intention to contract must be subjectively tested.
d. The family members must understand the legal consequences of a promise.

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   140

MSC:  Understand

 

TRUE/FALSE

 

  1. An invitation to treat is one of the basic components of a contract.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   119

MSC:  Remember

 

  1. An offer is a conditional promise.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   118

MSC:  Remember

 

  1. Once made, an offer cannot be revoked.

 

ANS:  F                    PTS:   1                    DIF:    Easy               REF:   123

MSC:  Remember

 

  1. A gratuitous promise is never enforceable.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   133

MSC:  Remember

 

  1. A contract in which one of the parties has agreed to pay too much for what she receives in return is not enforceable.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   133|134

MSC:  Remember

 

  1. The postbox rule prohibits formation of contracts through the mail.

 

ANS:  F                    PTS:   1                    DIF:    Easy               REF:   130

MSC:  Remember

 

  1. In an option agreement, the offeror sells her right to revoke the offer.

 

ANS:  T                    PTS:   1                    DIF:    Challenging    REF:   125

MSC:  Remember

 

  1. An advertisement in a newspaper will never be considered to constitute an offer.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   119

MSC:  Remember

 

  1. Use of a seal in a written contract acts as a substitute for the requirement of consideration.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   136|137

MSC:  Remember

 

  1. It is difficult to prove the presence of contractual intention in agreements between family members.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   140

MSC:  Remember

 

  1. Before a contract can take place, the parties must have reached a consensus as to their respective rights and obligations.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   118

MSC:  Remember

 

  1. In order to avoid having a contract fail for uncertainty, it must meet the standard of perfect clarity and precision in how it is expressed.

 

ANS:  F                    PTS:   1                    DIF:    Challenging    REF:   118

MSC:  Remember

 

  1. Because a court infers an intention to contract, it will also speculate on what the parties would have agreed had they fully completed their negotiations.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   118

MSC:  Remember

 

  1. Vague commitments involving commercial exchange between parties are invitations to treat because of the lack of specification of the terms or scope of the proposed arrangement.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   119

MSC:  Remember

 

  1. A standard form contract requires one party, typically a consumer, to enter into it without benefit of negotiation.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   120

MSC:  Remember

 

  1. The concept that a contract is formed only when a complete offer is unconditionally accepted by the other side forms a fundamental rule in codified law.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   120

MSC:  Remember

 

  1. If a purported offer is sufficiently comprehensive that it can be accepted without much more elaboration or clarification, it is an offer in law.

 

ANS:  F                    PTS:   1                    DIF:    Challenging    REF:   120

MSC:  Remember

 

  1. If enacted into law, the proposed Electronic Commerce Protection Act would make it illegal to send an electronic commercial message without the prior consent of the recipient.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   121

MSC:  Remember

 

  1. An offeree may revoke an offer anytime prior to acceptance by merely notifying the offeror of its withdrawal.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   122

MSC:  Remember

 

  1. A firm offer differs from an offer because it contains a promise to leave the offer open for a set period of time.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   124

MSC:  Remember

 

  1. Firm offers can be revoked prior to their deadlines by the formation of an option agreement, whereby the offeror pays the offeree to keep the offer open for a specified time.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   125

MSC:  Remember

 

  1. Where the expiry date for acceptance of an offer lapses, the offer is no longer alive.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   126

MSC:  Remember

 

  1. An offer is automatically terminated when it is rejected by an offeror.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   126

MSC:  Remember

 

  1. To be effective, the acceptance of an offer must demonstrate a qualified willingness to enter into a contract on precise terms.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   126

MSC:  Remember

 

  1. Where an agreement reached through offer and acceptance contains the phrase “this agreement is subject to formal contract,” the agreement itself is unenforceable unless and until the formal contract comes into existence.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   133

MSC:  Remember

 

SHORT ANSWER

 

  1. Explain the difference between offer and invitation to treat. Give an example of each.

 

ANS:

An offer constitutes a promise that the offeror will enter a contract with the offeree on the terms presented by the offeror if the offeree accepts them. An invitation to treat is merely an indication that the party making the invitation is willing to consider offers.

 

PTS:   1                    DIF:    Easy               REF:   118|119          MSC:  Remember

 

  1. Identify and briefly describe the provisions of the Uniform Electronic Commerce Act that deal with communication of acceptance messages. Identify and briefly explain what step an electronic trader must take to avoid disputes involving where acceptance becomes effective.

 

ANS:

 

The UECA has provisions specifying when a message is sent and when it is received, but it does not specify where an acceptance becomes effective. Therefore, unless electronic traders specify where acceptance becomes effective, the question of where an electronic contract is formed will be presumably decided on a case-by-case basis.

 

PTS:   1                    DIF:    Medium         REF:   132                MSC:  Remember

 

  1. How do the courts get around the basic rule that a gratuitous promise is not enforceable if they feel that not enforcing such a promise would be unfair? Identify and briefly describe the requirements for this “get around.”

 

ANS:

The courts solve the problem by applying the equitable doctrine of promissory estoppel.  The requirements for promissory estoppel are the following:

 

One party has, by words or conduct, made a promise or assurance to the other party that was intended to affect their legal relationship and be acted on. The party receiving the promise or assurance acted on it or in some way changed its position. The promising party’s own conduct has been above reproach, and in this way, it is deserving of the court’s assistance. Finally, promissory estoppel can be used only as a defence to legal claims made by the party breaking the promise.

 

PTS:   1                    DIF:    Medium         REF:   137|138          MSC:  Remember

 

  1. How does the common law treat partial payment of a debt in lieu of full payment, and what might a debtor do in response to the common law?

 

ANS:

The common law provides that, since there is no consideration, a creditor could actually sue for the full amount even after “agreeing” to a lesser amount. In some provinces the common law has been overridden by legislation to make such partial payment agreements legally enforceable. In provinces without such legislation, any partial payment agreement that is executed under seal will still be legally enforceable.

 

PTS:   1                    DIF:    Medium         REF:   138|139          MSC:  Remember

 

  1. Identify and briefly described two main risks negotiators face when attempting to negotiate commercial agreements that will lead to legally enforceable contractual obligations.

 

ANS:

 

Negotiators face the risk of misunderstanding when statements and conduct have legal consequences. The second risk is failing to anticipate and plan for contingencies that might occur after the contract has been formed.

 

PTS:   1                    DIF:    Medium         REF:   140                MSC:  Remember

 

  1. Identify and briefly describe what element is recognized as forming the basis of a contract in common law. Include a brief explanation of what is meant by the legal requirement of certainty of offer and identify and briefly described the circumstances under which a court would endeavour to resolve ambiguities in an alleged offer.

 

 

ANS:

 

Common law requires that only a complete offer can form the basis of a contract. This means that all essential terms must be set out or the contract will fail for uncertainty. If the parties intend to have a contract, the courts will endeavour to interpret the alleged offer in as reasonable a fashion as possible and thereby resolve ambiguities.

 

PTS:   1                    DIF:    Medium         REF:   118                MSC:  Remember

 

  1. Briefly describe how a store maintains the option of refusing to complete a transaction involving a product it displayed at a cash register. Identify and briefly describe the effects of any legislation that may affect the store’s ability to refuse to complete a sale to a customer.

 

ANS:

 

The display of a product in a store is not an offer by the store to sell. The display is simply an indication that a product is available and can be purchased. Accordingly, the display is an invitation to treat and, by definition, is not capable of being accepted. In this way, the store maintains the option of refusing to complete the transaction as the cash register. Human rights legislation prohibits a business owner from refusing to serve a customer on the basis of race, gender, and other discriminatory grounds.

 

PTS:   1                    DIF:    Challenging    REF:   119                MSC:  Remember

 

  1. Identify and briefly define the events that will cause an offer to be taken off the table.

 

ANS:

 

Following are the events that will cause an offer to be taken off the table:

  1. i) revocation: the withdrawal of an offer
  2. ii) lapse:the expiration of an offer after a specified or reasonable period of time

iii)        rejection: the refusal to accept an offer

  1. iv) counteroffer: the rejection of one offer and proposal of a new one
  2. v) death or insanity: an offer generally dies if the offeror or offeree dies and a party to an offer who subsequently becomes insane would not, as a general rule, be bound

 

PTS:   1                    DIF:    Challenging    REF:   122|126          MSC:  Remember

 

  1. Identify the source of a competing analysis of the traditional common law view of unenforceability of a gratuitous promise. Provide a brief explanation of the competing analysis and explain the goal it was meant to achieve.

 

ANS:

 

The competing analysis is offered by the New Brunswick Court of Appeal. In that case, the court held that, provided the variation to a contract is not the product of duress, it is enforceable due to principles of commercial or business efficacy. The ruling expresses a goal to protect the parties’ legitimate expectations that such a contractual variation would be respected and adhered to.

 

PTS:   1                    DIF:    Medium         REF:   141                MSC:  Remember

 

 

  1. Briefly describe the options available to a party to a contract who wishes to avoid problems related to cost increases?

 

ANS:

The party could negotiate a clause in the contract that included a formula for varying the price according to the prevailing market conditions. Other possibilities include negotiating a cost plus contract, meaning the contract price would be comprised of the manufacturer’s actual costs, plus a set percentage for profit. Another alternative would be to charge a higher price to begin with to cover unexpected cost escalations.

 

PTS:   1                    DIF:    Challenging    REF:   141                MSC:  Remember

 

Chapter 7 The Terms of a Contract

 

MULTIPLE CHOICE

 

  1. Which of the following could you reasonably expect your risk management supervisor to indicate as the most effective use of a business contract?

 

a. an aid for a court to interpret a business arrangement
b. a tool for the management of liability exposure
c. a means of limiting warranties for defective products
d. a mechanism limiting alternative dispute resolution

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   148

MSC:  Analyze

 

  1. With respect to a contract, what is the function of an express term ?

 

a. It gives effect to the parties’ intentions.
b. It brings an existing contract to an end.
c. It explicitly states contractual promises.
d. It implicitly states contractual promises.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   148

MSC:  Understand

 

  1. Which of the following would a law professor most likely state is the preferred means of ensuring each party to a contract knows its obligations and the obligations of the other party?

 

a. The rules of plain meaning are followed.
b. The essential implied contractual terms are expressed.
c. The rules of construction are often conflicting.
d. The essential terms of a contract are articulated.

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   148

MSC:  Analyze

 

  1. With respect to the content of a contract, in what way are assumptions and terms different from one another?

 

a. Assumptions can be given legal weight.
b. Terms are attributed with legal weight.
c. Terms may be expressed in vague language.
d. Assumptions are typically expressed.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   148

MSC:  Understand

 

  1. In contract law, what is meant by the term “rules of construction”?

 

a. a rule limiting evidence concerning a contract’s contents
b. a basis for relieving parties from their contractual obligations
c. a guiding principle for interpreting the terms of a contract
d. a contractual term stating that the contract is complete as written

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   148

MSC:  Remember

 

  1. Why is a reference in a contract to “best quality” considered to be nebulous?

 

a. Exactly what is best quality becomes a subjective element.
b. The language is ambiguous and requires interpretation.
c. The use of unclear language will cause a contract to fail.
d. Exactly what is best quality arises as an objective element.

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   148

MSC:  Understand

 

  1. A court hearing a contractual dispute has determined that an ambiguous term must be construed against the party drafting the agreement. Which of the following would the judge most likely state in his decision as being the policy rationale for the court’s finding?

 

a. The common law rules of construction apply.
b. The rules of construction require use of the best language available.
c. Rules of construction require that a promise be stated explicitly.
d. The framer should bear the risk of nebulous language.

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    REF:   148

MSC:  Analyze

 

  1. EcoGrow Inc. contractually agreed to deliver two tons of organic fertilizer on March 16 to Organics Inc. The contract provided for payment of $1,000 for each day delivery was delayed. An ice storm closed highways causing Eco to deliver four days late. Which of the following could you likely expect a lawyer representing Organics to argue before the court hearing a dispute over non-payment of the late fee?

 

a. to have the court apply the parole evidence rule to the contract
b. to ignore the parties’ intentions and apply the plain-meaning rule
c. to have the court apply the rules of construction to the contract
d. to ignore the rules of construction and apply the entire contract rule

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   149

MSC:  Analyze

 

  1. Which of the following would strongly support the statement suggesting the guiding principles for interpreting the terms of a contract are often conflicting?

 

a. The assistance provided by implied terms is sporadic and uncertain.
b. The parties’ intentions are given effect and a contract as it appears is enforceable.
c. It is impossible to predict what the parties intended a term to mean.
d. It is necessary to demonstrate that a term exists based on the balance of probabilities.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   149

MSC:  Evaluate

 

  1. Justice Hall listened to plaintiff’s counsel argue his client’s position relating to a contractual dispute. Counsel stressed that an unstated provision was relevant to the contract and necessary to give effect to the contractual objectives of the parties. If Justice Hall accepts counsel’s argument, how do you think he will proceed?

 

a. by enforcing the parties’ contractual agreement as it is written
b. by giving subjective consideration to the expressed elements
c. by considering the stated implied terms detailing a promise explicitly
d. by giving effect to the parties’ aims by imposing implied terms

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    REF:   149

MSC:  Evaluate

 

  1. In law, which of the following is the term given to a provision that is necessary to give effect to the contractual intentions of the parties?

 

a. an applied term
b. an implied term
c. an exemplified term
d. an inferred term

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   149

MSC:  Remember

 

  1. Which of the following would allow a judge to imply terms into a contract in order to make it workable?

 

a. the doctrine of business efficacy
b. the doctrine of business efficiency
c. the common law good faith rule
d. the common law parole evidence rule

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   150

MSC:  Understand

 

  1. OrganicFoods Inc. entered into a contractual supply arrangement with EcoGrow Inc. EcoGrow contractually promised to supply two tons of organic carrots by May 1, providing carrots were available. If EcoGrow does not supply the carrots as agreed, how do you think a court would view EcoGrow’s obligation to OrganicFoods to do so?

 

a. Business efficacy makes the obligation conditional.
b. Business efficacy makes the obligation provisional.
c. Business efficacy makes the obligation express.
d. Business efficacy makes the obligation absolute.

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    REF:   150

MSC:  Evaluate

 

  1. Nigel is the owner of a small drapery manufacturing business. He has several contracts with three fabric suppliers. Nigel believes the only obligations he owes to his suppliers are recited in the contracts. Which of the following circumstances would immediately let Nigel know his assumption was wrong?

 

a. a situation whereby a supplier’s misconduct adversely affects his business interests
b. a situation enabling one party to eliminate application of the Sale of Goods Act
c. an entire contract clause forestalling suppliers’ arguments relating to his guarantee
d. a price-variation clause that doesn’t allow a supplier to offset increased costs

 

 

ANS:  A                    PTS:   1                    DIF:    Medium         REF:   151

MSC:  Evaluate

 

  1. With respect to dealings between contractual parties, which of the following is a valid criticism of the common law with respect to the current application of an implied term of good faith by the courts?

 

a. Business interests are not served by good faith conduct of contractual obligations.
b. Business interests are not opposed to bad faith conduct to achieve added benefit.
c. Opposing rulings created uncertainty, which is not the function of common law.
d. Opposing rulings maintain the rule that parties must take care of themselves.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   151

MSC:  Evaluate

 

  1. A supplier and a retailer have a long, established relationship. Earlier contracts between them have always provided the standard “within 30 days of delivery” payment provision. A new contract makes no reference to payment terms. Which of the following would a court most likely rely on to arrive at a decision that payment is due within 30 days of delivery?

 

a. customs in the trade
b. past dealings
c. business efficacy
d. statutory requirements

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   151|152

MSC:  Analyze

 

  1. Rumpel Lawn Care Inc. has had contractual relations with Rudy for many years. Rudy left a message asking Rumpel to include an organic weed inhibitor in the next lawn dressing mix applied to his lawn and to just add the whatever charge there would be to his regular bill. Which of the following would you expect a risk manager is likely to advise Rumpel in this regard?

 

a. to negotiate the interest rate at the time business is transacted
b. that a court would imply a term requiring payment of the new sum
c. that a court will automatically impose a common law implied term of good faith
d. to clarify the contractual relationship each time business is transacted

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   152

MSC:  Analyze

 

  1. In Glenko Enterprises Ltd. v. Ernie Keller Contractors Ltd., [1994] 10 W.W.R. 641 (Man. Q.B.), aff’d [1996] 5 W.W.R. 135 (Man C.A.), the court found in favour of the subcontractor plaintiff, stating interest was properly due on the outstanding account it was owed. Why did the court find in favour of the plaintiff?

 

a. Trade practices are a reliable way of implying terms into an existing contract.
b. Trade practices are automatically implied to parties’ contractual obligations.
c. The defendant followed industry practice of charging interest on its accounts.
d. The parties had a history of past dealings, which clarified their intentions.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   152

MSC:  Understand

 

  1. Sheps & Shaps LLP contracted to receive a weekly delivery of 10 cartons of 8 x 11 bond paper and 5 cartons of 11 x 14 bond paper. This Tuesday, however, their supplier delivered 15 cartons of 8 x 11 bond and 10 cartons of 8 x 14. The office manager refused to accept the delivery. Which of the following would you identify as the source of law that allows contractual terms regarding quantity to be imposed?

 

a. the Customs in Trade Act
b. the Business Efficacy Act
c. the Sale of Goods Act
d. the Rules of Construction Act

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   152|153

MSC:  Understand

 

  1. Which of the following would a court have to find in order to require the judge to limit the scope of the court’s examination of the evidence to expressed contractual obligations?

 

a. entire contract clause
b. exemption clause
c. limitation of contract clause
d. limitation of liability clause

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   153

MSC:  Analyze

 

  1. Which of the following legislations would you need to rely on if you wanted to ensure that terms are implied into a contractual business arrangement?

 

a. the Commercial Transactions Act
b. the Electronic Commerce Act
c. the Goods and Services Act
d. the Sale of Goods Act

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   153

MSC:  Analyze

 

  1. What is meant by the term “contractual quantum meruit”?

 

a. as much as merited or deserved
b. a term required to imply payment
c. as much as someone will pay
d. a promise to pay a fair price

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   153

MSC:  Remember

 

  1. A court has been asked to determine what the express terms of a parties’ contract encompass, as well as their purpose in accordance with the parties’ intentions. Which of the following would most likely be constrained by application of the parole evidence rule with respect to the contract?

 

a. expatiated evidence
b. expedited evidence
c. extraneous evidence
d. expunged evidence

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   154

MSC:  Analyze

 

  1. The parole evidence rule prohibits introduction of a specific type of evidence relating to the terms of a contract when the language used in that document is clear. Which of the following would your law professor most likely indicate as the second condition required to invoke the parole evidence rule?

 

a. Neither party can prove adverse affects of a documentary mistake.
b. Neither party is able to support its interpretation of the contract.
c. The restriction of the contractual content to the document is intentional.
d. Fraud by one party affecting formation of the contract was intentional.

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   154

MSC:  Analyze

 

  1. Which of the following would have to be present in a contractual situation in order for a court to refuse to invoke application of the parole evidence rule?

 

a. a consumer’s personal guarantee to close a deal
b. an all-inclusive agreement involving more than one item
c. a consumer contract requiring expatiated evidence
d. an intentional partly oral and partly documented contract

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   154|155

MSC:  Analyze

 

  1. In what manner could you reasonably expect a court to apply the parole evidence rule when asked to interpret the meaning of a nebulous term in a written contract?

 

a. Abide by the rule and use its discretion to infer a clarification of the term.
b. Disregard the rule and allow extrinsic evidence to resolve the ambiguity.
c. Abide by the rule and use its discretion to apply implied terms for clarification.
d. Disregard the rule and apply the reasonable person test to interpret the term.

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   155

MSC:  Understand

 

  1. Kramer and Biff entered into a formal purchase and sale agreement with respect to Kramer’s house. Two weeks later Biff revisited Kramer and offered to purchase all of Kramer’s custom yard and deck furniture too. The price Biff offered was $2500 more than the last offer Kramer had received, and he accepted the offer. In these circumstances, were a dispute to ensue, what role would the parole evidence rule play?

 

a. It would be used to prevent extrinsic evidence regarding the oral agreement.
b. It would play no role; as the oral agreement deals with land and furniture, it is invalid.
c. It will be applied to prevent a challenge of the written agreement.
d. It would play no role owing to the distinct nature of the collateral contract and price.

 

 

ANS:  D                    PTS:   1                    DIF:    Challenging    REF:   155

MSC:  Understand

 

  1. Under the UEEA, which of the following would immediately tell you that you have satisfied the best evidence rule with respect to an electronic record?

 

a. proving the authenticity of an electronic record is as it was claimed to be
b. proving integrity regarding the claimed authenticity of the electronic record
c. proving the integrity of the electronic system that recorded the data
d. proving authenticity by production of the original electronic contract

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   156

MSC:  Evaluate

 

  1. Why would a businessperson use contractual terms as a planning feature of the law?

 

a. to limit liability and block use of the parole evidence rule
b. to limit liability and shield against possible future events
c. to limit liability and prevent collateral oral agreements
d. to limit liability and buffer against certain future events

 

 

ANS:  B                    PTS:   1                    DIF:    Medium         REF:   156

MSC:  Understand

 

  1. Which of the following is a distinguishing characteristic of the doctrine of frustration?

 

a. It relieves parties of contractual obligations in very limited circumstances.
b. As a contractual term, it is used to signify that a contract cannot be varied.
c. As a guiding principle, it is used for interpreting the terms of a contract.
d. It relieves parties in a variety of circumstances from contractual obligations.

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   156

MSC:  Remember

 

  1. Prior to entering into contractual negotiations, which of the following advice from the risk management department would let you know that you should be avoiding reliance on the common law doctrine of frustration?

 

a. It holds that the terms of a contract are settled at the time of acceptance.
b. It is a reliable avenue of escape that operates in limited circumstances.
c. It holds a party from being able to perform its contractual obligations.
d. It is an unreliable avenue of escape that operates in narrow circumstances.

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   156

MSC:  Evaluate

 

  1. Which of the following would a negotiator most likely caution against with respect to the notion of building flexibility into contractual agreements?

 

a. the risk of having no contract at all if the resulting document is too unfixed
b. the risk that the parties will be allowed to terminate the contract altogether
c. the risk of having the parole evidence applied regarding evidence of intent
d. the risk that voluntarily altering the contract will make it unenforceable

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   157

MSC:  Analyze

 

  1. Marty has made his acceptance of an offer to purchase his house subject to his lawyer’s approval. Why did Marty’s lawyer advise him that it was essential for him to do so?

 

a. to ensure contractual obligations Marty incurs are limited to certain circumstances
b. to ensure that any price-variation clause will be detected and eliminated
c. to ensure that Marty will receive a fair price without losing the sale altogether
d. to avoid having to negotiate a higher price to compensate for market changes

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   158

MSC:  Understand

 

  1. What is the legal term given to a clause that allows the parties to reopen negotiations or terminate the contract if specified events occur?

 

a. a condition precedent
b. an implied term
c. an entire contract clause
d. an exemption clause

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   158

MSC:  Remember

 

  1. What is the legal term given to a clause that makes a contract enforceable against a buyer only if the buyer is able to secure a satisfactory building inspection?

 

a. a liquidated damages clause
b. a limitation of liability clause
c. an condition subsequent
d. a condition precedent

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   158

MSC:  Remember

 

  1. Which of the following would automatically end a contract with a supplier if the buyer’s sales fall below a stated level?

 

a. an exemption clause
b. a condition precedent
c. a liquidated damages clause
d. a condition subsequent

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   158

MSC:  Understand

 

  1. Which of the following would establish a maximum level of liability for one of the parties if it commits a breach?

 

a. a condition precedent
b. a limitation of liability clause
c. a liquidated damages clause
d. an exemption clause

 

 

ANS:  B                    PTS:   1                    DIF:    Easy               REF:   160

MSC:  Understand

 

  1. Which of the following would establish that damages of $10 000 will be payable by a supplier if it fails to deliver products to a retailer on time?

 

a. a liquidated damages clause
b. a condition precedent
c. an exemption clause
d. a limitation of liability clause

 

 

ANS:  A                    PTS:   1                    DIF:    Easy               REF:   164

MSC:  Remember

 

  1. Which of the following would provide that a supplier will not be liable to the retailer if it is fails to deliver products to it on time?

 

a. a liquidated damages clause
b. a condition precedent
c. an exemption clause
d. a limitation of liability clause

 

 

ANS:  C                    PTS:   1                    DIF:    Easy               REF:   164

MSC:  Remember

 

  1. Which of the following must be present in order for a condition subsequent to be recognized as legally enforceable?

 

a. sufficient detail; otherwise the uncertain condition is unenforceable
b. sufficient fulfillment of each parties’ collateral contractual obligations
c. reasonable certainty and objectivity; otherwise the condition will fail
d. reasonable certainty of an unforeseen occurrence of an event

 

 

ANS:  A                    PTS:   1                    DIF:    Challenging    REF:   158

MSC:  Analyze

 

  1. “I’ll buy your horse if he decides he likes me” is an example of what type of contractual condition?

 

a. a fiduciary condition subsequent
b. a condition precedent
c. an illusory condition precedent
d. a condition subsequent

 

 

ANS:  C                    PTS:   1                    DIF:    Challenging    REF:   158

MSC:  Understand

 

  1. Which of the following principles could you reasonably expect Canadian common law courts to apply when faced by cases dealing with a standard form contracts?

 

a. Customers’ continued use amounts to acceptance of unilateral amendments.
b. Terms are to be set out in plain language and legalese must be absent.
c. Pre-printed terms are put inside a box to which reference is made on the outside.
d. Ambiguous terms should be construed against the party that prepared the contract.

 

 

ANS:  D                    PTS:   1                    DIF:    Medium         REF:   161|162

MSC:  Analyze

 

  1. Which of the following is a distinguishing characteristic of a standard form contract?

 

a. The condition subsequent cannot be enforced.
b. The buyer has an unfair advantage in negotiation.
c. The condition precedent cannot be enforced.
d. The terms cannot be changed by negotiation.

 

 

ANS:  D                    PTS:   1                    DIF:    Easy               REF:   161|162

MSC:  Analyze

 

  1. Which of the following is characteristic of a shrink-wrap agreement?

 

a. Continued use after posting of amendments to a website constitutes acceptance.
b. The enforceability of terms depends on notification of the user’s assent.
c. The effect of opening the package constitutes acceptance of the terms.
d. The appearance on screen is in response to a user’s attempt to download product.

 

 

ANS:  C                    PTS:   1                    DIF:    Medium         REF:   162|163

MSC:  Analyze

 

  1. In what way are a click-wrap agreement and a browse-wrap agreement different from one another?

 

a. Notification prior to assent is required to enforce terms of a click-wrap agreement.
b. Notification prior to assent is required to enforce browse-wrap agreements.
c. Notification and consent are required to enforce browse-wrap agreements.
d. Notification and consent are required to enforce terms of a click-wrap agreement.

 

 

ANS:  A                    PTS:   1                    DIF:    Medium         REF:   163

MSC:  Understand

 

TRUE/FALSE

 

  1. When the parties fail to address an important aspect of their contractual relationship, the law may help to “fill in the blanks” through implied terms.

 

ANS:  F                    PTS:   1                    DIF:    Easy               REF:   149

MSC:  Conceptual

 

  1. Parties to a sale of goods contract are always bound by the implied terms established by the Sale of Goods Act.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   152|153

MSC:  Conceptual

 

  1. Entire contract clauses are used to ensure that the parole evidence rule applies to the contract.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   153

MSC:  Remember

 

  1. Courts are not allowed to refer to external sources (e.g., dictionaries) when trying to determine the meaning of ambiguous terms used in contracts.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   154|155|156

MSC:  Remember

 

  1. The courts will not imply a duty to act in good faith in commercial contracts.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   150|151

MSC:  Remember

 

  1. When a new and separate contract is formed between parties who had an earlier contract dealing with the same matter, the terms, conditions, and exclusions will automatically be assumed to be identical to those found in the earlier contract.

 

ANS:  F                    PTS:   1                    DIF:    Challenging    REF:   152

MSC:  Remember

 

  1. When the existence of the contract is not in doubt, the court will assign as reasonable a meaning as possible to vague or ambiguous terms.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   148|149

MSC:  Remember

 

  1. A standard form contract allows major terms and conditions to be changed through negotiation.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   161|162

MSC:  Remember

 

  1. Contracting parties can agree to limit the liability for a breach to less than what is recoverable under the principles of contract law.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   160|161

MSC:  Remember

 

  1. Liquidated damages clauses are never upheld by courts since they unfairly limit damage claims.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   164

MSC:  Remember

 

  1. It can be very difficult to predict how a court will interpret any given contract because the principles for interpreting the rules of a contract are guided by conflicting rules of construction.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   148|149

MSC:  Remember

 

  1. When a court must apply the principles of the rules of construction, it may come to a conclusion simply by asking how a reasonable person would interpret the terms.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   148|149

MSC:  Remember

 

  1. The principle of business efficacy makes an obligation explicit.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   150

MSC:  Remember

 

  1. Bad faith is conduct that is contrary to community standards of honesty, reasonableness, or fairness.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   151

MSC:  Remember

 

  1. Some Canadian courts have ruled that a good faith clause is not an automatic term of every contract and can be implied only when it is consistent with the parties’ intentions.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   151

MSC:  Remember

 

  1. Because a party is never successful in litigation where reliance is made on trade customs to imply a term into a contract, the more prudent course is to ensure that all important terms are explicitly recited.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   151

MSC:  Remember

 

  1. Contractual quantum meruit requires a customer to pay whatever the supplier chooses to charge or whatever the market will bear.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   153

MSC:  Remember

 

  1. A product that contains a shrink-wrap licence typically bears a notice stating that opening the package constitutes agreement to the licence terms.

 

ANS:  T                    PTS:   1                    DIF:    Medium         REF:   162

MSC:  Remember

 

  1. A browse-wrap licence instructs the user to review the terms prior to assenting by clicking an “I accept” icon and the user typically cannot proceed any further without agreeing to the licence terms.

 

ANS:  F                    PTS:   1                    DIF:    Medium         REF:   163

MSC:  Remember

 

  1. The question of validity of browse-wrap agreements can be avoided entirely by requiring customers to take affirmative action to signify assent.

 

ANS:  T                    PTS:   1                    DIF:    Easy               REF:   163

MSC:  Remember

 

SHORT ANSWER

 

  1. Identify four grounds used by the courts for introducing implied terms into contracts. Give an example of each.

 

ANS:

Examples will vary. Following are four grounds:

  1. business efficacy
  2. customs in the trade of the transaction
  3. previous dealings between the parties
  4. statutory requirements

 

PTS:   1                    DIF:    Medium         REF:   150|151|152   MSC:  Remember

 

  1. Identify and briefly describe the conflicting consideration that arises from the common law rules of construction. Identify how this conflict arises and under what circumstances parties might find themselves facing such a dilemma.

 

ANS:

The common law rules of construction create two conflicting considerations for the courts as follows:

 

  1. On one hand, the courts are to enforce a contract as it is written and to rely primarily on the plain, ordinary meaning of the words that the parties have chosen.

 

  1. On the other hand, the courts are required to give effect to the parties’ intentions.

 

The conflict arises over which rule should prevail. Both these rules make sense standing alone, but they do not provide a solution to the situation in which the parties’ intentions may be inadequately reflected in the written contract itself.

 

PTS:   1                    DIF:    Medium         REF:   148|149          MSC:  Remember

 

  1. Identify and briefly describe the situations in which the court will disregard the parole evidence rule and consider evidence outside the contract.

 

ANS:

The situations in which the court will consider will disregard the parole evidence rule and consider evidence outside the contract are as follows:

 

  1. where there is an allegation of fraud or mistake creating an alleged problem that goes to the formation of the contract
  2. where the contract is intended to be partly oral and partly in writing the rule has no application
  3. where a promise is contained in a separate collateral agreement that happens to be oral, the rule does not apply
  4. where the language in the contract is ambiguous, evidence outside the contract can be             used to resolve the ambiguity

 

PTS:   1                    DIF:    Medium         REF:   147|148          MSC:  Remember

 

  1. The use of electronic communications creates difficulties in the application of contract law. Some jurisdictions have implemented legislation based on the recommendations of the Uniform Law Conference of Canada. Discuss.

 

ANS:

 

Electronic business involves the negotiation and creation of contracts online. The terms of the contracts are records electronically and there is no document record. This method of doing business creates difficulty if it becomes necessary to produce the original contract in court. Several jurisdictions have implemented the Uniform Electronic Evidence Act (UEEA). Under this legislation, the person seeking to introduce an electronic record has the burden of proving its authenticity by evidence capable of supporting a finding that the electronic record is what the person claims it to be.

 

PTS:   1                    DIF:    Medium         REF:   149                MSC:  Remember

 

  1. Briefly explain what is meant by a standard form contract? Identify when these types of contracts are typically used and identify a situation where a court would likely disallow a term contained in a standard form contract.

 

ANS:

 

A standard form contract is a pre-printed form containing all the pre-determined terms of a contract between the parties. Standard form contracts do not allow one party to negotiate. These types of contracts are typically used in consumer contracts, ranging from video rentals to automobile purchases, in which the consumer is subjected to a “take it or leave it” approach by large companies like retailers and manufacturers. As a general rule, where the business has failed to properly explain to the customer the consequences of the standard form contract in question, a court will generally take the customer’s side by disallowing the term.

 

PTS:   1                    DIF:    Challenging    REF:   161|162          MSC:  Remember

 

  1. Identify the terms that are required to be present in a commercial contract in order for it to be considered complete. Identify any additional clauses that could provide additional benefits through their inclusion.

 

ANS:

A commercial contract will be considered complete if it has identified the following terms:  parties, price, delivery date, product, quantity, quality, guarantees, limitations on or exemption of liability, and insurance.

 

Additional clauses that should be included if possible are a clause expressly eliminating application of the Sales of Goods Act, an entire contract clause, a price-variation clause, and an arbitration or mediation clause.

 

PTS:   1                    DIF:    Challenging    REF:   164                MSC:  Remember

 

  1. Identify and briefly explain the purchaser’s recourse in circumstances where, under the terms of contract, a supplier has: ( i) failed to deliver, (ii) delivered goods that have a minor defect,  (iii) delivered seriously defective goods.

 

ANS:

 

Should a supplier who is obligated under a contract to deliver goods fail to deliver those goods, the purchaser would not have to pay the consideration promised in the contract.

 

Where goods have been delivered with a minor defect, the purchaser may seek payment of a reduced price to reflect the lesser value of the goods and/or the cost of repairing the defects.

 

Where goods have been delivered with a serious defect, the purchaser has the option of refusing delivery.

 

PTS:   1                    DIF:    Easy               REF:   165                MSC:  Remember

 

  1. Identify and briefly explain the circumstances in which a court will imply a term where that term is alleged to have not been addressed in the contract as an express term. Identify and briefly describe the classic courtroom scenario that would be presented to a judge hearing such a case. Provide a brief explanation as to which party in the suit would bear the burden of proof.

 

ANS:

A court will imply a term in a contract  in order to give effect to the parties’ intentions if a judge has been satisfied that not all of the terms that the parties intended to include in the contract were in fact included. In the classic scenario, the plaintiff argues to include an implied term while the defendant argues that no such term was intended. The plaintiff carries the burden of proof and will only be successful where there has been a demonstration that the intention to include the term exists on the balance of probabilities.

 

PTS:   1                    DIF:    Challenging    REF:   149                MSC:  Remember

 

  1. Identify and briefly described how a situation involving delivery of an quantity of product exceeding the contracted amount would be resolved under the Sale of Goods Act.

 

ANS:

The Sale of Goods Act provides that where a seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or may reject the whole; if the buyer accepts the whole of the goods delivered, the buyer shall pay for them at the contract rate.

 

PTS:   1                    DIF:    Medium         REF:   153                MSC:  Remember

 

  1. Identify and briefly describe the circumstances that are of particular importance to negotiators with respect to evaluating risks associated with increases in the cost of materials used to produce a product. Identify and briefly describe contractual terms that may be applied to reduce the risk of market price fluctuations.

 

ANS:

 

It is particularly important in longer-term contracts that negotiators evaluate risks, speculate on possible changes in the business environment, and be wary of making inflexible commitments.  In order to reduce risk with respect to market price fluctuations, the following contractual terms may be used:

  1. i) provide a formula setting the price of the goods supplied in a manner that is tied to market value
  2. ii) set the price according to the cost of materials, plus a specific percentage for profit

iii)        allow the parties to reopen negotiations or terminate the contract altogether if                                                specified events occur, such as a commodity price reaching a certain level

 

PTS:   1                    DIF:    Challenging    REF:   157                MSC:  Remember