Deck 7: Formation of a Contract: Consideration and Intention

Question 1

Which of the following is NOT true about consideration?

A)Consideration must be of some value in the eyes of the law.
B)A gratuitous promise is not supported by consideration.
C)Consideration has to be adequate.
D)Consideration must be sufficient.
E)Consideration can be in the form of a detriment to a party.

Answer 1

C

Question 2

A gratuitous promise differs from a contract in that

A)a gratuitous promise cannot lapse.
B)it does not require the payment of money to the offeror by the offeree.
C)consideration flows only in one direction.
D)a gratuitous promise cannot be revoked.
E)the terms of a gratuitous promise are not precise enough to be binding.

Answer 2

C

Question 3

When a contract is authenticated by the affixing of a seal,the contract will be enforceable even when it lacks

A)a promissory basis.
B)an acceptance.
C)consideration.
D)contractual intention.
E)an offer.

Answer 3

C

Question 4

The concept of estoppel is where

A)the court stops a party from performing a contract.
B)the terms of the contract require that one of the parties be stopped from performing a particular act.
C)the promisee is stopped from denying the truth of a fact or statement.
D)the court suspends the operation of the contract.
E)the maker of a statement or promise is prevented by the courts from either denying the truth of the statement or going back on a promise.

Question 5

Use the fact situation in Q10 to answer the related question that follows. The principle of law that arises out of the fact situation above was meant to overcome an earlier principle of law that stated that

A)payment of a lesser sum terminates the contract.
B)a contract does not need consideration at all.
C)a contract is terminated by performance.
D)payment of a lesser sum in satisfaction of a greater sum is no payment at all.
E)none of the above

Question 6

On March 1,Al agrees to sell Barb his house for $250 000.Barb pays a deposit of $15 000,and they agree that title will transfer and the price will be paid on April 30.The agreement is signed by both parties under seal.What is the consideration on Barb's part?

A)the deposit of $15 000
B)there is no consideration
C)quantum meruit
D)the seal
E)the promise to pay the $250 000

Question 7

The contractual requirement of consideration provides that

A)the contract must be given careful consideration before it is entered into.
B)the offeror must pay cash for the offeree's promise to perform an act.
C)an offeree must pay cash for the offeror's promise to perform an act.
D)each party must give something of value in exchange.
E)what is exchanged by the parties must be of equal value.

Question 8

Even when offer and acceptance and consideration are present,there may be no enforceable contract if

A)the subject of the contract is too trivial.
B)there were no witnesses present at the signing of the contract.
C)the contract is not in writing.
D)there is no intent to create legal relations.
E)the consideration is not adequate.

Question 9

A,at the request of B,enters into a contract to buy a horse from B for a certain price.Just after entering into the contract,B tells A that the horse is sound and healthy.Later A discovers that,in fact,the horse is in ill health.In this situation,B's statement to A that the horse was sound and healthy

A)is partly fresh and past consideration so as to not make B's promise binding.
B)is partly fresh and partly past consideration so as to make B's promise binding.
C)is past consideration so as to not make B's promise binding
D)is fresh consideration so as to make B's promise binding
E)all of the above

Question 10

Shahid orders a pizza by telephone and says he will pay on delivery.Which of the following would constitute consideration received by Shahid?

A)placing the call.
B)promising to pay for the pizza.
C)handing over the money.
D)accepting delivery of the pizza.
E)none of the above.

Question 11

Use this fact situation to answer the questions that follow it. In January 1941 in Canada,John Landlord and Harry Tenant enter into a lease under which Harry agrees to rent a house from John for five years at a rent of $1000.00 per month.In March 1941,Canada declares war on Germany and John tells Harry that until the war is over,Harry will not have to pay rent.Of course,Harry stops paying rent while the war goes on.The war ends in January 1945,and now John Landlord sues Harry for all of the rent from March 1941 to present.In turn,Harry is thinking of suing John Landlord on the basis that his statement to Harry about not paying the rent during the war was a contract.
In the fact situation above,

A)John Landlord can argue that he is entitled to the rent,because there was no consideration for his promise to Harry,and the court will accept this.
B)Harry will be able to successfully sue John Landlord for breach of his agreement not to make Harry pay rent during the war.
C)John Landlord can argue that it would be unjust for Harry not to have to pay the rent,and this argument will succeed.
D)at the very least the court will value John Landlord's claim on a quantum meruit basis.
E)Harry Tenant will argue that John Landlord's promise in March 1941 stops John Landlord from suing him for rent from March 1941 to the end of the war,and this argument will be a good defence to John Landlord's action.

Question 12

An intention to create legal relations exists if

A)the promisor and the promisee have identified all the consideration involved in the contract.
B)there is an offer,acceptance,and consideration.
C)a reasonable person would believe that the parties intended to be bound by the contract.
D)the court examines the facts and determines that the parties intended to enter into legal relations.
E)the parties have capacity to enter into a contract.

Question 13

Consideration is

A)the price that is paid for the promise of another.
B)a special kind of gratuitous promise.
C)the acceptance of an offer.
D)the offer that is made to another.
E)a special kind of acceptance.

Question 14

The reasonable bystander test is

A)a test that employs witnesses to make candid observations about contract cases.
B)the test that is used by the courts to determine whether parties intended to enter into legal relations with each other.
C)the test that employs non-specialists as members of a jury in contract cases.
D)the test that the parties can use to determine who is in breach of contract.
E)the test that the parties can use to determine compensation in contract cases.

Question 15

Use the fact situation in Q10 to answer the related question that follows. The principle of contract law that arises in the fact situation above is

A)revocation.
B)fraudulent misrepresentation.
C)deceit.
D)fresh consideration.
E)promissory estoppel.

Question 16

Jack walks into a bar.He is a little tipsy.The waitress pours him a pint of beer and he pays with all the money he has on him.He makes this statement to the waitress: "Sorry I can't tip you today,but you know what,I have this lottery ticket,and if I win,I'll split it with you." The waitress says,"No problem,Jack." Jack later makes a copy of the ticket for the waitress.The next day Jack receives a call from Stephanie,the waitress,who tells him that she checked the numbers and that he has won $1 million.Stephanie asks,"Our deal is on right?" Jack says,"What deal?" She says,"You promised to split the winning ticket with me." He says,"Really?" Which of the following is true?

A)Jack will have to split the proceeds with Stephanie on a quantum meruit basis.
B)Stephanie can sue Jack for breach of contract if she does not get her share of the ticket.
C)Jack promised to split the winning ticket with Stephanie and she accepted,so a valid contract was created.
D)No contract arose because there was no intention on the part of Jack to enter into legal relations with Stephanie.
E)A contract did not arise because Jack's statement was not an offer.

Question 17

Jack and Jill are friends.Jack agrees to mow Jill's lawn and Jill agrees to pay Jack $50.00.Jill wants the lawn mowed by April 1.Jill returns on April 3 and finds that the lawn has not been mowed.Jill,who is entertaining the next day,goes to Jack and promises that if he mows the lawn that day,she will give him an additional $20.00.Jack mows the lawn but Jill refuses to pay him the additional $20.00.Which of the following is true?

A)Jack can sue Jill for breach of contract.
B)Jill has no obligation to pay because the promise to pay the additional $20.00 was not supported by fresh consideration.Jack had a pre-existing legal duty to mow the lawn.
C)There was no offer and acceptance.
D)Jill has an obligation to pay the additional $20.00 because a legally enforceable promise to pay was made.
E)Jill made an offer and Jack accepted it,so a contract was created.

Question 18

The principle of injurious reliance is

A)the loss or harm that is suffered by a promisee who,to his or her detriment,relies on a gratuitous promise.
B)the contractual relationship that arises between an injured party and the person or persons on whom this injured party relies.
C)the injury that a person in a contractual relationship suffers when there is a breach of contract.
D)the amount of compensation that is awarded to a party where there is a breach of contract.
E)the personal injury that is suffered by persons who are involved in contractual situations.

Question 19

James does some work for Jim.Jim refuses to pay on the grounds that not all the work was done.Jack takes Jim to court and the judge says Jack is entitled to a quantum meruit.This means that

A)the parties will agree on the appropriate price.
B)a dispute regarding the price should be resolved by arbitration.
C)Jim must pay a reasonable amount for the services rendered.
D)a price will be fixed for the work done.
E)Jack is entitled to his expenses.

Question 20

Which of the following would a court NOT regard as consideration on the part of a party to a contract?

A)a promise to pay for what the other party has already done
B)giving up what the party honestly believes is a right to sue
C)a promise to pay money to the other party in the future
D)a promise to pay money to a third party who is not a party to the contract
E)money paid to the other party

Question 21

Where there is an existing contract between two parties and one party,to ensure performance by the other,promises something more,so long as the other party also gives something more,there is a binding contract and the first party must perform the new promise.

Question 22

Use this fact situation to answer the related questions that follow. On June 1,A,a debtor,loans $5000.00 from B,a creditor,and agrees to repay it by December 1 of the same year.On November 1,B says to A,"Rather than paying me the full $5000.00,just pay me $3500.00 and your debt will be cancelled." A pays the $3500.00,but B now changes his mind and tells A that he wants A to pay him the balance of $1500.00.
In this situation at common law,

A)B cannot recover the extra $1500.00,because he agreed to reduce the amount of the debt.
B)B is estopped by promissory estoppel from recovering the $1500.00.
C)B can recover the extra $1500.00 on the basis of quantum meruit.
D)B can recover the extra $1500.00 under present-day legislation.
E)B can recover the extra $1500.00 since his promise lacks fresh consideration.

Question 23

Generally speaking,it is up to the court to ensure that a fair bargain was made;that is,to ensure that the consideration for a promise is adequate.

Question 24

Use this fact situation to answer the related questions that follow. On January 1,A and B enter into a contract under which B agrees to renovate A's house by September 1 for $60 000.00.By June 2,B has not yet started the renovations and A is getting worried,so A tells B that he will pay him an extra $5000.00 if B completes the renovations on time.B completes the renovations by September 1st and now asks A for $65 000.00.
In this situation,

A)A's promise to pay B an extra $5000.00 is not supported by fresh consideration.
B)A's promise to pay B an extra $5000.00 is made before the contract is over.
C)the consideration for the contract on January 1 is $60 000.00.
D)there was a contract on January 1 that must be performed by September 1.
E)all of the above

Question 25

The reasonable amount that a person deserves to be paid for goods and services provided to the person requesting them is called

A)gratuitous promise.
B)quantum meruit.
C)damages.
D)covenant.
E)promissory amount.

Question 26

Motive can change a gratuitous promise into a binding contract.

Question 27

There is no contract unless each party intends to create a legally enforceable contract.

Question 28

Use the fact situation in Q25 to answer the related question that follows. Review the fact situation above and now assume that on November 1,B said to A,"Rather than paying me the full $5000.00,just pay me $3500.00 and give me your watch,and your debt will be cancelled." A's watch is a cheap one worth $5.00.A gives B the watch and pays him the $3500.00.
In this situation,

A)B can recover the $1500.00 from A because the contract was to repay a debt of $3500.00.
B)B cannot recover the $1500.00 from A because A's watch is fresh consideration.
C)B is still estopped by promissory estoppel from collecting the $1500.00 from A.
D)there is still no fresh consideration for B's promise to reduce A's debt to $3500.00.
E)the watch is meaningless and A will still owe B $1500.00.

Question 29

Where there is an existing contract between two parties and,to ensure performance,one party promises to give more consideration than under the original contract,the new promise is binding and must be performed.

Question 30

A document made under seal does not require consideration.

Question 31

Gratuitous promises are made without consideration.

Question 32

Estoppel or promissory estoppel was developed to overcome the principle that payment of a lesser sum in satisfaction of a greater sum is no payment at all.

Question 33

Mo agrees to provide lawn care services to Judith in preparation for a summer birthday party Judith is holding for family and friends.The agreement requires that Judith pay Mo $250.00 for three hours' work.After completing approximately half of the job,Mo requests that Judith pay him an extra $50.00 because the cost of gasoline used for the rider mower had gone up significantly that morning.Judith agrees to pay the additional $50.00.Is she legally liable to do so?

A)Yes she is,because she told Mo she would pay him and he finished the job on the basis of her promise.
B)Yes she is,because the rising price of gas should be borne by Judith.
C)No she isn't,because Mo had an existing contractual obligation to perform the services for $250.00 and there is no consideration for the subsequent agreement to pay $50.00 more.
D)No she isn't,because Judith is promising to reward Mo for something he has previously done and the past consideration is no consideration.

Question 34

A promise by a creditor to accept less than full payment from a debtor is

A)unenforceable because the creditor did not provide consideration.
B)enforceable because the promisee accepts the offer.
C)a bilateral contract.
D)unenforceable because it is a gratuitous promise.
E)enforceable because it gives rise to a contract.

Question 35

Allen is Harry's older brother.Yesterday,Allen asked Harry,an experienced plumber,to fix a leaky pipe below the sink of Allen's main floor washroom.Knowing that Allan had just lost his job and wanting to help him out,Harry did the work,which took him almost half a day to complete.The next day,Harry and Allen had an argument,and in anger Harry told Allen he expected to be paid for his work.In this situation,

A)the law will imply a promise by Allen to pay Harry because it deals with supply of services.
B)the law will imply a promise by Allen to pay Harry because Allen has been unjustly enriched.
C)the law will imply a promise by Allen to pay Harry because they are family members.
D)the law will not imply a promise by Allen to pay Harry because they are family members.
E)the law will imply a promise by Allen to pay Harry because Harry performed services for Allen.

Question 36

Quantum meruit does not refer to the reasonable amount that a person merits for goods and services provided.

Question 37

Promissory estoppel can be used as the basis for a lawsuit.

Question 38

Use the fact situation in Q23 to answer the related question that follows. Review the fact situation above and now assume that instead of simply promising to pay B an extra $5000.00,A says,"I'll pay you an extra $5000.00 if you fix that cracked board in my fence.Also assume that B completes the job by September 1 and fixes the cracked board.
In this situation,

A)there is still no fresh consideration from B,so A does not owe the extra $5000.00.
B)since B completed the contract on September 1st,B is only entitled to the original price of $60 000.00.
C)the contract did not change on June 2,so A does not owe the extra $5000.00.
D)the promise to fix the cracked board and the fixing of it is fresh consideration and B is entitled to the extra $5000.00.
E)the promise to fix the cracked board and the fixing of it was a gratuitous promise so B is not entitled to the extra $5000.00.

Question 39

All gratuitous promises are unenforceable.

Question 40

A promise that is made without bargaining for or accepting anything in return is a

A)promissory estoppel.
B)covenant.
C)quantum meruit.
D)consideration.
E)gratuitous promise.

Question 41

What is a gratuitous promise? Can such a promise support a contract?

Question 42

When one party to a concluded contract promises the other party something more,why is the new promise not binding?

Question 43

Nan promises not to sue Reg if he agrees to pay her $1000.Reg agrees to pay Nan $1000,but later discovers that she actually had no right to sue him.Is Reg bound to pay Nan?

Question 44

What is the effect of sealing a contractual document?

Question 45

Why is a promise to perform a pre-existing legal duty not consideration?

Question 46

What is meant by "the meeting of minds"? How significant is it to the formation of contracts?

Question 47

Should promissory or equitable estoppel only be used as a defence?

Question 48

When we say that consideration is the price for a promise,what does price mean?

Question 49

Is it possible for a person to enter into an enforceable contract without receiving any benefit from the agreement?

Question 50

Today,the rule in Foakes v.Beer,that payment of a lesser sum in satisfaction of a greater sum is not payment at all,does not apply in Ontario.Explain.

Question 51

Injurious reliance and equitable estoppel are two sides of the same coin.Explain.

Question 52

Motive is irrelevant to consideration.Explain.