Deck 7: The Terms of a Contract

Question 1

What 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) an entire contract clause
B) an exemption clause
C) a limitation of contract clause
D) a limitation of liability clause

Answer 1

A

Question 2

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 the industry practice of charging interest on its accounts.
D) The parties had a history of past dealings,which clarified their intentions.

Answer 2

C

Question 3

OrganicFoods Inc.enters into a contractual supply arrangement with EcoGrow Inc.EcoGrow contractually promises to supply two tons of organic carrots by May 1,providing carrots will be available.If EcoGrow does not supply the carrots as agreed,how will a court 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.

Answer 3

D

Question 4

What is one of the drawbacks of the parol evidence rule?

A) It permits the acceptance of extrinsic evidence to determine the parties' intention.
B) It is a basis for relieving parties from their contractual obligations.
C) It may prohibit parties from enforcing oral promises.
D) It results in contractual quantum meruit.

Question 5

Sheps & Shaps LLP signed a one-year contract under which it was to receive a weekly delivery of 10 cartons of 8 x 11 bond paper and 5 cartons of 11 x 14 bond paper for a monthly fee of $700.The contract expired two months ago,but Sheps & Shaps continued to accept two additional deliveries.Given these circumstances,which of the following statements is true?

A) The Sale of Goods Act will imply a continuing contract between the parties on the same terms as the previously existing contract.
B) The contract has expired,and therefore Sheps & Shaps is not required to pay for the two additional deliveries.
C) If the parties have contracted in the past,it may be possible to imply that their contract remains the same.
D) The business exception rule will impose a requirement that Sheps & Shaps pay a reasonable price for the paper.

Question 6

A court that is hearing a contractual dispute has determined that an ambiguous term must be construed against the party drafting the agreement.What is name for the doctrine the court is applying?

A) parol evidence rule
B) quantum meruit
C) implied contract rule
D) contra proferentum rule

Question 7

Nathan is the owner of a small drapery manufacturing business.He has a written contract with a fabric supplier,but some aspects of their agreement were never put into the written document.Why will Nathan have difficulty enforcing the verbal aspects of their agreement?

A) because the parol evidence rule forbids outside evidence as to the terms of the contract when the written contract is clear
B) because verbal promises cannot form the basis of contractual obligations
C) because the contra proferentum rule will result in a court rejecting the verbal terms of the agreement
D) because the court cannot imply terms into a contract

Question 8

What is the name given to a clause in which the parties agree that their contract is complete as written?

A) parol evidence clause
B) entire contract clause
C) express term
D) exclusion clause

Question 9

What is the function of an express term with respect to a contract?

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.

Question 10

Which of the following statements regarding contract terms is correct?

A) Contract terms are an aid for a court to interpret a business arrangement.
B) Contract terms may be express or implied.
C) Contract terms must be in writing to be effective.
D) Contract terms must be reasonable.

Question 11

What is the term for the guiding principles that are used for interpreting terms of a contract?

A) the statutory interpretation rules
B) the entire contract rules
C) reasonable bystander test
D) rules of construction

Question 12

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 will she 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

Question 13

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 between them makes no reference to payment terms.What 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

Question 14

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 whatever charge there would be to his regular bill.What 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

Question 15

What is the legal term given to a provision in a contract whereby the parties agree in advance the amount to be paid in the event of a contract breach?

A) an applied term
B) a liquidated damages clause
C) a punitive clause
D) an exemption clause

Question 16

What is the policy rationale for contractual quantum meruit?

A) The assistance provided by implied terms is sporadic and uncertain.
B) It is not the intention of the parties that goods or services are provided for free.
C) Parties who fail to document their contracts should nonetheless be bound by their promises.
D) The parties' intention to impose a penalty should be upheld.

Question 17

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.

Question 18

What is a valid criticism of the common law with respect to the current application of an implied term of good faith by the courts when considering dealings between contractual parties?

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 create uncertainty,which is not the function of common law.
D) Opposing rulings maintain the rule that parties must take care of themselves.

Question 19

Which of the following allows a judge to imply terms in 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

Question 20

EcoGrow Inc.contractually agreed to deliver two tons of organic fertilizer on March 16 to Organics Inc.The contract provided for the payment of $1000 for each day the delivery may be delayed.An ice storm closed highways,causing Eco to deliver four days late.What could you likely expect a lawyer representing Organics to argue before the court hearing a dispute over the 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

Question 21

Under what circumstances might a court apply the "Best Evidence Rule"?

A) if the parties have entered into an oral contract with witnesses
B) when interpreting an implied term in a written contract
C) when applying an electronic contract
D) where evidence has been lost before trial

Question 22

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

A) to limit liability and block the 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

Question 23

Which of the following is a distinguishing characteristic of a limited liability clause?

A) It relieves or limits liability of a party for damages in particular circumstances.
B) It may be used to punish parties for non-compliance with contractual promises.
C) It requires the parties to purchase insurance.
D) It relieves parties in a variety of circumstances from contractual obligations.

Question 24

The parol evidence rule prohibits the introduction of a specific type of evidence relating to the terms of a contract when the language used in that document is clear.What is the second condition required to invoke the parol 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.

Question 25

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,if a dispute ensues,will the parol evidence rule play a role?

A) It will be used to prevent extrinsic evidence regarding the oral agreement.
B) It will not play a role; because 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 will not play a role,owing to the distinct nature of the collateral contract and price.

Question 26

ABC Electrical Inc.has a contract with a building contractor that provides that in the event of breach,ABC will be entitled to damages of $10 000.Which of the following best describes this type of contract term?

A) a liquidated damages clause
B) a condition precedent
C) an exemption clause
D) a limitation of liability clause

Question 27

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 the 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 producing the original electronic contract

Question 28

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

Question 29

Which if the following is a distinguishing characteristic of a "condition precedent"?

A) It prevents a contract from coming into existence if a particular condition is not met.
B) It relieves a party from performing a contract if a particular condition is not met.
C) It is a term that,if breached,entitles the other party to cancel the contract.
D) It permits a party to limit liability for damages.

Question 30

Which of the following would provide that a supplier will NOT be liable to a 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

Question 31

Why should one NOT rely on the common law doctrine of frustration in contractual negotiations?

A) The doctrine of frustration holds that the terms of a contract are settled at the time of acceptance.
B) The doctrine of frustration is a reliable avenue of escape that operates in limited circumstances.
C) The doctrine of frustration holds a party from being able to perform its contractual obligations.
D) The doctrine of frustration is an unreliable avenue of escape that operates in narrow circumstances.

Question 32

What 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

Question 33

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

Question 34

What 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 parol evidence applied regarding evidence of intent
D) the risk that voluntarily altering the contract will make it unenforceable

Question 35

In what manner could you reasonably expect a court to apply the parol 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.

Question 36

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

Question 37

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

Question 38

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) a condition subsequent
D) a condition precedent

Question 39

What legislation would you need to rely on if you want to ensure that terms are implied in 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

Question 40

Under what circumstances might a court refuse to invoke the application of the parol evidence rule?

A) where there are changed circumstances since the contract was negotiated
B) where it would be contrary to the business efficacy rule
C) in the case of a consumer contract requiring expatiated evidence
D) where consumer protection legislation provides that oral pre-contractual statements are not necessarily superseded by written terms

Question 41

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.

Question 42

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

Question 43

An entire contract clause could be used to prevent a court from using outside evidence to interpret a contract.

Question 44

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

Question 45

The court may decline to apply the parol evidence rule if the language in the written contract is ambiguous.

Question 46

What is the term given to the guiding principles for interpreting the terms of a contract?

A) Thompson's Rules
B) The Rules of Construction
C) The Rules of Interpretation
D) The Parol Evidence Rules

Question 47

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

Question 48

The court may refuse to uphold a liquidated damages clause if its purpose is to punish.

Question 49

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.

Question 50

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.

Question 51

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.

Question 52

When resolving a dispute regarding the interpretation of a contract,the court always bases its interpretation on how a reasonable person would regard a term in a contract.

Question 53

What principle could you reasonably expect Canadian common law courts to apply when faced by cases dealing with 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.

Question 54

Through the doctrine of business efficacy,a judge is entitled to imply terms necessary to make a contract workable.

Question 55

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.

Question 56

What type of contractual condition is the statement "I'll buy your horse if he decides he likes me" an example of?

A) a fiduciary condition subsequent
B) a condition precedent
C) an illusory condition precedent
D) a condition subsequent

Question 57

An implied term may be imposed by the court in order to give effect to the parties' intentions.

Question 58

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

Question 59

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.

Question 60

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

Question 61

Because numerous circumstances may arise that prevent a party from performing its contractual obligations,it is important (particularly in longer-term contracts)that negotiators evaluate risks,speculate on possible changes in the business environment,and be wary of making inflexible commitments or obligations that make performance much more expensive than anticipated.How might a business that is contracting to supply goods in the future protect itself from potential increases in costs?

Question 62

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

Question 63

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.

Question 64

Is there an implied obligation of good faith on parties to a contract? Explain.

Question 65

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

Question 66

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.

Question 67

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

Question 68

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.

Question 69

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

Question 70

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.

Question 71

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.

Question 72

The court in Tilden Rent-A-Car v.Clendenning refused to uphold an exemption clause because the business knew that the customer had not read the contract.

Question 73

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.

Question 74

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

Question 75

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