Deck 7: The Terms of a Contract

Question 1

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.

Answer 1

C

Question 2

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.

Answer 2

B

Question 3

Great White North Plumbing received an urgent call to repair a ruptured water line in a house.After attending the premises and repairing the line,Great White North submitted its invoice for it services however now the customer refuses to pay,arguing that no price was discussed before the emergency repair was undertaken.What legal doctrine might Great White rely upon to collect its invoice?

A) the parol evidence rule
B) contractual quantum meruit
C) the business efficacy doctrine
D) the factual matrix approach

Answer 3

B

Question 4

Which statement best expresses the position taken by the courts with respect to contractual penalty clauses?

A) The court will enforce if it is meant to scare the other party into timely performance.
B) Such a clause is enforceable only if it fits the definition of a liquidated damages clause.
C) Such clauses are always enforceable provided the other party has sufficient notice.
D) Such clauses are enforceable provided they are in writing.

Question 5

Which description best describes the factual matrix examined by the courts when interpreting contractual terms?

A) the evidence of the party's subjective intention or negotiations leading up to the contract
B) the background facts known to the parties when the contract was concluded
C) the plain meaning of the words used in the contract document itself
D) the impression of a 'reasonable bystander' of the parties' intentions

Question 6

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 7

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 most accurate?

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 8

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 9

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.

Question 10

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 the 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 11

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 12

How does the doctrine of business efficacy impact the interpretation of contracts?

A) by permitting judges to strike out contractual terms that are commercially unreasonable
B) by permitting judges to imply terms necessary to make the contract workable
C) by permitting the parties to vary the wording of their contract to suit changing circumstances
D) by permitting the parties to ignore contractual terms that are commercially unreasonable

Question 13

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 14

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 15

Which statement best describes the effect of the parol evidence rule?

A) The rule preserves the sanctity of the written agreement.
B) The rule ensures that both written and oral contract terms are given effect.
C) The rule ensures that the true intentions of the parties are given effect.
D) The rule requires all contracts to be in writing to be enforceable.

Question 16

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 17

What is the position of the courts regarding the enforceability of 'browse-wraps' agreements?

A) They are not binding because they purport to accept an offer without something affirmative or positive to signal assent.
B) They are not binding because the user is not provided with sufficient notice of the terms of the agreement.
C) They are binding provided the user is provided with sufficient notice of the terms of the agreement.
D) They are an exception to the rule that the terms of a contract must be known in order to be enforceable.

Question 18

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 19

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 20

Which statement best encapsulates the Supreme Court of Canada's position regarding the duty of honesty in contract law?

A) Parties must disclose any matters that would adversely impact the other party's decision to enter into the contract.
B) Parties in a contract have a duty to disclose any advantages flowing to them from the contract.
C) Parties in a contract have a duty to be loyal to one another.
D) Parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.

Question 21

Upside Software Development Ltd.has agreed in its contract to pay damages of $500 per day for each day that it is late in delivering the agreed upon software program to its client.What is this type of contract clause?

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

Question 22

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 23

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 24

What is the legal effect 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 25

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 26

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 27

Wee Ones Safety Ltd.manufactures child car carriers and has agreed to provide 2000 statutorily compliant car seats to a department store chain.If the government changes the regulations and Wee Ones' production costs rise accordingly,what is the legal position of Wee Ones in its contract with the chain?

A) The doctrine of frustration holds that the terms of a contract are settled at the time of acceptance and Wee Ones will have to comply with its original contract terms.
B) The doctrine of frustration is a reliable avenue of escape for Wee Ones.
C) The doctrine of frustration will allow Wee Ones to modify its contract to incorporate the regulatory changes and its increased production costs.
D) The doctrine of frustration will not apply unless the parties have specifically referenced it in their contract.

Question 28

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 29

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 30

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 31

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 32

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 33

Primetime Events has hired the Janglers to perform at its concert hall,but the contract provides it can be cancelled if Primetime cannot sell more than 1000 tickets before December 1.What is the name given to the term that would allow Primetime to cancel the contract?

A) escape clause
B) exclusion clause
C) condition precedent
D) condition subsequent

Question 34

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 35

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 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

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 38

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 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

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 41

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

Question 42

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

Question 43

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 44

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 45

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

Question 46

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 47

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 48

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 49

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

Question 50

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 51

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 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

The purpose of an entire contract clause is to signal that the parties consider each term in the contract to carry the same weight.

Question 54

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

Question 55

Contracts may be entirely written or entirely oral but not partly oral and partly written.

Question 56

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 57

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 58

The courts have implied a duty of honesty into contractual relationships.

Question 59

There is a point where language in a contract is so ambiguous that the contract will fail for uncertainty.

Question 60

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

Question 61

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

Question 62

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 63

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 64

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

Question 65

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 66

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 67

How has the Supreme Court of Canada characterized the goal of contract interpretation in its recent decision in Sattva Capital v Creston Molly Corp?

Question 68

What is a liquidated damages clause and how can it be used to manage risk in a contract? What are the limitations on their use?

Question 69

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

Question 70

Compare and contrast a condition precedent and condition subsequent.Provide an example of each.

Question 71

A condition precedent situation means that the parties' obligations to perform are not triggered pending fulfillment of the condition.

Question 72

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

Question 73

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

Question 74

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 75

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

Question 76

Provide a formula setting the price of the goods supplied in a manner that is tied to market value
2.Set the price according to the cost of materials,plus a specific percentage for profit
3.Allow the parties to reopen negotiations or terminate the contract altogether if specified events occur,such as a commodity price reaching a certain level