Deck 5: An Introduction to Contracts

Question 1

What is the likely outcome when a court is asked to resolve a dispute involving parties that have reached an incomplete agreement?

A) The court will decline jurisdiction to provide a remedy derived under contract law.
B) The court will refer to statute law that will be applied to formulate a binding contract
C) The court will lack jurisdiction to refer the issue to alternative dispute resolution.
D) The court will apply the principles of the common law to constitute a binding contract.

Answer 1

A

Question 2

Which of the following is a good reason to use a contract as opposed to having a casual understanding?

A) Casual understandings require lengthy negotiations and time to perform.
B) All contracts typically involve arrangements that are unlikely to be repeated.
C) Casual understandings are casually conducted and completed instantly.
D) All contracts are subject to the same set of compulsory legal rules.

Answer 2

D

Question 3

Under what circumstances would a court apply the objective standard test?

A) when deciding the amount of damages to award the winning party
B) if there is inequality of bargaining power between the parties
C) where it is unclear whether the parties intended to form a contract
D) if the enforcement of the contract might cause harm to a third party

Answer 3

C

Question 4

What sequence of procedures will a court follow when asked to determine a matter involving a contractual dispute between two large corporations?

A) review the conduct of the parties,evaluate the relevant law and the contract terms,then reach a decision
B) evaluate the contract terms and the conduct of the parties,then apply relevant law to arrive at a determination
C) review the relevant law,evaluate the conduct of the parties,then apply the contract terms to arrive at a decision
D) evaluate the conduct of the parties,review the contract terms,then apply the rules of law to arrive at a decision

Question 5

With respect to the relationship that exists between contractual parties,what is meant by the phrase "meeting of the minds"?

A) There is an agreement between two or more persons.
B) The legal cornerstone of the commercial operation has been formed.
C) There is an informing idea behind the contractual relationship.
D) There is agreement upon the intrinsic responsibilities owed to each other.

Question 6

Which of the following best describes the relationship between bargaining power and the law of contract?

A) The law of contract is not generally concerned with the parties' relative bargaining power.
B) The law of contract seeks to correct inequalities in bargaining power.
C) The law of contract is very concerned with the relative bargaining power of the parties.
D) The goal of the law of contract is to reduce the bargaining power of the parties.

Question 7

Which statement best describes written contracts?

A) Written contracts must be filed at the appropriate registry in order to be enforceable.
B) Only certain types of contracts must be in writing in order to be enforceable in court.
C) All contracts must be in writing in order to be enforceable in court.
D) Written contracts are usually less cost-effective than verbal contracts.

Question 8

Fatima needs to copy and bind five sets of legal submissions with beige covers,but none are left in the supply cabinet.The office manager offers to reimburse Fatima for the cost of the covers and buy her lunch from petty cash if she will dash to the nearby office supply store to buy them.Fatima agrees.What is the nature of the arrangement negotiated between Fatima and the office manager?

A) a formal accord
B) an informal business arrangement
C) a haphazard promise
D) a binding agreement

Question 9

What is the primary benefit of contract law to business?

A) Contract law allows businesses to transfer risk.
B) Once a contract is created,it permits both parties to rely on the terms they have negotiated and plan their business affairs accordingly.
C) Contract law guarantees that others will follow through with their promises.
D) It ensures that businesses treat each other as equals and do not take advantage of one another in business relationships.

Question 10

How is the general body of law governing contracts best characterized?

A) common law
B) statutory law
C) constitutional law
D) civil law

Question 11

Two accomplished software developers want to combine their talents on a lucrative project offered by a large document storage firm.The developers will have their agreed roles and responsibilities incorporated into a formal contract to be prepared by their respective lawyers.Which of the following is a valid representation of the legal significance of the relationship between the parties that will be evidenced by the contract?

A) Each party will get exactly what it bargained for.
B) There has been a deliberate meeting of the minds.
C) Some of the parties to a contract can be sued under it.
D) No element of coercion exists between the contracting parties.

Question 12

Which statement best explains the requirement that "contracts must be supported by mutual consideration"?

A) There must always be at least two parties to a contract.
B) Contracts require that the parties treat each other fairly.
C) A contract involves a bargain or exchange between the parties.
D) Contracts must be in writing to be enforceable.

Question 13

When resolving contractual conflicts,what laws do the courts usually apply?

A) the Contracts Act
B) the Sale of Goods Act
C) all decisions based on principles of fairness and equity
D) common law and occasionally statutory law

Question 14

What types of employees should a company's head of risk management choose when putting together a negotiating team?

A) executives with highly developed abilities to deceive when necessary in order to secure a favourable agreement
B) experienced individuals who want to win and are willing to bluff and bluff hard to have a successful career
C) individuals with adequate legal knowledge for the negotiation of an enforceable contract that meets needs and protects interests
D) individuals who know the game and are not shy in demonstrating a complete lack of ethical standards

Question 15

What test will a court apply when asked to determine a matter involving a dispute between parties regarding the formation of a contract?

A) whether the contract is sufficiently complete to provide certainty to all parties
B) whether the terms of the contract provide sufficient mutual consideration
C) whether a reasonable person could conclude that an offer and acceptance occurred
D) whether the parties to the agreement have legal capacity to enter into contracts

Question 16

Matt purchases a car for his son from an auto dealership.A week later,his son discovers a defect that renders the car unsafe.The defect is one that a court would consider to be a breach of contract.What legal recourse is available to remedy this problem?

A) The court's resistance to imposing ethical business standards leaves no recourse.
B) Matt may commence a lawsuit against the dealer for breach of contract.
C) Matt's son may file a lawsuit against the auto dealer for breach of contract.
D) Mat's son can sue the manufacturer of the car for breach of contract.

Question 17

Which statement best describes the value of contracts to society?

A) Contracts can never be breached and therefore provide permanence to promises made between parties.
B) Contracts permit parties to rely on terms and plan their business affairs accordingly.
C) Contracts create equal bargaining power between negotiating parties.
D) Contracts ensure that agreements are fair to both parties.

Question 18

With respect to what the terms contained in a negotiated formal contract should ultimately be representative of,each parties' reasonable expectations will most likely be founded on which of the following?

A) that all of the parties to the contract have legal capacity to contract
B) the time period within which all obligations must be performed
C) that there has been a formal intention to create legal relations
D) the binding commitments that form the essence of the contract

Question 19

The purchase of stationery supplies from a retailer for cash,without an invoice or a receipt being provided in return,is an example of which of the following?

A) an incomplete agreement
B) a formal contract
C) a standard form agreement
D) an informal agreement

Question 20

Grandview Developments negotiated an oral agreement with a landowner to purchase property on the outskirts of the city.Grandview intends to develop the land into a housing project.What is Grandview's legal position regarding this agreement?

A) The agreement is legally binding on Grandview and the landowner.
B) The agreement is not legally enforceable because it is not in writing.
C) The agreement is not legally enforceable because it is not supported by mutual consideration.
D) The agreement is not legally enforceable because the parties have not achieved a 'meeting of the minds'.

Question 21

Which of the following is a requirement in order to have a legally enforceable agreement?

A) The parties must have intended to create legal relations.
B) The agreement must have been signed by the parties.
C) The parties must have equal bargaining power.
D) The agreement must be in writing and witnessed.

Question 22

Countdown Events made what looks like an offer to Roxy Theatre group to provide online ticketing services to Roxy in exchange for a share of ticket proceeds.Roxy has now accepted the offer.Countdown now insists it was only exploring a possible business relationship and did not intend to make an offer to Roxy.How will a court resolve this dispute?

A) by considering the parties' legal capacity to contract
B) by considering whether the bargain is fair to both parties
C) by considering the relative bargaining power between the parties
D) by considering how 'a reasonable person' would view the matter

Question 23

Ajay entered into a contract to buy a used car from a dealership for $10,000.Upon doing further research,he has now discovered the car is actually only worth $9,000.Which of the following best describes Ajay's legal position?

A) The contract is binding as Ajay was expected to take care of his own interests.
B) The contract is not binding because it is not a fair price for the car.
C) The contract is binding because both parties had equal bargaining power.
D) The contract is not binding because the dealership has committed fraud.

Question 24

Individuals who negotiate a contract on behalf of their employer are bound to the contract along with their employer.

Question 25

Which of the following is an example of an alternative method of dealing with a breach of contract,rather than starting a lawsuit?

A) Treat the subject matter of the contract as a standard or ordinary commodity.
B) Maintain the project's profitability by insisting on full compensation for any loss.
C) Seek sufficient compensation for any resulting loss but extend the time for payment.
D) Show respect for the other party while seeking a standard of reasonableness in return.

Question 26

Monkeytown Playground Supplies has negotiated an oral agreement with a highly reputable toy store to deliver $10,000 worth of product to the store for resale.Why should Monkeytown insist that the agreement be put in writing?

A) because oral contracts are unenforceable
B) because personnel can change and memories can be selective and self-serving
C) because a lawsuit cannot be based on an oral agreement
D) because the toy store can cancel the agreement unless it is in writing

Question 27

A large greenhouse grower that wants to source a suitable organic liquid fertilizer contacts Organics.The grower is willing to pay a premium price for Organics's product.Accepting the order would mean Organics will not be able to completely fill existing orders to its current customers.Organics desires the new business but wants to maintain its existing customer base.Which of the following strategies should Organics use to solve this problem?

A) Abandon all but the most important of the existing orders and fill the new order.
B) Present an ultimatum on existing orders offering delivery on a later date or nothing at all.
C) Comply with existing obligations,fill the orders,and offer the new business what is left.
D) Offer a price break on existing orders in return for varying quantity and delivery date.

Question 28

The law applies the principle of equality of bargaining power even though usually one party has an advantage over the other.

Question 29

Contract law is primarily derived from statutory law.

Question 30

In most instances,the rules governing contractual disputes are based on the common law.

Question 31

Contract law ensures that all parties concerned may rely on the terms included in the contract.

Question 32

Under which of the following circumstances would a court be likely to set a contract aside?

A) if there is a lack of sufficient equality of the benefits received by each party
B) if there is an attempt to take advantage of a handicapped,vulnerable person
C) if there were witnesses to the contract
D) if the parties put their contract in writing

Question 33

Bespoke Designs Inc.,a custom suit maker,has a contract to purchase its suiting fabric from ABC Textiles.The dye used in the most recent order of fabric from ABC appears to be slightly different from the sample agreed upon in the contract and from orders in the past and will not work with Bespoke's product line.The manufacturer insists that the material is the same as previous orders.What should Bespoke consider at this point?

A) whether it makes business sense to sue ABC
B) that failure to immediately sue ABC will result in giving up its right to sue
C) the impact of the litigation on the industry
D) whether it can prove that the breach was due to negligence on the part of ABC

Question 34

It is important for a business person to know when simple communications crystalize into legal obligations.

Question 35

All contracts are complex documents that must be prepared by lawyers.

Question 36

How should a manufacturer try to salvage its reputation after it has been discovered to have knowingly produced and sold a defective product to the public?

A) Deny any wrongdoing and obtain top lawyers to defend against litigation.
B) Take ownership for the problem and voluntarily compensate affected customers.
C) Hire bloggers to create confusion about the facts on social networking websites.
D) Have a top executive issue an official apology presented on national television.

Question 37

What is a defining characteristic of the principle of equality of bargaining power?

A) Judicial assistance is readily available to all disadvantaged parties to a contract.
B) It is applied to adjust the terms so that the contract is fair and then enforces it.
C) It is applied to reject unfair contracts and return the parties to their prior positions.
D) It generally applies regardless of some distinct advantage favouring one party.

Question 38

Every contract is subject to the same set of mandatory rules.

Question 39

If someone has suffered a legal wrong,he or she should automatically sue the wrongdoer.

Question 40

Juha agreed to hire Zen Home Builders Ltd.(Zen)to construct his new home.Juha,Zen,and their lawyers met to review and sign a contract that provided for specific types of environmentally safe construction materials to be used.In many instances,Zen failed to use the stipulated "green" construction materials.What would a court,faced with determining a resolution to the ensuing dispute,rely on the existence of to establish the existence of the contract?

A) Juha's entitlement to rescind the contract due to poor contractual performance.
B) A framework of rules created by the parties and which judges automatically enforce.
C) Mandatory rules which every type of contract is subject to.
D) An intention between the parties to create a legal relationship.

Question 41

It is a legal assumption in contract law that parties to a contract are able to look out for their own interests.

Question 42

An alternative to a contract is a casual understanding between the parties.Explain the disadvantages of casual understandings and outline the advantages of ensuring a business understanding is formalized by a contract.

Question 43

Alberta Carr,in his well-known article published in the Harvard Business Review,encouraged businesspeople to break the law to seek advantage in business negotiations.

Question 44

Luna Quan has been directed to attend a meeting tomorrow for the purpose of negotiating a new supply contract.It is vitally important that Luna pay particular attention during those negotiations to when simple business communications transform into legal obligations.

Question 45

Do all contracts have to be in writing in order to be legally enforceable? What are the advantages of putting your contract in writing?

Question 46

Business people regularly breach contracts because the decision to breach a contract is both a business and legal decision.

Question 47

In order to be binding,an agreement must contain a bargain or exchange between the parties.

Question 48

A business should always insist on the strict observance and enforcement of its legal rights.

Question 49

Identify the role that a contract plays in any commercial operation.Provide several examples of what activities a business is able to do through a contract.Identify and briefly explain the role contract law plays with respect to contractual participants and their commercial operations.

Question 50

Identify and briefly explain the circumstances where a party might opt to deliberately breach a contract by refusing to honour its promises to the other side.Provide an example and a possible alternative to an outright breach of existing contractual obligations.

Question 51

Any contract can be written or oral; each are equally enforceable.

Question 52

Courts will take into account the impact on the long-term relationship between the parties when applying contract law principles.

Question 53

Identify and briefly describe the objectives that owners and managers should keep in mind when dealing with a customer who is attempting to expand or restrict an existing contract.

Question 54

Is a lawsuit always the best response to a contractual legal dispute? Explain your answer.

Question 55

Issues can arise in contractual relationships that will require owners and managers to be conscious of the fact that business relationships are long-term,and so is reputation.

Question 56

Explain the notion of equality of bargaining power and its impact on the operation of contract law.

Question 57

In order for a court to recognize a contract as a binding agreement between the contracting parties,there must be clear evidence of each party having given something of value in exchange for receiving something of value.

Question 58

The principle of equality of bargaining power follows the rationale that parties should be able to rely on contractual commitments.