Deck 9: Representations and Terms

Question 1

An exception to the parol evidence rule may arise if

A) both parties want to rescind the contract.
B) additional information is required in order to rectify a mistake.
C) the plaintiff will not be able to successfully claim damages otherwise.
D) the judge is convinced that the contract would be more effective if it contained additional terms.
E) none of the above.

Answer 1

B

Question 2

Ranjit purchased a complex computer system from Compu- Less. Although Compu- Less had specially manufactured the computer to Ranjit's personal specifications, the sale was created on the basis of a standard form agreement that the company uses when customers buy mass- produced computer units. A dispute has now arisen between Ranjit and Compu- Less. Which of the following statements is TRUE?

A) The strict terms of the contract will not be enforced if, before Ranjit signed the agreement, the company's sales manager said, "Don't worry about the legal mumbo- jumbo. We stand behind our products."
B) The golden rule of interpretation states that an ambiguous term must be interpreted in the way that most benefits the party that did not draft the contract.
C) As long as the language of the contract is sufficiently clear, the parties may have excluded all possible statutory conditions and warranties.
D) because of the parol evidence rule, the parties' contract will not include the warranties contained in the Sale of Goods Act unless the contract either repeats those warranties or at least refers to them
E) The court may refuse to add an implied term to the contract even if that term would make the contract much better.

Answer 2

E

Question 3

Denise is a farmer in Prince Edward Island. Recently she purchased a new tractor from her local dealer. Although her contract of sale contained a large number of standard terms and conditions, it did not guarantee that the tractor would function properly. Assume that the tractor malfunctions and Denise tries to sue for breach of contract. Which of the following is most likely TRUE?

A) Denise would fail because no term in the contract was breached.
B) Denise would fail no matter what.
C) Denise would fail unless she was able to prove a collateral contract.
D) Denise would fail unless the court was willing to imply a term.
E) none of the above

Answer 3

E

Question 4

Which of the following best describes an implied term?

A) It can be used to rectify a mistake in a contractual document.
B) It is a statement expressed by one of the parties.
C) It is sometimes inserted into a contract by a court.
D) It cannot create an enforceable legal obligation.
E) none of the above

Question 5

In order to get Susannah to buy his cottage, Paul tells her that he has recently spent $100 000 in repairs that make its foundations flawless. In love with the cottage and in reliance on Paul's representation, Susannah impulsively trades her condo in the city for the cottage without asking for a home inspection. Two months after she moves into the cottage, Susannah hears a creaking noise during a windy evening. The next morning, she has a home inspector over to take a look. He tells her that there have been no repairs on the house in the last twenty years and that the foundation is in a dangerous state of disrepair. She calls Paul to try to get her condo back but finds out that he has sold the unit and has moved to Bermuda with all of his assets. In seeking an order for restitution,

A) Susannah will most likely fail because courts are unlikely to grant rescission when the rights of third parties are affected.
B) Susannah will most likely succeed, as Paul's misrepresentation is clearly actionable.
C) Susannah will most likely fail because her living in the cottage for two months is an affirmation of Paul's misrepresentation.
D) Susannah will most likely succeed, and the court will therefore award damages for breach of contract.
E) Susannah will most likely fail, as Paul's misrepresentation is clearly not actionable.

Question 6

Jacqui purchased a business from Dickie. During the pre- contractual negotiations, Dickie said, based on past experience, he expected that the business would earn approximately $1 000 000 per year. After that statement was made, but before the contract was signed, Dickie learned that the manufacturer that supplied his business with the materials that it needed was going out of business. Dickie realized that, because of the need to purchase materials from another manufacturer, his business could only be expected to earn $700 000 per year, regardless of whether it was run by himself or by Jacqui. Afraid that that news would scare off Jacqui, Dickie decided to keep the new information to himself. Jacqui completed the purchase of Dickie's business, but was very disappointed when it earned only $700 000 in its first year. She now wants to sue Dickie. Which of the following statements is TRUE?

A) Dickie cannot be held liable because Jacqui ought to have independently confirmed his statements.
B) Jacqui cannot successfully sue unless she can prove that Dickie's statements regarding the business's profits became a term of their contract.
C) Dickie cannot be held liable because his statement was an opinion about the future.
D) While Jacqui probably is entitled to damages, she cannot possibly receive rescission because the contract has already been completed.
E) none of the above

Question 7

Contracts of utmost good faith

A) have no bearing on the law of misrepresentation.
B) arise when one party is uniquely situated to know the material facts.
C) do not require notification of any changes to previously supplied information.
D) are the only contracts that do not require any kind of disclosure.
E) none of the above

Question 8

Asif purchased a business from Olga. During negotiations leading up to the contract, Olga made an innocent misrepresentation. As a result of that statement, Asif has discovered that the business is far less valuable than he expected. Which of the following statements is TRUE?

A) Asif is entitled to rescission even if, before entering into the contract, he investigated the true state of affairs that Olga addressed in her innocent misrepresentation.
B) Asif is not entitled to rescind the contract if, before entering into the contract, he carelessly failed to discover the error contained in Olga's innocent misrepresentation.
C) Asif is not entitled to rescission unless he can prove that Olga's innocent misrepresentation was the only, or at least the most important, reason for him entering into the contract.
D) Rescission is not available for an innocent misrepresentation.
E) none of the above

Question 9

Samuel and Ben are negotiating the sale of a sailboat. Samuel expresses an interest in the boat but emails Ben a list of five questions that he wants answered before agreeing to purchase it. Ben responds with full answers to four of the questions. Samuel emails back and says he will buy the boat on Saturday as long as his remaining question (about the state of its hull) checks out okay. Ben promises to check with his boat mechanic and respond before they are scheduled to meet on Saturday. Both men get busy. Ben checks with his mechanic but innocently forgets to report back to Samuel that there is a crack in the hull. Samuel forgets that there was one question outstanding. Saturday comes and the transaction takes place. If it turns out that there is a significant problem with the hull of the boat, which of the following is TRUE?

A) If he sues, Samuel will likely succeed in a tort action.
B) Samuel is stuck with the boat.
C) Ben may seek to get his boat back even if Samuel wants to keep it.
D) Ben may have to take the boat back and return Samuel's money.
E) If he sues, Samuel will likely obtain a damage award.

Question 10

Which of the following statements is TRUE with respect to misrepresentations?

A) A pre- contractual misrepresentation may trigger relief in contract but not relief in tort.
B) A negligent misrepresentation may trigger damages but not rescission.
C) An innocent misrepresentation may trigger an award of damages.
D) An innocent misrepresentation may be rescinded.
E) A fraudulent misrepresentation may trigger rescission but not damages.

Question 11

A contract requires reasonable notice of its terms

A) only in the case of exclusion clauses.
B) only when its terms are onerous or unusual.
C) only when its terms are on the back of a ticket.
D) whenever a signature is required.
E) none of the above

Question 12

Even if a lease does not expressly say that the item leased must come back in the same condition in which it went out (subject to reasonable wear and tear), a court will imply such a term. Courts will do so on the basis that such a term

A) would improve the contract.
B) is in line with industry standards.
C) was clearly intended by both parties.
D) was clearly desirable.
E) all of the above

Question 13

Which of the following cannot result in a damage award?

A) silence that distorts a previous assertion
B) fraudulent misrepresentation
C) innocent misrepresentation
D) negligent misrepresentation
E) breach of contract

Question 14

Asha sells bottled spring water. Unlike other water vendors who purify their water, Asha is marketing her product to those who want to drink spring water in its natural state. Although her water source is pure and clean, she is concerned that some consumers might have allergic reactions to trace elements in the unpurified water, so she designs a clause to exclude her company from liability. The clause indicates that, by opening and drinking the water, consumers are indicating that they have read and understood the warning that the water has not been purified and, as such, waive all liability for any allergic reactions resulting from drinking the water.Which of the following is most likely TRUE of Asha's strategy?

A) It will succeed as long as the label on the bottle constitutes reasonable notice of the exclusion clause.
B) It will only succeed if the distributor personally points out to the consumer that by drinking the water they are waiving their right to sue.
C) Reasonable notice by itself is insufficient. The exclusion clause must also be written in clear and unambiguous language.
D) It will fail because it is never possible to exclude tort liability by way of contract.
E) none of the above

Question 15

A contractual term

A) is made with the intention to induce a contract.
B) is a promissory statement.
C) is a form of misrepresentation.
D) does not impose a contractual obligation.
E) all of the above

Question 16

Business people often sign written agreements on the assurance that some of the terms will not be enforced. To sign under these conditions is imprudent because of

A) the contra proferentum rule.
B) the absurdity rule.
C) the parole evidence rule.
D) the golden rule.
E) all of the above

Question 17

Ejay wants a court to consider oral evidence about a written contract in order to resolve a dispute about an ambiguous term in one of her client's contracts. She decides that she will characterize the facts as giving rise to a collateral contract. Which of the following is TRUE?

A) Ejay is a good lawyer because the collateral contract doctrine is the only way to have her oral evidence heard.
B) Ejay is a bad lawyer because a collateral contract can never circumvent the rule preventing oral evidence from being used to prove the terms of a written contract.
C) Ejay is an inefficient lawyer because there is a more direct way of having the court consider her oral evidence under the circumstances.
D) Ejay is a bad lawyer because the collateral contract doctrine was overturned years ago.
E) none of the above

Question 18

Molly decides to sell her house by way of a private sale. After advertising and showing the house, she receives a written offer from an interested purchaser using a standard form document assembled from a do- it- yourself legal kit. Molly studied the offer and wished to change two of its terms. The interested purchaser agreed to the changes and reflected those changes in the document. Molly signed the document and cashed the down payment cheque. Two days later, Molly spotted an extremely onerous and somewhat unusual term that was not brought to her attention when reading the document. As a result, Molly wishes to cancel the contract.Which of the following is most likely TRUE?

A) Molly will fail but only because she cashed the cheque.
B) Molly will succeed because she was not given reasonable notice of the onerous and unusual term.
C) Molly will succeed because the term was onerous and unusual.
D) Molly will fail because she is bound by her signature.
E) none of the above

Question 19

Diamond Dave decides to sell his donut franchise to Fast Freddie. Freddie has a number of questions about the receivables. Diamond Dave says that all of the answers to his questions can be found in the corporate ledger. Instead of inspecting the ledger, Fast Freddie hires an accounting firm to do a forensic audit of the business. Relying on the audit, Freddie buys the business. Which of the following explains why Freddie would fail to obtain rescission if he later decided he did not like the transaction?

A) Diamond Dave was not reckless with his ledger.
B) Diamond Dave's corporate ledger was not relied upon by Freddie.
C) Diamond Dave was not careless with his ledger.
D) Diamond Dave did not make any false statements.
E) all of the above

Question 20

Which of the following statements is FALSE? The use of plain language instead of legalese

A) is required by the official Communications Policy of the Government of Canada.
B) is always detrimental to companies that use standard form contracts because it raises customer awareness of unfavourable clauses.
C) can reduce the amount of time a company spends answering questions from customers about confusing terminology.
D) can be mandated by law.
E) was strategically avoided in the past.

Question 21

Standard form agreements

A) are rarely offered on a take- it- or- leave- it basis.
B) always balance the interests of both parties.
C) often are more time- consuming than negotiating the terms of a new contract.
D) often contain language that has been refined and tested over the years.
E) all of the above

Question 22

Consumer protection laws in several jurisdiction including Manitoba, Northwest Territories, and the Yukon

A) makes it a crime to sell used goods.
B) implies a term that goods being sold are new unless otherwise described.
C) makes it a tort to sell used goods.
D) has been repealed.
E) implies a term that goods being sold are used unless otherwise described.

Question 23

Preetpal purchased a ticket to ride on a train from Toronto to Ottawa. After she had boarded the train, she was asked if she wished to place her outerwear and backpack into a storage unit on the train. Because she did not want to be encumbered during her journey, she accepted the offer. She was given a "small baggage claims" ticket before handing over her coat and belongings. When the train arrived in Ottawa, and Preetpal tried to collect her coat, she was told that it could not be found. When she threatened to sue, the person who was representing the train told Preetpal that the back of the "small baggage claims" ticket she received excluded liability for lost or stolen goods. Regardless of any other facts, Preetpal can be bound by the exclusion clause only if

A) it was explained to her when she first bought her train ticket.
B) she actually read it.
C) was written in a font that was larger than the font that otherwise appeared on the ticket.
D) the clause was written in a language that she can read.
E) none of the above.

Question 24

A misrepresentation is

A) a kind of mistake.
B) an opinion that turns out to be untrue.
C) actionable if it induces a contract by misdescribing another's future action.
D) actionable if it induces a contract by falsely characterizing the consequences of a law.
E) actionable whenever it turns out to be false.

Question 25

The BEST way for a company to manage the risk associated with standard form agreements is to

A) require customers to clearly indicate their agreement to be bound by any onerous or unusual terms.
B) frequently redesign the standard form agreement to ensure that customers must read through the form each time they sign it.
C) conceal ambiguous language at the end of the agreement to avoid customer confusion.
D) teach employees the meaning of onerous and ambiguous contract terms.
E) all of the above

Question 26

When will silence distort a previous assertion?

A) when a half- truth is told
B) whenever a change in circumstances occurs
C) when a statutory provision requires disclosure
D) whenever a change in circumstances does not affect the accuracy of a representation
E) when a contract requires a duty of utmost good faith

Question 27

Justice Howe, a member of the Supreme Court of Canada, is deciding a case that deals with a complicated commercial agreement between two sophisticated and experienced companies. The resolution of the case depends upon the interpretation of several clauses in that agreement. Which of the following statements is TRUE?

A) Given the nature of the parties and the contract, Justice Howe cannot decide that their agreement contains implied terms.
B) In order to decide the case, the judge may need to know which party drafted the agreement.
C) The golden rule of interpretation, which says "do unto others as you would have others do unto you," requires the judge to adopt whichever interpretation of the contract that favours both parties equally.
D) The contextual approach to interpretation requires a particular clause to be interpreted exclusively by reference to its own terms and the terms of the other clauses within the contract.
E) The general rules governing the interpretation of contracts do not apply in the Supreme Court of Canada because that court is expected to arrive at the fairest result regardless of the rules.

Question 28

Which of the following approaches to contractual interpretation will ONLY SOMETIMES give words their plain, ordinary meaning?

A) the contextual approach
B) the golden rule
C) the contra proferentum rule
D) the literal approach
E) none of the above

Question 29

A pre- contractual representation

A) is a promissory statement.
B) creates a legally enforceable obligation.
C) is a voluntary agreement to do something in the future.
D) will always induce a contract.
E) can be made by words or conduct.

Question 30

Which of the following is NOT true of the contra proferentum rule?

A) It attributes to a term the meaning least favourable to its author.
B) It is a rule of contractual interpretation.
C) It provides an incentive for the author of a term to draft it in clear and unambiguous language.
D) It is always the best means of resolving an ambiguous term.
E) none of the above statements are true.

Question 31

An express term

A) is a statement made by one party to induce the other party to enter into an agreement.
B) is a statement made by one of the parties that a reasonable person would believe was intended to create an enforceable obligation.
C) is only enforceable if one of the parties agrees to it in writing.
D) sometimes arises as a result of an operation of law.
E) all of the above

Question 32

A court will find an implied term

A) in order to rewrite the contract so that it is a better deal.
B) only if the parties had expressed it but forgot to write it down.
C) only if a statute tells it to.
D) when it is necessary to bring the contract in line with the presumed intentions of the parties.
E) whenever it wants.

Question 33

A ticket contract is

A) enforceable only if the terms on the back of the ticket are initialed by the customer.
B) never enforceable.
C) enforceable only if the terms on the back of the ticket have actually been read by the customer.
D) enforceable only if the terms are clear and reasonable notice of the terms was given when the contract was made.
E) enforceable only if the customer knew about the terms on the back of the ticket.

Question 34

Which of the following statements is TRUE with respect to a contractual clause that protects one party from the consequences of breach?

A) Such clauses may reduce or limit liability, but they cannot entirely exclude liability.
B) Depending upon the circumstances, such clauses may be enforced even if the party who wants to sue for breach did not read the clause.
C) Such clauses are enforced only if they appear in written and signed contracts.
D) Such clauses are invalid if they are written in ambiguous language.
E) Such clauses are enforced only if they are the product of equal bargaining power.

Question 35

The possible consequences of actionable misrepresentation include

A) the remedy of an injunction.
B) a damage award for breach of contract.
C) the remedy of an incision.
D) the remedy of rescission.
E) none of the above

Question 36

An ambiguous contractual term

A) never results in litigation.
B) will always have only one plausible meaning.
C) always results in litigation.
D) will always have more than one plausible meaning.
E) none of the above

Question 37

Reeni was interested in purchasing a car. After searching the classified ads, she found a car in which she was interested, being sold by Ethan whom she had never met. Ethan knew that his car was in need of new tires, a new muffler, and would soon need a new clutch and a brake job. Consequently, he was hoping that, when they met, Reeni wouldn't ask too many questions. When she wanted to go for a test drive, Ethan gave her the keys and said that he trusted her to go alone and that doing so would allow her to test it in a less inhibited fashion. Really, he just didn't want her to ask about any of the car's problems. Reeni took the car by herself and, on the basis of its performance, bought it at Ethan's listed price, no questions asked. Which of the following statements is most likely TRUE?

A) Silence can never amount to a misrepresentation.
B) Ethan is not required to disclose the car's problems during pre- contractual negotiations.
C) Reeni would succeed in an action against Ethan for misrepresentation.
D) Ethan owed Reeni a special duty to disclose the problems with his car.
E) By failing to accompany Reeni in the test drive, Ethan breached a duty of utmost good faith.

Question 38

Suppose that a term is not the result of a statement expressed by either of two negotiating parties. Which of the following is TRUE?

A) It could only be a term of a contract between them if it is implied by a court.
B) It could only be a term of a contract between them if both parties subsequently affirm the term.
C) It could only be a term of a contract between them if it is an implied term.
D) It could only be a term of a contract between them if one party subsequently affirms the term.
E) It could never be a term of any contract between them.

Question 39

Which of the following is NOT an example of a disclosure required by statute?

A) disclosure of significant liabilities that exist when making a domestic contract
B) disclosure of material facts pertaining to the sale of securities
C) disclosure of material facts by a financial officer of a corporation
D) disclosure of a serious medical condition when obtaining life insurance
E) disclosure of material facts by an accountant when she sells her car to a client

Question 40

Leilani purchased a business from Troy. She is now interested in the possibility of taking legal action on the basis of an alleged misrepresentation that occurred during the negotiations leading up to the contract. Which of the following statements is TRUE?

A) because the purpose of rescission is to reverse the effects of a transaction, Leilani will not be able to receive court costs if she rescinds the agreement
B) because the courts will not punish a person who did not breach an obligation, rescission is not available if Troy merely made an innocent misrepresentation
C) The contract can be rescinded only if Troy made a fraudulent misrepresentation.
D) If Troy made a negligent misrepresentation, Leilani may choose to sue in tort rather than rescind the contract.
E) Leilani cannot get rescission because she can only sue in tort.

Question 41

Why are boilerplate provisions of potential value to businesses generating standard form agreements?

Question 42

Parol evidence cannot be used to resolve ambiguous terms.

Question 43

A misstatement of law is identical to a misstatement about the consequences of that law.

Question 44

Restitution is always possible.

Question 45

Pre- contractual representations can result in an action for breach of contract.

Question 46

A person who investigates rather than relying on a pre- contractual statement will usually succeed in an action for misrepresentation whenever the statement turns out to be untrue.

Question 47

A purchaser explains to his real estate agent that he wants to buy a house containing a suite that would generate rental income. The agent showed and sold to him a house with a basement suite. After taking possession of the house, the purchaser discovered that the previous owner had been renting the basement unlawfully. No permit to build the suite had been obtained, nor could it have been obtained because the ceiling was too low and the lot too small. It turned out that the agent knew about these legal requirements and knew that they had not been met. She said nothing. Is the law of misrepresentation actionable? Explain your reasoning.

Question 48

Restitution requires a giving back and a taking back on both sides.

Question 49

If Vasaliki is induced to enter into a contract as a consequence of a statement made by Lampros with reckless indifference as to its truth, Vasaliki has an automatic right to rescission and may also get damages if the statement is fraudulent.

Question 50

"It is imperative that all business contracts be in writing." Assess this statement. Is it accurate from a legal perspective? It is accurate from the perspective of risk management? Explain your reasoning.

Question 51

Steve, Sheryl's doctor, is selling some of the artwork from his office. Sheryl says she has always been interested in his Thomson piece and asks how much he wants for it. Although the painting is not actually a Thomson original, Steve knows which one she means and tells her that he paid $3000 but will take $1000. (That much is true, but he doesn't say anything at all to indicate that it is NOT a Thomson original). By his silence, Steve has engaged in actionable misrepresentation.

Question 52

Entering into a collateral contract is sometimes done for evidentiary reasons (reasons of proof).

Question 53

A contractual promise cannot be false at the time it is uttered.

Question 54

What is the rationale for holding people to their signatures even when they have not read or understood the contract?

Question 55

Cavell is selling his CD burner to an acquaintance. Cavell knows that the CD burner has a defect, generating CDs that skip. The acquaintance asks Cavell for his opinion of the machine just before the purchase is to take place. All Cavell says is "I think it is totally awesome." Cavell has made a misrepresentation.

Question 56

The golden rule always requires an adoption of the contextual approach to contractual interpretation.

Question 57

Negligent misrepresentation occurs when a person is reckless.

Question 58

Damages for actionable misrepresentation are not available in the domain of contract law.

Question 59

Why do insurance contracts require a duty of utmost good faith?

Question 60

Someone who signs a document when in a hurry is never bound by his signature.

Question 61

What does it mean to say that an exclusion clause is always read contra proferentum? Why do you think that this is a consistent judicial practice?

Question 62

What is an exclusion clause? Why would a business want one included in a contract?

Question 63

Can an express term ever be overridden by an implied term? Explain your reasoning and provide an example.

Question 64

Zhou listed a commercial lot for sale, describing the land as being zoned for commercial/residential occupation. Dalvi, who was looking to build a funky billiards bar with condos above, inquired about Zhou's lot. Throughout their negotiations Zhou maintained that the law would allow the purchaser to use the lot for both commercial and residential purposes, and understood that the consequences of the zoning law were critical to Dalvi's business plan. Induced by this, Dalvi subsequently decided to buy the property. After buying the property, Dalvi learned that the land was not zoned as residential and that he was not permitted to build condos above the billiards bar. He sued Zhou, arguing that the inducing statement was actionable as misrepresentation. Will Dalvi succeed in his action? Why?

Question 65

In what sense might a standard form agreement be beneficial to consumers? Briefly explain the downside of standard forms.

Question 66

A purchaser bought an oil painting from a private collector who promised that it was painted by one of the members of the Group of Seven, a promise that was held to be one of the terms of the contract. The painting quickly became the purchasers very favorite. He took it home and built a special room for its viewing, with an expensive lighting system. Five years later, after having grown somewhat tired of the room, the purchaser decided to sell the painting. In so doing, he discovered much to his chagrin that the painting was worth much less than he had thought as it was, in fact, done by a less famous American painter, who worked in a style similar to the Group of Seven. The purchaser decided to try to get his money back. He sued the private collector who sold it to him, asking the court to rescind the contract on the ground that there had been an innocent misrepresentation. What are the most plausible grounds upon which the court might decide not to rescind?

Question 67

What does it mean to say that a pre- contractual representation is NOT promissory in nature?

Question 68

Personal opinions are not usually treated as misrepresentations. Very briefly explain why they are not and describe a situation where it is risky to offer a personal opinion.

Question 69

Jane was at the international terminal of the airport when she realized that she had forgotten to purchase travel insurance for her trip. After checking- in early, Jane was browsing at some of the shops and happened upon a vending machine selling travel insurance. On the outside of the machine was a sign that indicated "Full coverage for $2 per day." Jane plugged in three toonies to cover herself for the weekend. Out from the machine dropped a standard form agreement. After boarding the plane, Jane examined the fine print and noticed that the coverage was limited to travel within Canada. Like every other potential customer in the international terminal of the airport, Jane was not traveling within Canada. Concerned that she would not be covered, as soon as the plane landed Jane used her cell phone to dial the 1- 800 number on the back of the printed form. All she got was a recorded message. If Jane got injured while traveling in the US, will the exclusion clause prevent her from making a successful claim?

Question 70

Name a shortcoming of the literal approach to contractual interpretation. Provide an example to illustrate your point. How might this difficulty be overcome?