Deck 5: An Introduction to Contracts

Question 1

When asked to secure a supplier for your company, what is the one goal you should be focused on to ensure the task is completed correctly?

A) to ensure there is evidence of a deliberate intention to create legal relations
B) to select a reliable supplier, negotiate terms, and secure a written contract
C) to secure terms that will allow for the recovery of related financial losses
D) to secure a commitment on price and the delivery date of the goods

Answer 1

B

Question 2

What will likely be the result if one of the parties to a contract fails to perform his or her obligations under that agreement?

A) The offending party is legally obligated to renegotiate the terms of the contract.
B) Both parties must adhere to a mandatory requirement to renegotiate their contract.
C) A court will generally award damages to the innocent party to cover resulting losses.
D) A court will order each party to return whatever consideration has been received.

Answer 2

C

Question 3

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.

Answer 3

B

Question 4

A Canadian court hearing a disputed matter involving parties to a contract will rely on past decisions to determine a remedy for the dispute. Why is the court's reliance on past decisions considered to be an effective manner for it to determine an appropriate legal remedy?

A) Precedents support the parties' respective disputed positions.
B) Precedents are derived from statue laws that guide the court's deliberations.
C) Precedents contain legal principles determined from similar past litigation.
D) Precedents provide supporting evidence of applicable common law rules of contract.

Question 5

Which of the following has the greatest influence on creating the flexible relationship that exists between contract law and economic reality?

A) Contractual obligations must be performed or compensation paid for non-performance.
B) Courts assess the fairness of the contract terms chosen by the parties.
C) A party's need for judicial assistance or judicial intervention must be justified.
D) Parties must be responsible for themselves and work to maximize self-interest.

Question 6

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 7

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 8

In a strictly legal sense, which of the following is synonymous with the reasonable person test?

A) an objective standard
B) the degree of bargaining power
C) a subjective standard
D) an agreement on essential terms

Question 9

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 10

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 11

Why would a lawsuit be considered the least favourable choice of remedy for non-performance in a contractual business relationship?

A) The court's remedy will focus on the parties' economic realities.
B) The court will limit its remedy to focus on the specific disputed transaction.
C) The court will direct its decision strictly to the finding of the correct answer.
D) The court's decision will focus on the parties' best business options.

Question 12

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 13

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 14

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 15

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 16

Which of the following has the most influence on the negotiators' statements made during contractual negotiations?

A) the business game is not subject to ethical standards
B) their communications form legal obligations
C) the concealment of facts
D) the compulsion to practice deception when negotiating

Question 17

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.

Question 18

What is a valid reason for a court to accept that there is a legally binding contract governing the actions of the parties named to it?

A) Under contract law, each party must get what it bargained for.
B) The parties are permitted to rely on the terms they negotiated.
C) Only the parties to a contract can sue or be sued on it.
D) The contract clearly contains an offer and acceptance of that offer.

Question 19

Which of the following 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 20

Why are contractual relationships usually preferable over casual forms of business arrangements?

A) They envision business commitments or promises.
B) They solidly prove the parties' relationship is voluntary.
C) They readily provide the means for legal enforceability.
D) They must be expressed in writing using legal terminology.

Question 21

Rachel decides to sell her home, so she meets with several real estate agents. One agent offers a reduced commission rate and a guarantee her home will sell within three months without a price reduction. Why should Rachel secure a formal contract if she chooses to use this agent?

A) to ensure the arrangement meets the agent's needs and protects the agent's interests
B) to ensure the agent is motivated to avoid damaging his business reputation
C) to obtain favourable terms that provide for the no-fault cancellation of the contract
D) to allow Rachel to exercise her right to sue if the agent fails to perform as promised

Question 22

An incomplete agreement is not contractual because its content is not sufficiently comprehensive.

Question 23

What constitutes an economic breach of contract in a contractual business relationship?

A) refusing to provide payment for services received in order to get a reduction in price
B) allowing existing legal obligations to keep the business from considering other opportunities
C) electing to refuse performance of contractual obligations and paying damages for the breach
D) electing to avoid damages by completing the performance of the contractual obligations

Question 24

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 25

When hearing a case, the court will generally assume equality of bargaining power, even though it is not always a valid assumption.

Question 26

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

Question 27

Which of the following would most likely have the greatest influence in orchestrating the occurrence of an economic breach in a contractual business relationship?

A) seeking methods of maintaining profits when entering into new business relationships
B) taking an intractable position and forcing an ultimate favourable settlement
C) finding practical ways of interpreting contracts to arrive at higher profit margins
D) deciding to secure greater profits through non-performance of an existing contract

Question 28

Which of the following is an example of a contract that would be governed by legislation and NOT by common law?

A) a contract involving the sale of goods governed by the Sale of Goods Act
B) a contract involving the supply of services governed by the Employment Act
C) a contract retaining a lawyer to perform legal services on behalf of a client
D) a verbal contract involving an exchange of services for a set monetary price

Question 29

What is the most important factor for a retailer to consider when deciding whether to file a lawsuit against a supplier for a breach of a business contract?

A) the significance of the economic harm caused by the defaulting party's breach
B) the ability to secure an adequate supply of the stock from another supplier
C) the costs associated with obtaining the stock from a different supplier
D) the impact of the lawsuit on the reputation of the defaulting company

Question 30

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 31

Traditionally, contract law focuses its attention on the need to preserve long-term business relationships.

Question 32

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 33

In reaching his or her decision regarding a contractual dispute, a judge will always apply the objective standard test.

Question 34

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.

Question 35

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

Question 36

Contract law principles will be applied by a judge to resolve disputes based on a contract, whether the parties were aware of those principles or not.

Question 37

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

Question 38

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 39

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

Question 40

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 41

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

Question 42

The object of creating contractual obligations is to reduce the risk of uncertainty in the business relationship.

Question 43

Explain how the operation of contract law makes it possible for the wheels of commerce to turn efficiently and effectively.

Question 44

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 45

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

Question 46

Identify and briefly describe the necessary elements that must be present in order for a court to recognize a contract as a legally binding agreement.

Question 47

Most Canadian jurisdictions require contracts regarding interests in land to be in written form.

Question 48

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 49

A year ago, you negotiated a contract with a supplier on behalf of your company. The contract was broken six months ago, and the supplier is about to commence legal proceedings for the breach. Can you personally be held liable for the losses resulting from the breach? Explain.

Question 50

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 51

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 52

Most contractual business relationships are initiated through an offer and the acceptance of that offer. Acceptance is typically followed by communications to fill in the details of the arrangement.

Question 53

In order for a court to be convinced that both parties deliberately entered into a contractual relationship, there must be evidence of their intention to create legal relations.

Question 54

Down the legal road, one faces an ultimate settlement based on a correct answer ultimately derived from the court's interpretation of the contract.

Question 55

Identify and briefly explain the legal rules that apply to a commercial relationship between a for-profit figure skating club and the skating instructors it has contractually hired for the current fiscal year. Identify the methods available to these parties for resolving disputes that may arise, including which method is the least expensive and which is recommended as a last resort and the procedure that method entails.

Question 56

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 57

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 58

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

Question 59

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.