Deck 7: The Terms of a Contract

Question 1

In what way are assumptions and terms different from one another with respect to the content of a contract?

A) Assumptions can be given legal weight.
B) Terms are attributed with legal weight.
C) Terms may be expressed in vague language.
D) Assumptions are typically expressed.

Answer 1

B

Question 2

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.

Answer 2

C

Question 3

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 3

C

Question 4

Nigel is the owner of a small drapery manufacturing business. He has several contracts with three fabric suppliers. Nigel believes the only obligations he owes to his suppliers are recited in the contracts. Under what circumstances would Nigel know immediately that his assumption was wrong?

A) a situation whereby a supplier's misconduct adversely affects his business interests
B) a situation that enables one party to eliminate the application of the Sale of Goods Act
C) a situation where an entire contract clause forestalls suppliers' arguments relating to his guarantee
D) a situation where a price-variation clause doesn't allow a supplier to offset increased costs

Question 5

Which of the following would strongly support the statement suggesting "the guiding principles for interpreting the terms of a contract are often conflicting"?

A) The assistance provided by implied terms is sporadic and uncertain.
B) The parties' intentions are given effect, and a contract as it appears is enforceable.
C) It is impossible to predict what the parties intended a term to mean.
D) It is necessary to demonstrate that a term exists based on the balance of probabilities.

Question 6

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 7

A court hearing a contractual dispute has determined that an ambiguous term must be construed against the party drafting the agreement. What is the policy rationale for the court's finding?

A) The common law rules of construction apply.
B) The rules of construction require the best language available be used.
C) The rules of construction require that a promise be stated explicitly.
D) The framer should bear the risk of nebulous language.

Question 8

What is meant by the term "rules of construction" in contract law?

A) rules limiting evidence concerning a contract's contents
B) a basis for relieving parties from their contractual obligations
C) guiding principles for interpreting the terms of a contract
D) contractual terms stating that the contract is complete as written

Question 9

In Glenko Enterprises Ltd. v. Ernie Keller Contractors Ltd., [1994] 10 W.W.R. 641 (Man. Q.B.), aff'd [1996] 5 W.W.R. 135 (Man C.A.), the court found in favour of the subcontractor plaintiff, stating interest was properly due on the outstanding account it was owed. Why did the court find in favour of the plaintiff?

A) Trade practices are a reliable way of implying terms into an existing contract.
B) Trade practices are automatically implied to parties' contractual obligations.
C) The defendant followed the industry practice of charging interest on its accounts.
D) The parties had a history of past dealings, which clarified their intentions.

Question 10

Which of the following allows a judge to imply terms in a contract in order to make it workable?

A) the doctrine of business efficacy
B) the doctrine of business efficiency
C) the common law good faith rule
D) the common law parole evidence rule

Question 11

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

A) to have the court apply the parole evidence rule to the contract
B) to ignore the parties' intentions and apply the plain-meaning rule
C) to have the court apply the rules of construction to the contract
D) to ignore the rules of construction and apply the entire contract rule

Question 12

What is the legal term given to a provision that is necessary to give effect to the contractual intentions of the parties?

A) an applied term
B) an implied term
C) an exemplified term
D) an inferred term

Question 13

What is the preferred means of ensuring each party to a contract knows its obligations and the obligations of the other party?

A) The rules of plain meaning are followed.
B) The essential implied contractual terms are expressed.
C) The rules of construction are followed.
D) The essential terms of a contract are articulated.

Question 14

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 15

Why is a reference in a contract to "best quality" considered to be nebulous?

A) Exactly what is best quality becomes a subjective element.
B) The language is ambiguous and requires interpretation.
C) The use of unclear language will cause a contract to fail.
D) Exactly what is best quality arises as an objective element.

Question 16

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 17

What is the most effective use of a business contract?

A) an aid for a court to interpret a business arrangement
B) a tool for the management of liability exposure
C) a means of limiting warranties for defective products
D) a mechanism limiting alternative dispute resolution

Question 18

Justice Hall listened to plaintiff's counsel argue his client's position relating to a contractual dispute. Counsel stressed that an unstated provision was relevant to the contract and necessary to give effect to the contractual objectives of the parties. If Justice Hall accepts counsel's argument, how will she proceed?

A) by enforcing the parties' contractual agreement as it is written
B) by giving subjective consideration to the expressed elements
C) by considering the stated implied terms detailing a promise explicitly
D) by giving effect to the parties' aims by imposing implied terms

Question 19

Sheps & Shaps LLP contracted to receive a weekly delivery of 10 cartons of 8 x 11 bond paper and 5 cartons of 11 x 14 bond paper. This Tuesday, however, their supplier delivered 15 cartons of 8 x 11 bond and 10 cartons of 8 x 14. The office manager refused to accept the delivery. Which source of law allows contractual terms regarding quantity to be imposed?

A) the Customs in Trade Act
B) the Business Efficacy Act
C) the Sale of Goods Act
D) the Rules of Construction Act

Question 20

What would a court have to find in order to require the judge to limit the scope of the court's examination of the evidence to expressed contractual obligations?

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

Question 21

Which of the following is a distinguishing characteristic of the doctrine of frustration?

A) It relieves parties of contractual obligations in very limited circumstances.
B) As a contractual term, it is used to signify that a contract cannot be varied.
C) As a guiding principle, it is used for interpreting the terms of a contract.
D) It relieves parties in a variety of circumstances from contractual obligations.

Question 22

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 23

Which of the following would establish a maximum level of liability for one of the parties if it commits a breach?

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

Question 24

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 25

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 26

What is the legal term given to a clause that allows the parties to reopen negotiations or terminate the contract if specified events occur?

A) a condition precedent
B) an implied term
C) an entire contract clause
D) an exemption clause

Question 27

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 28

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 29

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 30

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 31

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 32

A court has been asked to determine what the express terms of a parties' contract encompass, as well as their purpose in accordance with the parties' intentions. What would most likely be constrained by the application of the parol evidence rule with respect to the contract?

A) expatiated evidence
B) expedited evidence
C) extraneous evidence
D) expunged evidence

Question 33

Which of the following would establish that damages of $10 000 will be payable by a supplier if it fails to deliver products to a retailer on time?

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

Question 34

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 35

What would have to be present in a contractual situation in order for a court to refuse to invoke the application of the parol evidence rule?

A) a consumer's personal guarantee to close a deal
B) an all-inclusive agreement involving more than one item
C) a consumer contract requiring expatiated evidence
D) an intentional partly oral and partly documented contract

Question 36

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 37

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

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

Question 38

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 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

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 41

When the parties include an "entire contract clause" in their contract, they are directing the courts to apply the parol evidence rule.

Question 42

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

Question 43

Liquidated damages clauses are never upheld by courts since they unfairly limit damage claims.

Question 44

Entire contract clauses are used to ensure that the parole evidence rule applies to the contract.

Question 45

When a court must apply the principles of the rules of construction, it may come to a conclusion simply by asking how a reasonable person would interpret the terms.

Question 46

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 47

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 48

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 49

When the existence of the contract is not in doubt, the court will assign as reasonable a meaning as possible to vague or ambiguous terms.

Question 50

The principle of business efficacy makes an obligation explicit.

Question 51

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

Question 52

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 53

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

Question 54

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

Question 55

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 56

When the parties fail to address an important aspect of their contractual relationship, the law may help to "fill in the blanks" through implied terms.

Question 57

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

Question 58

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 59

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 60

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 61

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

Question 62

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 63

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 64

Identify and briefly explain when a court would rely on the customs of trade to imply a term into a contract.

Question 65

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

Question 66

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

Question 67

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

Question 68

Because a party is never successful in litigation where reliance is made on trade customs to imply a term into a contract, the more prudent course is to ensure that all important terms are explicitly recited.

Question 69

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

Question 70

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 71

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 72

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

Question 73

Identify the terms that are required to be present in a commercial contract in order for it to be considered complete. Identify any additional clauses that could provide additional benefits through their inclusion.

Question 74

Identify and briefly describe the conflicting consideration that arises from the common law rules of construction. Identify how this conflict arises and under what circumstances parties might find themselves facing such a dilemma.

Question 75

Briefly explain what is meant by the parol evidence rule. Identify when a court might avoid applying the parol evidence rule.