Deck 8: Non Enforcement of Contracts

Question 1

In what way is a void contract different from a voidable contract?

A) A void contract contains a defect so substantial that it is of no force or effect.
B) A void contract cannot be enforced because it is contrary to legislation or public policy.
C) A voidable contract fails to meet the requirements imposed by the Statute of Frauds.
D) A voidable contract fails to meet the requirements imposed by the Sale of Goods Act.

Answer 1

A

Question 2

In recent Alberta and Ontario appellant court decisions, the courts have regarded unconscionability as involving a four-step procedure. Which of the following will a judge now recognize as an additional step to be considered over and above the traditional two-step procedure?

A) proof of improvident bargain or proof of exploitation in a contractual deal
B) imbalance in bargaining power due to ignorance of the language of the bargain
C) a sufficient divergence from community standards of commercial morality
D) proof of inequality between the parties entering into a contractual bargain

Answer 2

B

Question 3

What is the definition of the legal term "voidable contract"?

A) a contract that cannot be enforced because it is contrary to legislation or public policy
B) a contract that fails to meet the requirements imposed by the Statute of Frauds
C) a contract that fails to meet the requirements imposed by the Sale of Goods Act
D) a contract that allows an aggrieved party to choose to keep it in force or bring to an end

Answer 3

D

Question 4

Which of the following would immediately let you know that a contract contains an element that would cause a court to hold that the contract is unenforceable?

A) a desire to end a contract for economic benefit
B) a failure to diligently negotiate a good outcome
C) an auxiliary mistake concerning the contract
D) an inequitable relationship between the parties

Question 5

In the case of Bank of Montreal v. Duguid (2000), 47 O.R. (3d) 737 (C.A.), the court was asked to consider whether a wife who had signed a guarantee on a loan for her husband's business was entitled to be released from the guarantee on the basis of undue influence exerted by her husband. Why did the majority of the court find that the guarantee was enforceable against the wife?

A) because the wife had received independent legal advice
B) because the wife was a real estate agent and presumably knowledgeable enough to not be unduly influenced by her husband to sign the guarantee
C) because agreements between spouses are always enforceable
D) because there was no evidence that the guarantee was unconscionable

Question 6

A sales representative knowingly entered into a contract for an alarm system during a door-to-door sales campaign with an obviously mentally ill individual. Why could the contract be immediately rendered voidable at that individual customer's request?

A) The contract is contrary to the culpable silence provisions contained in the Vulnerable Persons Act.
B) The contract is unenforceable in accordance with the Unconscionable Transactions Relief Act.
C) Establishing true consent is not possible due to the individual's incapacity to grasp the essence and effect of the contract.
D) The individual is lacking legal capacity and is unable to perform the contract in whole or in part.

Question 7

Even though Dalbert knew Rahim had consumed copious amounts of alcohol during the afternoon, both signed a contract written on a napkin whereby Rahim agreed to buy Dalbert's old car for top dollar. Upon regaining his legal capacity, if Rahim opts to repudiate the contract on the basis of an improvident agreement, how must he proceed to void the contract?

A) He must claim relief due to the effects of duress.
B) He must claim relief due to economic duress.
C) He must claim relief due to undue influence.
D) He must claim relief due to unconscionability.

Question 8

What exerts the greatest influence on the law's focus on the enforcement of a contract after negotiations are complete and the formal contract is executed?

A) the endeavour to achieve a good faith between two competing goals
B) the preservation of the integrity, predictability, and reliability of contractual relationships
C) the endeavour to preserve the real agreement reached by the parties
D) the preservation of good faith, honesty, and diligent conduct in contractual relationships

Question 9

Cory, aged 17, plays hockey under contract with the Northern Manitoba Huskies junior hockey team. What is the legal term given to this particular type of contractual arrangement?

A) beneficial contract of training
B) beneficial development contract
C) beneficial contract of service
D) beneficial minor training contract

Question 10

While negotiating a commercial agreement, Juan made a misrepresentation that goes to the heart of the ensuing formal contract between the parties. How do you think the other party to the contract will act, once it becomes aware of the misrepresentation?

A) The other party must seek a mediated remedy for the problem.
B) The other party may opt to enforce the contract or have it set aside.
C) The other party must seek legal advice to remedy the misrepresentation.
D) The other party may opt to reproach the contract and set it aside.

Question 11

How will a court that hears a matter involving one party allegedly taking advantage of another party's unsophistication in relation to commercial matters arrive at a determination as to whether such an advantage actually existed?

A) The unsophisticated party must prove undue influence was present.
B) The unsophisticated party must prove the presence of the actual pressure.
C) The more powerful party must prove the absence of the actual pressure.
D) The more powerful party must prove the absence of the presumed pressure.

Question 12

Holding a gun to someone's head to induce them to enter a contract exemplifies which of the following legally exceptional circumstances?

A) unconscionability resulting from presumed pressure
B) undue influence resulting from actual pressure
C) misrepresentation resulting from presumed pressure
D) undue inducement resulting from actual pressure

Question 13

What is the definition of "undue influence" with respect to contractual relationships?

A) a false statement of fact that causes someone to enter a contract
B) the threat of physical or economic harm that results in a contract
C) unfair manipulation that compromises someone's free will
D) unfair criminal activity that seriously undermines a contract

Question 14

Which of the following would affect the status of a contract entered into by a minor upon that individual attaining the age of majority?

A) The contract is ratified after attaining legal capacity.
B) The contract involves enforceability by some statute.
C) The contract involves a non-continuing interest.
D) The contract is of a permanent or continuous nature.

Question 15

The case of Atlas Supply Co. of Canada v.Yarmouth Equipment (1991), 103 N.S.R. (2d) 1 (N.S.C.A.) disallowed the reliance on the defendant's exclusion clauses to prevent evidence of the plaintiff's reliance on misleading information provided by the defendant. The dissenting appellant court judge cautioned against setting aside business deals such as this one. What was the dissenting appellant court judge advocating by taking this position?

A) that a small businessperson needs protection from unconscionable big businesses
B) that the acceptance of bad faith misrepresentations is a legal commercial negotiating practice
C) that the acceptance of unconscionable misrepresentations is grounds to set aside a contract
D) that a small businessperson is disadvantaged when dealing with a multinational business

Question 16

Why is it necessary for Canadian law to grant children and mentally ill individuals special legal protection?

A) Both groups lack the substantial mental capacity to make binding legal decisions.
B) Both groups lack the legal capacity to be able to enter into binding contracts.
C) Both groups lack the experience to make binding legal decisions.
D) Both groups lack the functional mental capacity to understand binding legal commitments.

Question 17

In the case of Atlas Supply Co of Canada v. Yarmouth Equipment (1991), 103 NSR (2d) 1 (CA), the court considered whether a franchise agreement was unconscionable and therefore unenforceable because financial projections given by the franchisor were overly optimistic. Why did the court find that the contract was unconscionable?

A) because the agreement was illegal
B) because the franchisee and franchisor were in a relationship of good faith
C) because the franchisee acted promptly in seeking to avoid the contract
D) because the franchisor gave misleading financial information and withheld contrary information

Question 18

What are the elements of importance emphasized by contract law as it pertains to the legal capacity to form contracts?

A) offer and acceptance
B) essentials of a contract
C) immunity from liability
D) consent and voluntariness

Question 19

Where circumstances surrounding a proposed commercial transaction involve an unsophisticated party, what would a court most likely accept as undisputable evidence that that party has proceeded with the transaction on a free and informed basis?

A) a certificate of individual legal advice
B) a certificate of independent legal advice
C) a certificate of indisputable legal advice
D) a certificate of indubitable legal advice

Question 20

In contract law, the presence of which of the following elements would immediately alert a court to the possibility that an agreement may be voidable due to duress?

A) An error by one or both parties seriously undermines a contract.
B) The use of a threat of physical harm results in a contract.
C) Unfair manipulation compromises one party's free will.
D) A false statement of fact causes someone to enter a contract.

Question 21

Johan is negotiating the possible sale of one of his company's regional business operations to Bill. In response to Bill's inquiry regarding the duration remaining on the existing supply contracts, Johan provided the end dates of the contracts themselves. Johan did not advise Bill that two of the customers were on the brink of insolvency. If Bill relies on the information Johan provided, what recourse will contract law allow him?

A) The contractual defect is so substantial that it is of no force or effect.
B) A misrepresentation must meet the requirements imposed by legislation.
C) An aggrieved party can choose to enforce the deal or bring it to an end.
D) Partial provision of information allows the contract to be rescinded.

Question 22

What is the goal of the common law remedy of rescission?

A) It seeks to provide redress to the innocent party.
B) It seeks to provide monetary redress for harm incurred.
C) It seeks to return parties to their pre-contractual positions.
D) It seeks to enforce good faith in commercial transactions.

Question 23

Which of the following elements would a court consider when determining the enforceability of a non-competition clause on the grounds of reasonableness?

A) contravention of the Real Estate and Business Brokers Act
B) the reasonableness of location and time restrictions
C) contravention of anti-price maintenance legislation
D) the need to maintain free and open competition

Question 24

How is a wilful omission with regard to relevant information during pre-contractual negotiations regarded in law?

A) as a false statement of fact that causes someone to enter a contract
B) as permissible because each party must look out for their own interests
C) as an error made by one or both parties that seriously undermines a contract
D) as a breach of the duty to disclose information without being prompted

Question 25

Which of the following forms the basis of a common argument for setting aside a contract based on mistake that will rarely succeed in Canadian courts?

A) misunderstanding of the legal consequences of giving an oral guarantee
B) misunderstanding of the terms of an oral contract dealing with land
C) misunderstanding of the nature or type of contract signed by the party
D) misunderstanding that a contract is not to be performed within one year

Question 26

What categories of actionable misrepresentations entitle an innocent party to a common law remedy in damages?

A) fraudulent and negligent misrepresentation
B) fraudulent and innocent misrepresentation
C) innocent and negligent misrepresentation
D) negligent and factual misrepresentation

Question 27

What criteria must be satisfied in order for a misrepresentation to be actionable?

A) the misrepresentation must be made to a minor
B) the misrepresentation must be material to the contract
C) the misrepresentation must be made in conjunction with a threat of harm
D) the misrepresentation must be intentional

Question 28

Most provincial jurisdictions in Canada have enacted legislation to provide a form of protection to consumers by setting unconscionability as a standard for the assessment of fairness of the bargain. What element of this legislation is most similar to elements addressed in separate, related consumer loan protection legislation?

A) The price grossly exceeded the price for similar, readily available goods or services.
B) Physical infirmity or ignorance prevent the consumer from reasonable self-protection.
C) There was no reasonable probability of payment by the consumer of the obligation.
D) Illiteracy prevented the consumer from reasonably protecting his or her interests.

Question 29

What is the legal definition of a "guarantee"?

A) a fair contract formed by one advantaged party over another
B) a pledge evidencing the capacity to enter into legally binding contracts
C) a pledge to pay another's liability in the event of default of such duty
D) a contract made enforceable by performance over a period of time

Question 30

Under the classic model of illegality, a freely chosen contract will be held unenforceable by a court in which of the following circumstances?

A) if it is contrary to common law and/or violates public policy
B) if it is contrary to statue law and/or violates public policy
C) if it is contrary to public policy and/or the doctrine of good faith
D) if it is contrary to public policy and/or the doctrine of illegality

Question 31

Why did the Supreme Court of Canada, in 2009, expressly reaffirm that restrictive covenants in the sale of a business are subject to less scrutiny than other applications of restrictive covenants?

A) because the clauses are typically reasonably clear as stated
B) because there is typically a power balance in business transactions
C) because the clauses are typically time limited and less intrusive
D) because the vendor typically receives consideration for goodwill

Question 32

A seller unknowingly made a misrepresentation during negotiations to sell his car. Now that the seller is aware of the misrepresentation and the prospective buyer is returning to make an offer, what recourse is available to rectify the situation and accept the offer without risking an ensuing lawsuit?

A) The seller has no recourse; once information is offered, it must be completely accurate.
B) The seller can remain silent to secure the best price and plead mistake as a defence.
C) The seller should simply forego the deal with this buyer and look for a new buyer.
D) The seller must attend to the prompt disclosure of the correct facts to the prospective buyer.

Question 33

Why are contracts that unduly interfere with the ability to earn a livelihood or reduce competition generally unenforceable in common law?

A) They contravene the rules of goodwill contained in the Competition Act.
B) They cannot be enforced because they are contrary to statues and public policy.
C) They contravene the rules of fairness contained in the Consumer Protection Act.
D) They are contrary to the community's common sense and common conscience.

Question 34

What had the greatest influence on the early courts in Britain with respect to their inclusion of a provision in the Statute of Frauds requiring contracts that were to be performed after the passage of one year's time to be evidenced in writing?

A) to maintain the integrity of the contractual language by all of the contractual parties
B) to facilitate spreading writing skills amongst the early citizens of the British kingdom
C) to avoid difficulties presented by the passage of time with proving past oral promises
D) to safeguard the commercial viability of the business of practising contract law

Question 35

What is the legal definition of "mistake"?

A) the threat of physical or economic harm that results in a contract
B) an unfair manipulation that compromises someone's free will
C) an error made by one or both parties that seriously undermines a contract
D) a false statement of fact that causes someone to enter a contract

Question 36

Which of the following is a valid requirement under the federal Secure Electronic Signature Regulations issued in 2005?

A) to facilitate the association of a person's typewritten name with their unique signature
B) to ensure that typewritten names bind electronic contractual obligations
C) to ensure documents and signatures are evidenced in written form.
D) to ensure alterations to a document after it was signed can be evidenced

Question 37

A judge has determined that offending portions of a contract can be severed and the remaining portions saved. What type of common law contractual infraction is this judge resolving?

A) a mistaken contract
B) a fraudulent contract
C) an illegal contract
D) a negligent contract

Question 38

In a recent 2009 ruling, the Supreme Court of Canada found it necessary to direct that judges in lower courts were prohibited from redrafting overly broad non-competition clauses to make them legal and enforceable, stating that such clauses are simply and utterly unenforceable. Why did the Supreme Court find it necessary to invoke this prohibition?

A) to restate policy that vague or ambiguous clauses are unenforceable
B) because such clauses improperly bind employees unable to afford litigation costs
C) because such clauses are difficult to prove when the meaning is in fact unclear
D) to restate a central policy objective to facilitate drafting of broad clauses

Question 39

What was the intended purpose of the creation and enactment of the Statute of Frauds?

A) to require that commercial contractual relationships be stated in one document
B) to avoid the difficulty in proving the value of the goods or services exchanged
C) to allow performance to take the place of a written duly executed agreement
D) to impede perjury and fraud by documented evidence of specified types of contracts

Question 40

How does the common law classify a situation in which both parties to an agreement have shared the same fundamental mistake in order to provide a remedy?

A) as a mistake at law
B) as a shared mistake
C) as a common mistake
D) as a mutual mistake

Question 41

An employer can never be awarded damages for breach of a beneficial contract of service by a minor.

Question 42

In British Columbia, the interests of under-age-of-majority children are protected by the Infants Act.

Question 43

Which of the following would be a valid provision under the various provincial acts dealing with the sale of goods?

A) Contracts above $20 to $25 must be made in writing in order to be enforceable.
B) If partial payment or acceptance is made by the buyer, an oral contract is enforceable.
C) Contracts above $15 to $20 must be made in writing in order to be enforceable.
D) If creation of a record of an agreement is evident, the court must make a prudent ruling.

Question 44

Some Canadian common law courts have ruled that, where proper circumstances allow, a party's lack of a practical or realistic alternative can establish valid evidence of economic duress.

Question 45

Sanjip has elected to build up the earth around the cracked foundation of his home prior to listing the home for sale. Sanjip's action will not amount to misrepresentation if he fails to disclose the cracks to potential purchasers.

Question 46

People seeking to avoid a contract owing to mental capacity, duress, undue influence, or unconscionability must do so promptly.

Question 47

The only basis for a contract being held to be illegal is if it is prohibited by the Criminal Code.

Question 48

To establish undue influence, evidence of actual pressure requires the party seeking relief to show, among other things, that the influence existed.

Question 49

Minors have the option of fulfilling their contractual obligations and suing the other party to enforce the contract.

Question 50

Intoxication is regarded as a form of mental incapacity under the law.

Question 51

In circumstances where one party provides only partial information to the other side during negotiations to induce that party to enter into contractual obligations, the contract will likely be enforced by the courts despite the misrepresentation of relevant facts.

Question 52

If possible, the courts will redraft an offending provision in a contract to make it legal.

Question 53

When applying for life and disability insurance protection on her mortgage, Marabou neglected to disclose that she had been diagnosed with type 2 diabetes. As players in the commercial contractual area have a duty to look after their own interests, the insurance policy will be enforced should she become disabled or die as a result of the undisclosed pre-existing condition.

Question 54

A contract will be set aside for mistake only if one party realized the other party was mistaken at the time of entering the contract.

Question 55

A lawyer selling his practice initially provided information regarding its value that his accountant later informed him was inaccurate. The lawyer is not required to disclose this new fact to the lawyer interested in purchasing the practice as both are commercially and legally sophisticated players who are fully capable of watching out for their own interests.

Question 56

A beneficial service contract is enforceable as long as it was commercially viable for the business owner employing a minor.

Question 57

In order for a contract to satisfy the requirement of being written, all of the requirements must be met in one document called "the contract."

Question 58

A simple oversight or error by one negotiating party does not constitute a legal mistake and provides no basis for voiding a contract.

Question 59

The purpose of the Statute of Frauds is to prevent fraud and perjury regarding certain kinds of contracts.

Question 60

When a relationship exists between a lawyer and a client, the court is entitled to assume presumed pressure amounting to undue influence.

Question 61

Johan is a director on the board of a corporation considering entering into a contract with a company in which Johan holds a beneficial interest. Johan has decided it is in his best economic interests not to disclose this fact to the board. Discuss the possible legal consequences, if any, that may befall Johan as a result of his decision.

Question 62

What must be proven in order to have a contract set aside for misrepresentation?

Question 63

Identify the circumstances where parties would be considered to have breached the requirement to disclose information without the need to be prompted to provide it during contractual negotiations.

Question 64

With respect to a contractual relationship, identify the types of remedies for misrepresentation available to the affected parties and how they are applied.

Question 65

When is a contract considered to be contrary to public policy? Give an example.

Question 66

What interests do the courts balance in deciding whether a noncompetition covenant, preventing an employee from leaving and going into competition with her former employer, is enforceable? What is the test applied by the courts?

Question 67

Identify and describe four classes of contracts that must be written in order to be enforceable in most provinces.

Question 68

What is an "electronic signature," and is it legally valid?

Question 69

Ranjit, Quan Lu, and Ng are all directors of BigSkyInvestments Inc. who have a beneficial interest in a contract that BigSkyInvestments' management is considering and each must disclose their status to management in accordance with statute requirements.

Question 70

Identify and briefly explain the relevance of a misrepresentation of relevant facts with regard to an insurance contract.

Question 71

If a contract is one that the Statute of Frauds requires must be written in order to be enforceable, what must appear in writing?