Deck 8: Consideration and Privity

Question 1

A gratuitous promise
A.occurs when one party promises to provide two benefits in exchange for the receipt of one benefit.
B.is usually enforceable even though it is not given in exchange for consideration.
C.is not enforceable even if it is placed under seal.
D.is enforceable as long as it is supported by love and affection.
E.is a promise that is not given in exchange for consideration.

Answer 1

E

Question 2

Hofflehass Architectural Ltd was hoping to persuade the Town of Buchanan to create a new beachfront resort.Buchanan said that it was not yet willing to commit itself to such a project.However, it also said that it would likely agree to any proposal that met certain specifications.On that basis, Hofflehass spent $150 000 in creating a proposal that met all of the town's specifications.It presented the proposal and further explained that it would charge $2 million to actually undertake the construction project.The town's officials, however, said that they were no longer interested in a beachfront resort.Although Hofflehass cannot force Buchanan to pay it $2 million to create the proposed resort, it can use the doctrine of promissory estoppel to recover its expenses of $150 000.

Answer 2

False

Question 3

Patricia and Charlie entered into a written agreement.Patricia promised to pay $5000 to Haden, who is Charlie's brother.Charlie placed his seal on the document, but Patricia did not do so.Three days later, Charlie promised that he would design a new computer program for Bethany, Patricia's sister, in exchange for Patricia's promise.Which of the following statements is the most accurate?

A)Patricia's promise is not enforceable because each party to a contract must provide a benefit to the other party of that contract.
B)Patricia's promise is enforceable because Charlie placed his seal on his agreement with her.
C)Charlie's promise is enforceable because it was given in exchange for Patricia's promise to pay $5000.
D)Patricia's promise is not enforceable because it was not given in exchange for consideration.
E)Patricia must pay $5000 to Haden if Charlie actually does design a new computer program for Bethany.

Answer 3

Patricia's promise is not enforceable because it was not given in exchange for consideration.

Question 4

Dina threatened to sue Chris for $25 000 unless he immediately paid her $10 000.Chris paid $10 000.He will be entitled to recover that money as long as he later proves that Dina honestly and mistakenly thought she had the right to sue Chris for $25 000.

Question 5

Alpha Corp entered into an agreement with Beta Inc.Alpha promised to transfer certain equipment to Beta and Beta promised to pay $50 000 to Gamma Ltd.Alpha has provided sufficient consideration but Beta has not.

Question 6

Epsilon Inc and Delta Ltd entered into an agreement.Epsilon promised to pay $10 000 to Delta in March.Delta promised to deliver a piece of machinery to Epsilon in June.Epsilon paid the money in March.It is now April.The parties do not yet have a contract because while Delta has given a promise, it has not yet performed that promise.

Question 7

Luke threatened to sue Leia for $50 000 unless she immediately paid $30 000 to him.Leia paid $30 000 as requested.Luke is entitled to keep that money even if Leia later proves that he never honestly believed in the validity of the lawsuit that he threatened.

Question 8

Canadian courts consistently hold that a promise to perform a pre-existing contractual obligation cannot provide consideration under a new contract with the same party.They apply that rule because it always reflects commercial reality.

Question 9

A gratuitous promise is generally not enforceable.

Question 10

The doctrine of promissory estoppel operates only if the representor promised that an existing right would not be strictly enforced.

Question 11

Tracey is a police officer.While she was on vacation, she agreed to act as a security guard at a concert in exchange for payment of $500.She performed the work, but the concert promoter refuses to pay her.He is entitled to do so because the law wants to discourage public servants like Tracey from improperly taking advantage of their special skills for private gains.

Question 12

Gareth recently graduated with the highest GPA of any student in Business.He has been hired by a prestigious bank in London, but that job will not start for three months.To fill the time and to make a little extra money, Gareth posted an advertisement around campus: "Top Flight Tutorials-Learn from the Best-$100 Per Hour-Minimum of Ten Sessions." Reva is a struggling student in the first year of the Business program.Desperate to improve her grades, she signed a contract with Gareth and paid $1000 for ten tutorials.That agreement, which Gareth personally drafted, expressly states: "This agreement is subject to the usual rules regarding assignments." After the first tutorial, Reva was delighted with Gareth's services.She found him extraordinarily arrogant, but also very smart.For the second tutorial, however, she was surprised when Evan, a mediocre second-year student, showed up instead of Gareth.As Evan explained, Gareth decided that he wanted to travel, rather than deliver tutorials, in the time before his bank job started.Gareth therefore assigned his role under the contract to Evan.Reva has no basis for complaint because she expressly agreed to abide by the general law of assignments.

Question 13

A statutory assignment is "subject to the equities." That means that even if the requirements for a statutory assignment have been satisfied, it will be enforced only if a court believes that, in light of all of the circumstances, it would be fairer for the assignee, rather than the debtor, to win the case.

Question 14

In exchange for Miles's promise to pay $10 000 to the Society for Prevention of Cruelty to Animals, Fran promised to give up eating meat for one year.Which of the following statements is TRUE?

A)Fran's promise is gratuitous because Miles does not receive anything of value from her.
B)Fran has not given consideration because she has only suffered a detriment.
C)Because neither party will receive a direct benefit, a contract was created only if the parties' agreement was placed under seal.
D)The facts demonstrate a mutual exchange of value.
E)The facts demonstrate the doctrine of promissory estoppel.

Question 15

In late May, Lovin was excited about his upcoming graduation ceremonies.Because he wanted to look his best, he visited a tailor and agreed to pay $500 for a new suit.The contract required Lovin to pay the full price on June 1 and entitled him to collect the finished product on June 10.As promised, Lovin paid the full amount on the first of June.At that point, it can be said that he gave "past consideration" in support of the contract.

Question 16

Which of the following statements is TRUE?

A)Consideration must be adequate but it does not have to be sufficient.
B)A person can provide consideration by making a promise that will either create a benefit for itself or impose a detriment upon the other party.
C)A party seeking to receive the benefit of a promise does not have to provide consideration if it placed its seal upon a document in which the promise is contained.
D)Love and affection can serve as consideration if a contract is created between family members.
E)To place a contract under seal, a person may either apply a seal or write the word "seal" on a document.

Question 17

The Canadian government announced its plan to create and circulate a new $100 bill.Because Marta knew that Bernie was an avid collector of currency, she promised to give him the first new $100 bill that she received from her work at a flea market.The agreement was placed in writing and Bernie applied his seal to the document.Shortly after the government released the new $100 bills, Marta received one from a customer at the flea market.She is required to deliver it to Bernie.

Question 18

Zeta Corp was contractually obliged to pay $25 000 cash to Omega Inc on June 15.On June 1st, Omega agreed to discharge the entire debt if Zeta immediately gave a cheque worth $15 000.Zeta did so.Nevertheless, on June 15th, Omega demanded payment of another $10 000.It is entitled to receive that amount.

Question 19

As a wedding anniversary present for himself and his wife, Louisa, Mario entered into an agreement with Stanislaus, a world famous pianist.Under the terms of that agreement, Mario promised to pay Stanislaus $52 000.Stanislaus promised that he would provide weekly lessons for one year for both Mario and Louisa.After two weeks of lessons, Mario completely lost interest, but Louisa is eager to continue.Stanislaus, however, refuses to go on.Louisa has the right to demand the remainder of the lessons from Stanislaus because the courts generally assume that if one party (such as Mario) enters into a contract for the benefit of another person (such as Louisa), the promise provided by the other contractual party (such as Stanislaus) is held on trust.

Question 20

Because he was in love with her, Noriel promised to sell his car to Marina for $500 and Marina agreed to pay $500 for the car.At the time of that agreement, Marina stressed that the deal was purely commercial and made it clear that she did not share Noriel's hopes for an intimate relationship.Before the sale was performed, Noriel fell in love with another woman, Valerie.He therefore now refuses to transfer the car to Marina.The actual market value of the car is $7500.Which of the following statements is TRUE?

A)Marina cannot enforce Noriel's promise because her promise did not provide adequate consideration.
B)Marina cannot enforce Noriel's promise to transfer the car because that promise was only supported by past consideration in the sense that it was based on the fact that Noriel was previously in love with Marina.
C)Marina cannot enforce Noriel's promise because love and affection are not good consideration.
D)Marina can enforce Noriel's promise to transfer the car, but only if she pays the actual market value of the car.
E)Noriel and Marina exchanged consideration even though he has not transferred the car to her and she has not paid the money to him as they exchanged mutual promises.

Question 21

Sarah was an orphan.Her uncle Rocco agreed to act as her guardian until she became an adult.In that role, he borrowed money to pay for her education.She promised to repay him when she became an adult.Sarah later became an adult and married Stepan.Stepan also promised to repay Rocco for the money that he had spent on Sarah's education.Sarah and Stepan, however, now refuse to pay the money.Rocco has sued Stepan on his promise.Which of the following statements is most likely TRUE?

A)Sarah and Stepan and jointly and severally liable to Rocco.
B)Stepan has privity to the contract that was created between Sarah and Rocco.
C)Stepan is liable to Rocco.
D)Sarah became liable to Rocco only after Stepan made his promise to Rocco.
E)Stepan's promise to Rocco involves the concept of past consideration and is unenforceable.

Question 22

Which of the following statements is TRUE?

A)As a general rule, a promise to perform a pre-existing public duty can provide consideration for a new contract.
B)As a general rule, a promise to perform a pre-existing contractual duty to one party cannot provide consideration for a new contract with a different party.
C)As a general rule, a promise to perform a pre-existing contractual duty to one party can provide the consideration for a new contract with that same party for a lesser contractual duty.
D)As a general rule, a creditor's promise to accept a lesser sum in complete discharge of a larger debt is unenforceable.
E)As a general rule, a promise that is not supported by valuable consideration is enforceable only if both parties have applied their ceremonial wax seals.

Question 23

JB Inc sold a piece of equipment to SubSurf Ltd for a total price of $240 000.Under the terms of their contract, SubSurf was required to pay $10 000 on the first day of each month for 24 months.The contract also stated that if SubSurf was late on any single payment, JB was entitled to demand immediate payment of the entire outstanding amount.SubSurf made the first four payments on time.For the next six months, however, it was habitually late by at least one week.JB did not object to receiving those late payments.However, when SubSurf did not pay the eighth instalment on the first day of the next month, JB demanded immediate payment of the entire outstanding amount.Which of the following statements is TRUE?

A)SubSurf must immediately make a lump sum payment of $240 000 to Jb.
B)The parties' contract is invalid because SubSurf's promise to immediately pay the entire outstanding amount if it failed to perfectly comply with the repayment schedule was a gratuitous promise.
C)The doctrine of promissory estoppel is inapplicable because JB did not make an effective representation or statement.
D)The doctrine of promissory estoppel is inapplicable because it can only be used as a sword.
E)JB is estopped from complaining about the late payments as long as SubSurf can prove that it relied upon the fact that the first 10 payments were accepted without objection.

Question 24

Which of the following best explains why a court will not enforce an agreement that was created on the basis of a pre-existing public duty?

A)The performance of a public duty does not confer a benefit upon anyone.
B)As a matter of public policy, it would be undesirable if a public official with a pre-existing public duty was motivated to perform for wealthy citizens but not poor citizens.
C)Because public duties usually concern very serious matters, such as police investigations and firefighting, there is nothing that a citizen could give that would provide adequate consideration for a promise to perform a pre-existing public duty.
D)Citizens should not have to pay for services that public officials, like police officers and firefighters, perform while they are off-duty.
E)A promise by a public official is binding only if it is placed under seal.

Question 25

Which of the following situations best illustrates the rule that a promise to perform a pre-existing public duty does not constitute consideration?
A.Pam has threatened to sue Dave for $10 000.She is quite sure that she would win the case in a public court.However, because she is very fond of him, she has also generously offered to settle the matter for $6000.
B.Pam, who is a fire fighter employed by the city, agreed to extinguish a fire that was destroying Dave's house, which is located in the city, only after he promised to pay $10 000 to her in exchange for her services.
C.Pam placed an advertisement in a newspaper that promised to pay $10 000 to anyone who returned her lost cat to her.
D.In exchange for his promise to pay $5, Pam promised Dave that she would guard a parking lot in which his car was located during a sporting event.Several minutes later, she promised Earl, who had also parked there, that she would guard the same parking lot during the same sporting event if he promised to pay her $7.
E.Pam asked Dave, who is a real estate agent, to locate a house in which she could operate a small accounting business.After he directed her attention to such a house, she promised to pay $10 000 to him.

Question 26

Dunlop sold tires to Mew.The parties' contract prohibited Mew from reselling the tires unless its sub-buyer agreed to abide by Dunlop's list price for the tires.Mew resold the tires to Selfridge.Under its contract with Mew, Selfridge agreed to (1) abide by Dunlop's list price, and (2) pay $50 to Dunlop for each tire that it sold in violation of that list price.Selfridge resold 10 of the tires to its own customers for less than Dunlop's list price.Which of the following statements is most likely to be TRUE?

A)Selfridge is required to pay $500 to Dunlop only if Selfridge's contract with Mew is under seal.
B)Selfridge is required to pay $500 to Mew.
C)Selfridge is required to pay $500 to Dunlop.
D)As a result of the contract between Mew and Selfridge, privity of contract exists between Dunlop and Selfridge.
E)Dunlop is not entitled to any payment from Selfridge because Dunlop was not privy to the agreement between Selfridge and Mew.

Question 27

Maria went on vacation in May.She expected that her garden would be fine because May is normally a very rainy month.In fact, it did not rain at all during May.Her neighbour, Hector, therefore watered her garden because he knew that she would not want her plants to die.When she returned from her vacation in early June, she thanked Hector and promised to pay him $200 for his time and effort.Which of the following statements is most likely to be TRUE?

A)Hector is not entitled to payment because his services were not given in return for Maria's promise.
B)Maria is contractually liable, but if the market value of her services is less than $200, then Hector is entitled to collect only the lesser amount.
C)The concept of past consideration does not apply because Hector never gave any sort of promise.
D)Maria's promise would be unenforceable even if it was placed under seal.
E)Maria is contractually liable as long as a reasonable person in her circumstances would have agreed to pay for Hector's services.

Question 28

Which of the following propositions is TRUE in the context of the doctrine of promissory estoppel?

A)The representee cannot rely on the representor's gratuitous promise if the representor was guilty of inequitable behaviour.
B)Once legal rights are affected by the doctrine of promissory estoppel, they can never be revived.
C)Promissory estoppel can only be based on representations of existing or past facts.
D)Promissory estoppel can be used as a sword but not as a shield.
E)The doctrine of promissory estoppel is relevant if the representor already has existing rights that can be enforced against the representee.

Question 29

ABC Construction agreed to build a pool for Carmen in exchange for $100 000.The pool was to be built during the month of May, but payment was not due until the end of August.The pool was completed on schedule.However, because it was experiencing financial difficulties, ABC orally assigned its contractual rights against Carmen to Miranda in early June.In July, Carmen discovered that the pool leaked.Because ABC denied responsibility, Carmen had the problem fixed by another company at a cost of $20 000.The evidence now indicates that the problem was in fact caused by ABC's breach of contract.ABC failed to use appropriate materials when it constructed the pool.Which of the following statements is TRUE?

A)The assignment may be statutory, but it cannot be equitable.
B)The assignment may be equitable, but it cannot be statutory based on the existing state of the statute law.
C)Miranda can collect $100 000 from Carmen regardless of when she received notice of the assignment.
D)Miranda can collect $100 000 from Carmen only if it notified her of the assignment before the pool began to leak in July.
E)Because of the assignment, Carmen can sue Miranda on the basis of ABC's breach of contract.

Question 30

Mason renovated Reece's shop in exchange for the promise of $75 000.Reece had enough money to pay the entire bill, but simply did not want to do so.Reece much preferred to cheat Mason out of the contract price it had agreed to pay.That possibility existed because Reece knew that Mason's financial situation was very weak.In fact, Mason it might be forced into bankruptcy if it did not receive at least $25 000 for its work.Reece therefore offered to pay $25 000 in full satisfaction of the outstanding debt.Because of the circumstances, Mason accepted that offer and promised that it would not demand payment of the additional $50 000.Reece paid $25 000 to Mason.However, Mason has now sued Reece for $50 000.Which of the following statements is TRUE?

A)Reece will win the lawsuit because all of Mason's work has become past consideration.
B)Mason will win the lawsuit only if he provides some new benefit to Reece.
C)Reece will win the lawsuit because the contract ceased to exist once Mason agreed to receive $25 000 in full satisfaction of the contractual debt.
D)Reece cannot rely on the principle of promissory estoppel because his behaviour was inequitable.
E)The doctrine of promissory estoppel is inapplicable because Mason's representation concerned a past fact (the value of the work that it performed for Reece).

Question 31

Parker Inc promised to pay $100 000 cash to Coltrane Ltd in exchange for a shipment of widgets.The widgets were delivered on October 1st and the price was to be paid on October 15.On October 13, Parker informed Coltrane that it would not be able to afford to pay any more than $75 000.Which of the following statements is TRUE?

A)Coltrane will be able to recover the full contract price even if it promises under seal to accept $75 000 in complete satisfaction of Parker's debt.
B)Coltrane will not be able to recover the full contract price if it agrees to accept $75 000 from Parker to be paid on October 14 in complete satisfaction of the $100 000 debt, that was to be paid on October 15.
C)If the parties are located in Alberta, Ontario, British Columbia, Manitoba, the Northwest Territories, Nunavut, Saskatchewan, or the Yukon, Coltrane will be able to recover the full contract price even if it has accepted Parker's offer to pay $75 000 in complete satisfaction of the $100 000 debt.
D)Coltrane will be able to recover the full contract price even if it accepts Parker's offer to satisfy the $100 000 debt by both paying $75 000 in cash and delivering a used truck to Rollins Corp, which is another company with which Coltrane has close ties.
E)There is no mutuality of consideration, and therefore the contract is invalid, because Coltrane actually delivered the widgets before Parker was required to pay the purchase price.

Question 32

Bruce and Rosie entered into an agreement.He promised to transfer a necklace to her mother and she promised to deliver a computer to his father.Which of the following statements is most likely to be TRUE?

A)There is no contract between Rosie and Bruce because neither her mother nor his father is a party to the agreement.
B)As long as Bruce's father relies upon the terms of the existing contract, and as long as he does not act inequitably, he can use the doctrine of promissory estoppel to compel Rosie to transfer the computer to him.
C)As long as Bruce transfers the necklace to Rosie's mother, Bruce's father can demand delivery of the computer from Rosie.
D)There is no contract between Bruce and Rosie because there was no mutuality of consideration.
E)Even if neither Bruce nor Rosie have yet performed, a valid contract exists on the basis of their mutual exchange of promises to perform.

Question 33

Which of the following rules applies to an equitable assignment?

A)The assignment must be written.
B)The assignment must be placed under seal.
C)The assignment must be unconditional.
D)The assignment is valid only once the debtor is given written notice.
E)The assignee takes the assignor's rights subject to the equities.

Question 34

Rande promised to provide a series of lectures on tort law to a group of professional athletes in exchange for payment of $10 000.Shortly before the lectures were scheduled to take place, Rande promised to provide a publishing company with a recorded set of lectures on tort law in exchange for $15 000.The publishing company agreed that Rande's planned lecture for the group of professional athletes would be the subject of the recording.Which of the following statements is TRUE?
A.Rande does not have a contract with the publishing company because a pre-existing contractual obligation cannot be re-used for the purpose of supporting a new contract.
B.If Rande fails to provide the lecture as promised, he may be held liable for breach of contract to both the group of professional athletes and the publishing company.
C.Rande does not have a contract with the group of professional athletes because he re-used his promise to provide a lecture in order to support his contract with the publishing company.
D.Rande's promise to the publishing company would be enforceable only if it was made under seal.
E.Although Rande has contracts with both the group of professional athletes and the publishing company, he can only demand payment from one of them.

Question 35

Which of the following situations involves the creation of a contractually enforceable promise?

A)Suneeta promised to pay $5000 to a firefighter who responded to a routine call to extinguish a fire at her house.
B)Suneeta promised to pay $500 to her father for a birthday present that she had received from her parents two weeks earlier.
C)Suneeta had a contract with a construction company to build a deck in her backyard.Halfway through the project, the cost of materials suddenly increased.Although the original agreement did not require her to do so, Suneeta agreed to pay an additional $2000 to the construction company to off-set the additional expenses that it would encounter in the remainder of the project.
D)Suneeta borrowed money from a bank.Under the terms of that agreement, she was required to pay the bank $10 000 cash on June 1.On May 28, she explained to the bank that she would not be able to pay the full amount on schedule.On the same day, she also persuaded the bank to accept a cheque for $7500 in satisfaction of the full debt.
E)Suneeta's brother, Arvid, had long promised that he would pay $10 000 to her when she turned 21.She was always skeptical, but a few weeks before her 21st birthday, she wanted to be sure that he would honour his promise.Suneeta therefore persuaded Arvid to write his promise on a piece of paper, and then she added her signature and seal to that document.

Question 36

Mohana promised Ian that she would pay $10 000 to him on his birthday.Ian gave nothing in exchange for that promise and neither party placed a seal on the document containing Mohana's promise.Ian demanded payment on his birthday.Mohana refused, primarily on the basis that she had recently become quite annoyed with him.Ian then threatened to start a lawsuit.He also offered to settle that lawsuit in exchange for payment of $7500.Mohana accepted that offer in an attempt to avoid paying the full $10 000.Several weeks after paying $7500, however, she learned that her initial promise was not actually legally enforceable.She also learned that Ian, who was a lawyer, was aware of that fact all along and made the threat knowing that there was no meritorious lawsuit which he could bring against Mohana.Which of the following statements is the most accurate?

A)Mohana cannot recover $7500 from Ian because she paid that money in exchange for his forbearance to sue.
B)Mohana can recover her $7500 because Ian did not give consideration in exchange for her initial promise to pay $10 000.
C)Mohana can recover $7500 from Ian because his threat to sue her for payment of $10 000 was not made honestly.
D)Mohana would have been required to pay $10 000 to Ian if he had placed his seal on the document that contained her promise.
E)Mohana can recover only the difference between the sum that she paid ($7500) and the sum that she originally promised to pay ($10 000).

Question 37

Which of the following statements is TRUE?

A)An assignee under an equitable assignment acquires its rights "subject to the equities," but an assignee under a statutory assignment does not.
B)If the parties have tried, but failed, to create a statutory assignment, they cannot rely on an equitable assignment.
C)An equitable assignment is valid only if it is unconditional and complete.
D)An assignment of contractual rights sometimes is created by operation of law and without regard to the assignor's intention.
E)The doctrine of vicarious performance is a type of assignment.

Question 38

Which of the following statements is TRUE?

A)The courts generally do not require adequate consideration because they believe that each person can look after their own interests by deciding how much to demand under a contract.
B)Promissory estoppel can be used as a sword but not as a shield.
C)Consideration is unnecessary as long as the word "seal" was printed on a form that a contractual party read.
D)Because of the significance of the privity of contract doctrine, exceptions can only be created by the legislature, and not by the courts
E)Consideration can never consist of a promise to perform a pre-existing obligation.

Question 39

Bentley Inc operates a sporting goods store.In January, it purchased a shipment of baseball bats from Tadpole Manufacturing Ltd for $20 000.In February, Tadpole orally assigned its rights under that contract to J&H Collections.In May, Bentley purchased a shipment of footballs from Tadpole for $15 000 under a separate contract.Immediately after delivery, Bentley discovered that the footballs were defective.They had been improperly treated with a chemical that destroyed their leather exterior.The footballs consequently are completely worthless.Both contracts between Bentley and Tadpole required payment to be made by the end of June.Which of the following statements is TRUE?

A)J&H can collect $20 000 from Bentley as long as it notified Bentley of its assignment before the end of June.
B)Because the assignment is equitable, J&H can collect $20 000 from Bentley regardless of when it notified Bentley of the assignment.
C)Because the assignment is statutory, J&H can sue Bentley without joining Tadpole as a party to that action.
D)Even if Bentley paid for the baseball bats as soon as they were delivered (even though payment was not required until the end of June), it will have to pay the price a second time to J&H, if J&H provides written notice of the assignment before the end of June.
E)The assignment may be equitable, but it cannot be statutory because it is not in writing.

Question 40

Fred owed a debt of $10 000 to Regina.Because he had lost his job and was experiencing financial difficulties, he hoped that she would take pity on him and would not insist upon payment.Fred therefore said to Tyra, who was Regina's colleague, "If you can get her to drop the matter, I'll make it worth your while." Tyra felt sorry for Fred and said that she would do her best.A week later, she called Fred and explained that Regina had agreed under seal to forgive the $10 000 debt.Fred replied by saying, "Many thanks.Come by my house and I'll pay you $500 for your effort." Which of the following statements is most likely to be TRUE?

A)Although Regina is no longer entitled to receive $10 000 from Fred, she can still recover a reasonable amount from him.
B)Regina can still recover $10 000 from Fred because he did not use his own seal.
C)Tyra would not be entitled to any payment from Fred if he did not state the specific amount of $500.
D)The agreement between Tyra and Fred is enforceable because Fred's promise to pay $500 is past consideration.
E)Regina cannot sue under the agreement that was created between Tyra and Fred as she was not privy to that agreement.

Question 41

Lewis is a wealthy entertainer.While watching a telethon that was aimed at raising money for medical research, he was overwhelmed by a sense of grief and sorrow.He consequently picked up the telephone, dialed the number on the screen, and promised to donate $5 million within one month.The volunteer on the other end of the line thanked Lewis and assured him that "the money will be put to good use." Two days later, before Lewis had sent in a cheque, the telethon organizers announced that, because of the public's overwhelmingly positive response, and in particular because of Lewis's generous promise, their organization would be able to build a research facility that they previously believed was beyond their budget.They also announced that they would name the facility the Jerry Medical Research Park, after Thomas Jerry, a local surgeon who recently had died.Lewis became very angry.He had long hated Jerry and he was horrified at the thought of paying for a building named in his enemy's honour.He therefore informed the telethon organizers that he had changed his mind and that he would not be sending any money.The telethon organizers have now sued for breach of contract.Which of the following statements is TRUE?

A)Lewis is contractually obliged to honour his promise if the telethon organizers can prove that, in reliance upon his promise, they already have hired architects and contractors to build the new facility.
B)Lewis is required to honour his promise as a result of the doctrine of promissory estoppel.
C)There is no contract in this case because Lewis merely promised to pay, and did not actually pay any money, and therefore did not provide consideration.
D)Lewis will be contractually obliged to honour his promise as long as the telethon organizers agree to drop Thomas Jerry's name from the new research park.
E)Lewis is not required to pay because his promise was a gratuitous promise.

Question 42

The contractual rule that requires an exchange of value
A.is best explained through the doctrine of privity.
B.generally requires proof that each party provided sufficient consideration, but it does not also require proof that each party provided adequate consideration.
C.can be satisfied by the use of a seal because a seal is itself a form of valuable consideration.
D.is based on the need for clear evidence of an agreement and therefore does not apply if the parties' agreement is written, rather than oral.
E.cannot be satisfied by the provision of love and affection because that rule requires each party to provide a physical benefit, rather than services or actions.

Question 43

The traditional doctrine of estoppel, rather than promissory estoppel, requires proof
A.of either consideration or seals from both parties.
B.of a statement regarding a past or present fact.
C.of detrimental reliance by the representor.
D.that one of the parties acted inequitably.
E.of an intention to create a new contract.

Question 44

Laetitia agreed to provide certain services to Hans in exchange for a payment of $10 000.Although Laetitia fully performed her side of the agreement, Hans refuses to pay anything.He insists that Laetitia does not have a right to sue for breach of contract because, in performing the services, she was merely doing something that she had become obliged to do even before she entered into her agreement with Hans.Hans's position is correct if Laetitia's pre-existing obligation was

A)some type of public duty.
B)supported by a seal rather than by consideration.
C)a private obligation owed to a third party.
D)for some reason unenforceable.
E)subject to a quantum meruit.

Question 45

Cookie and Muhammad created a contract.Muhammad promised to pay $25 000 to Cookie; Cookie promised to install a modified engine in Muhammad's speedboat.Jane vicariously performed part of the contract.Which of the following statements is most likely to be TRUE?

A)Jane almost certainly vicariously performed on behalf of Cookie.
B)One of the parties undoubtedly breached the contract.
C)Vicarious performance occurs only under an assignment.
D)Vicarious performance will be recognized by a court of equity but not by a court of law.
E)If Jane performed carelessly, and if the party that received Jane's services suffered a loss as a result, that party is entitled to sue Jane, but not the other contractual party.

Question 46

The word "estop" means

A)"to prove."
B)"to deny."
C)"to prevent."
D)"to guess."
E)"to promise."

Question 47

Carlos entered into a contract with Keisha.He promised to design a computer system for her business and she promised to pay $50 000 to his brother, Mikey.When that contract was created, Keisha agreed that Carlos would receive her promise on trust for Mikey.Which of the following statements is TRUE?

A)Because of the trust, Mikey is entitled to enforce Keisha's promise even though he did not provide any consideration.
B)Because Carlos and Keisha agreed to create a trust, their contract is valid even without consideration.
C)Keisha is the trustee of a trust.
D)The facts illustrate the concept of vicarious performance.
E)Carlos is the beneficiary of a trust.

Question 48

Which of the following statements is TRUE?
A.As long as the required formalities are satisfied, any contractual obligation can be assigned by using either a statutory assignment or an equitable assignment.
B.All common law provinces and territories allow statutory assignments, but only some of them allow equitable assignments.
C.An assignee acquires rights against the debtor only if it provides new consideration to the debtor.
D.If there are two assignees of the same debt, a court will always favour the assignee that received its assignment first.
E.The parties to a contract may agree at the outset that the rights that arise under their agreement cannot be the subject of assignment.

Question 49

The employment exception to the privity doctrine

A)was created by statute.
B)allows an employer to acquire rights in a contract that was created between a customer and an employee.
C)may be applied in a case that involves vicarious performance.
D)is usually necessary because the employer did not provide consideration to the customer.
E)is a form of equitable assignment.

Question 50

Which of the following statements is TRUE?

A)The doctrine of promissory estoppel can be used to create a new contract between parties who do not have any pre-existing relationship.
B)The decision in London Drugs Ltd v Kuehne & Nagel International Ltd requires proof that the relevant contractual clause expressly refers to the employee.
C)The decision in Central London Property Ltd v High Trees House Ltd created a new equitable doctrine that allows for the enforcement of some gratuitous promises.
D)The decision in Pao On v Lau Yiu Long stands for the proposition that a contract may exist if a person gives an implied promise to pay when requesting the provision of goods or services.
E)An equitable assignment is possibly only if the parties created a contract that is valid in equity, but not in law.

Question 51

The decision in London Drugs Ltd v Kuehne & Nagel International Ltd is the leading authority for which of the following propositions?

A)A trust can be used to avoid the consequences of the privity of contract doctrine only if the parties actually intended to create a trust.
B)Forbearance to sue may be sufficient consideration even if the underlying claim was not actually valid.
C)In certain circumstances, an employee is entitled to enforce an exclusion clause that is contained in a contract that was created between an employer and a customer.
D)A promise to perform a pre-existing contractual obligation that is owed to one party may provide consideration under a new contract with a different party.
E)Sufficient consideration may consist of either a benefit provided to another person or a detriment to oneself.

Question 52

Which of the following statements is TRUE?

A)A Himalaya Clause creates a true exception to the privity rule.
B)The decision in Vandepitte v Preferred Accident Insurance Co creates a special exception to the privity rule for employees.
C)The decision in London Drugs Ltd v Kuehne & Nagel International Ltd is the reason why assignments are "subject to the equities."
D)A contractual right can be transferred from one person to another because that right is classified as a chose in action, which is a type of property.
E)If a person who holds a contractual right dies, that right automatically is transferred to a "trustee for performance."

Question 53

In which of the following situations is a statute most likely to provide an exception to the privity doctrine?
A.employment
B.income tax
C.life insurance
D.marriage
E.divorce

Question 54

Which of the following statements is TRUE?

A)Under the doctrine of consideration, a contract exists only if both parties receive some type of benefit.
B)The "peppercorn theory" demonstrates that consideration must be sufficient, but it does not have to be adequate.
C)The "peppercorn theory" demonstrates that consideration must be adequate, but it does not have to be sufficient.
D)The decision in Gilbert Steel Ltd v University Construction Ltd stands for the proposition that a person cannot give good consideration for a new contract by promising to perform a pre-existing obligation that is owed to a third party.
E)The phrase "quantum meruit" (which means "you get what you deserve") is used in a case of promissory estoppel to explain that equity will not provide assistance to a person who acted inequitably.

Question 55

Sid and Nancy entered into a contract.Sid assigned part of that contract to Johnny.Which of the following statements is most likely to be TRUE?

A)The contract required Nancy to perform services for Sid.
B)Sid was able to assign part of the contract to Johnny even though Nancy strongly objected to Johnny being involved in the contract.
C)As a result of a statutory assignment, Johnny is entitled to receive half of the money that Nancy owed to Sid under the contract.
D)Johnny is now required to perform services for Nancy.
E)If the contract required Susan to make payment to Sid, and she paid Sid before learning of the assignment, she will have to pay Johnny as well.

Question 56

Indira owed $5000 to Patrice.On a different matter, Juan owed $5000 to Indira.In an attempt to be clear of both situations, Indira equitably assigned her rights against Juan to Patrice.Which of the following statements is most likely to be TRUE?

A)The assignment will not come into existence until Patrice notifies Juan.
B)If Indira learns that she has a defence against Patrice, and if that defence arose from the same contract that required Indira to pay $5000 to Patrice, then Juan is not required to pay anything to Patrice under the assignment.
C)The assignment is invalid unless it is evidenced in writing.
D)If Juan pays $5000 to Indira after Patrice has notified Juan about the assignment, Juan will have to pay $5000 to Patrice.
E)For the purposes of the assignment, Patrice is the creditor, Juan is the debtor, and Indira is the assignor.

Question 57

Sentinel Safety Inc entered into a contract with Glengarry Shopping Mall to provide security.The parties' contract contained a clause that said: "Neither Sentinel nor its employees or agents shall be held liable in an amount that exceeds $10 000 for any loss or damage that may be caused in the performance of this agreement." Elaine works as a security guard for Sentinel.As part of her job, she regularly patrols the Glengarry Shopping Mall.Which of the following statements is TRUE?

A)Elaine could not be held liable for more than $10 000 if she caused property damage to Glengarry Shopping while shopping there on her day off.
B)If Elaine negligently damaged Glengarry's property while she was working at the mall, she would be protected by the limitation clause, but only if she agreed to provide consideration to Glengarry.
C)If Elaine carelessly damaged part of the mall's property while on patrol, she would be protected by a statutory exception to the privity of contract doctrine.
D)Because of the decision in London Drugs Ltd v Kuhne & Nagel International Ltd, Elaine may be protected by the contractual clause even though she is not privy to that agreement.
E)The facts involve the contractual concepts of privity of contract, promissory estoppel, and mutuality of consideration.

Question 58

As a result of her participation in a telemarketing scheme, Susan was charged with several counts of fraud.Because she knew that the courts had recently started to take a much harsher approach to such crimes, and because she already had been convicted for similar offences in the past, she was anxious to "beat the rap." She therefore called Anqwaan, her brother-in-law, who was also a lawyer, and begged for his help.Anqwaan initially hesitated.He already was very busy with his practice.Furthermore, although they were related, Anqwaan had met Susan only a few times and he did not know her well.He did, nevertheless, eventually agree to take on the case.As a result of his excellent services, Susan was acquitted on all charges.A few days after the trial ended, Anqwaan sent Susan a bill for his legal services: $15 000.As a family courtesy, Anqwaan had, in fact, charged Susan only half of his usual hourly rate.Susan nevertheless is very upset.As she correctly notes, she and Anqwaan had never discussed his fee and she had never actually promised to pay him anything.Which of the following statements is most likely to be TRUE?

A)Because the parties never discussed Anqwaan's fee, they could not have created a contract.
B)Even though neither party mentioned money before Susan was acquitted, a court will find that the parties impliedly created a contract at the outset because Anqwaan impliedly promised to act and Susan impliedly promised to pay on a quantum meruit basis.
C)If Susan had promised to pay $15 000 immediately after the trial ended, and before Anqwaan raised the subject of his fee, Susan's promise necessarily would be seen by a judge as past consideration.
D)There cannot be a contract on these facts because, given his relationship to Susan, Anqwaan already had a family obligation to act on her behalf.
E)A court will find that the parties created a contract, but since neither party mentioned a price at the outset, Anqwaan is only entitled to receive the amount that Susan believes is reasonable in the circumstances.

Question 59

Under a contract of carriage, Bravo Shipping promised to deliver Alpha Manufacturing's widget from Vancouver to Miami.That contract was subject to the Hague Rules and a Himalaya Clause.A stevedore hired by Bravo negligently damaged the widget during the journey.The damage is valued at $25 000.Which of the following statements is most likely to be TRUE?

A)Alpha is not entitled to receive $25 000 from either Bravo or the stevedore.
B)Although Bravo effectively enjoys the benefit of an exclusion clause, Alpha is entitled to receive $25 000 from the stevedore.
C)Although Bravo is not liable, Alpha is entitled to receive $25 000 from Bravo's insurance company.
D)As a result of the Hague Rules, Bravo and the stevedore are jointly and severally liable for Alpha's loss.
E)Alpha is entitled to receive $25 000 from the stevedore unless Bravo assigns its rights to that stevedore.

Question 60

Frank entered into a contract with Paradise Equestrian Services (PES).The purpose of the contract was to allow Frank's child, Sonny, to learn to ride horses.The situation was somewhat complicated by the fact that while Frank lived in Prince Edward Island, Sonny was starting college in British Columbia, where PES was also located.In an attempt to make it easier for Sonny to take action on the contract, if any problems arose, Frank made sure that the agreement contained Paragraph 13, which says, "The promises that PES gives under this contract are given to Frank to hold for the benefit of Sonny." Which of the following statements is most likely to be TRUE?

A)Paragraph 13 is null and void under the decision in Vandepitte v Preferred Accident Insurance Co.
B)PES is a trustee under the contract.
C)Frank is a beneficiary under the contract.
D)Sonny is a trustee under the contract.
E)Frank is a trustee under the contract.

Question 61

"The law of contract assumes that people are generally capable of looking after their own interests.An agreement therefore may be enforceable even if the parties do not exchange things of equal value." Discuss that statement.Illustrate your answer with three business law examples.

Question 62

Betta Corp, a manufacturer, sold widgets to Splendens Inc, a wholesaler.Under the terms of that agreement, Splendens was entitled to resell the widgets to a retailer, but only if its contract with the retailer (1) required the retailer to sell the widgets to its own customers at a list price established by Betta, and (2) required the retailer to pay $500 to Betta for every widget that it sold to a customer at a price that was below the list price established by Betta.Splendens in fact sold the widgets to Siamese Fish Ltd, a retailer.Siamese then sold ten of the widgets to its own customers for less than Betta's list price.Is Siamese required to pay $5000 to either Betta or Splendens? Explain your answer.

Question 63

"Depending upon the circumstances, a promise to pay a specific sum of money may or may not be enforceable if that promise is given in response to services that have already been received." Explain whether or not that statement is accurate.

Question 64

"A trust provides am exception to the privity of contract doctrine.The contract is enforced by the person to whom the contractual promise was intended to benefit." Explain the meaning of that statement and indicate whether or not it is true.

Question 65

Dawn Sumi hosts a national call-in radio program.On a number of occasions, when the on-air discussion concerned computers and electronic devices, she spoke very favourably about the merchandise manufactured by Rabby Electronics Inc.As a result of those compliments, Rabby's business increased dramatically.Rabby was both delighted and surprised: delighted because it was making larger profits and surprised because it had never asked Sumi for the endorsements.As a gesture of thanks, the president of Rabby wrote to Sumi and promised to pay him $25 000 within six weeks.In reliance upon that promise, Sumi immediately entered into a contract with a builder to add a sun deck to her home at a cost of $25 000.Sumi never would have entered into that contract if she had not received Rabby's promise.A week later, however, the president of Rabby changed his mind and told Sumi that she would not be receiving the money after all.Is Rabby entitled to do so? Did a contract exist between the parties? If no contract existed between the parties, is Rabby nevertheless obliged to fulfill its promise? Explain your answer.

Question 66

Paradise Publishing Inc entered into a contract with Carol Chambers, a successful author, for the writing of two novels.Under the terms of that agreement, Carol was entitled to payment of $50 000 six months after the submission of each novel.Carol submitted the first novel on the first day of January.As she found the first phase of the contract to be exhausting, she wanted to immediately take a vacation.She asked Paradise for payment of $50 000, but it pointed to the terms of their contract and denied her request.Carol purported to sell her contractual rights regarding the first novel to Nigel.Under that arrangement, Nigel immediately paid $35 000 to Carol in exchange for her right to receive $50 000 from Paradise on the first day of July.With the money that she received from Nigel, Carol took an extended vacation to Costa Rica.While relaxing on the beach, she met Jose, an aspiring author who explained that he was finding it difficult to break into the publishing world.Carol then proposed an arrangement under which he would pay $10 000 to her in exchange for the right to write her second contract for Paradise.Jose agreed.In the middle of May, Paradise learned about Carol's agreements with Nigel and Jose.It insists that both of those arrangements are invalid.Is it correct? Explain your answer.

Question 67

Explain the relationship between offer and acceptance on the one hand and consideration on the other.Your answer should focus on the concepts of cross offers and mutuality of consideration.

Question 68

Identify and explain two situations in which legislation allows a stranger to sue on a contract that was made for its benefit.

Question 69

Under the Electronic Home Business Administration Act, any citizen that pays a $50 fee is entitled to receive a licence to operate a certain type of business from home.Donna, who wished to operate such a business, sought information over the telephone from Duncan, a government official who was responsible for issuing licences under the legislation.Duncan agreed to provide a licence to Donna, but only if she promised to pay an additional fee of $25 to him directly.Although Duncan was not actually entitled to demand that extra sum, he honestly believed that he was acting within his rights.Because she was anxious to receive the licence, Donna promised to pay $75.However, she now regrets her decision to do so.How much must she pay Duncan in order to receive a licence? Explain your answer.

Question 70

"A promise to perform a pre-existing contractual obligation cannot provide consideration for a new contract.That rule is based on the fact that it would be undesirable if party A could threaten to break an existing contract in order to get party B to enter into a second agreement at a higher price." Is that statement true: (1) if the existing contract was created between A and B, or (2) if the existing contract was created between A and C? In each instance, provide two reasons for your answer.

Question 71

Briefly describe the requirements that must exist before a promissory estoppel will arise.

Question 72

Identify the circumstances in which an employee can take advantage of an exclusion clause that is contained in a contract that was created between an employer and a customer.

Question 73

Koln Enterprises Ltd is a music publisher that manufactures compact discs.In January, it agreed to record a jazz concert for Jade Nagoya, a pianist, in exchange for payment of $25 000.The recording was to take place in April.Under the terms of that agreement, Jade would then be entitled to sell the CDs to her own customers for her own profit.As soon as that contract was created, Koln orally assigned its rights to Bremen Collection Inc.In February, Koln breached a separate contract that it had with Jade.As a result of that breach, it became indebted to her for $5000.It has not yet paid that amount to her.In March, Bremen notified Jade of the assignment that it had received from Koln.Koln recorded the concert in April and pressed it onto a set of CDs.When Jade received those discs, however, she noticed that while the sound quality was acceptable, the packaging did not satisfy the terms of her January agreement with Koln.As a result of the shoddy packaging, Jade lost $3000 on the re-sale of the CDs to her own customers.How much money is Bremen entitled to collect from Jade? Explain your answer.

Question 74

What is the essential purpose of a seal?

Question 75

Sebastien Johan is a music critic known for his ill-tempered manners.In a recent newspaper article, he harshly criticized a classical recording that was released shortly after the death of Glenn Klavier, its featured performer.Johan's review attacked Klavier's music, which was not unusual.However, the review also attacked Klavier personally.It unfairly and inaccurately suggested that Klavier had intentionally stolen all of his ideas from another pianist.Klavier's widow sued Johan under the tort of defamation on the basis that the review tended to make people think less of her late husband.She threatened to sue for $500 000 unless she immediately received payment of $100 000.Although Johan normally would have simply ignored the matter, he recently had experienced a number of financial setbacks.He therefore realized that while he would prefer to pay nothing, he could afford $100 000, but would be ruined if he was ever required to pay $500 000.He therefore promised to pay $100 000 within one year to Klavier's widow in exchange for her promise to drop the lawsuit.Six months later, however, Klavier's widow was reliably informed that her lawsuit certainly would have failed if it had been brought before a judge.The law of defamation states that a person cannot be held liable for making derogatory comments about a dead person.Johan therefore now refuses to fulfill his promise to pay $100 000.Is he entitled to do so? Explain your answer.