Deck 8: Consideration and Privity

Question 1

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-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.

Answer 1

E

Question 2

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.

Answer 2

False

Question 3

A statutory assignment involves three parties: the assignor,the assignee,and the debtor.

Answer 3

True

Question 4

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.
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.

Question 5

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 6

Past consideration does not satisfy the requirement of mutuality of consideration but can satisfy an obligation in certain circumstances.

Question 7

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 8

A gratuitous promise is generally not enforceable.

Question 9

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 10

An assignment can only be created by an intentional act of the assignor.

Question 11

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 12

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 13

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 14

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 15

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.

Question 16

The doctrine of promissory estoppel operates only if the representee relies upon a statement made by the representor.

Question 17

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 18

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.

Question 19

A promise to perform a pre-existing contractual obligation cannot provide consideration under a new contract with the same party.That rule always reflects commercial reality.

Question 20

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 21

Deecey 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 and Reece wanted to cheat Deecey out of the contract price it had agreed to pay.Reece also knew that Deecey's financial situation was very weak and that 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,Deecey accepted that offer and promised that it would not demand payment of the additional $50 000.Reece paid $25 000 to Deecey.However,Deecey now claims that it is entitled to the additional $50 000.Which of the following statements is TRUE?

A)The doctrine of promissory estoppel is not applicable because Deecey is trying to use a gratuitous promise as a sword,rather than a shield.
B)Deecey will want to rely on the principle of promissory estoppel because Reece's behaviour was inequitable.
C)The doctrine of promissory estoppel is inapplicable because Reece is trying to use a gratuitous promise as a sword,rather than a shield.
D)Reece cannot rely on the principle of promissory estoppel because its own behaviour was inequitable.
E)The doctrine of promissory estoppel is inapplicable because Deecey's representation concerned a past fact (the value of the work that it performed for Reece).

Question 22

ABC Construction agreed to build a pool for Miranda 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 Miranda to Mirth Enterprises in early June.In July,Miranda discovered that the pool leaked.Because ABC denied responsibility,Miranda 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)ABC can collect $100 000 from Miranda regardless of when she received notice of the assignment.
D)Mirth can collect $100 000 from Miranda only if it notified her of the assignment before the pool began to leak in July.
E)Because of the assignment,Miranda can sue Mirth on the basis of ABC's breach of contract.

Question 23

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 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 24

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 25

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 their 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.However,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 26

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 27

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 effective only if the representee relied upon a statement by the representor.

Question 28

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 29

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 30

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 reused 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 31

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 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)Even though it promised Mew to pay $50 to Dunlop for each tire sold in violation of the list price,and even though it sold ten tires at less than the list price,Selfridge is not liable to Dunlop as Dunlop is not privy to the contract with Selfridge.

Question 32

Which of the following situations illustrates 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 owed $25 000 to Bryce as a result of committing a tort against him.Because she did not want to pay the full amount,she persuaded Bryce to accept a document that had a pre-printed seal on it that said "I agree that I will pay to Bryce $100 in full compensation for my tort against him."

Question 33

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 completely 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 as it is not in writing.

Question 34

Which of the following situations most likely illustrates the concept of pre-existing public duty not constituting consideration?

A)Pam has threatened to sue Dave for $10 000.She is quite sure that she would win the case in court.However,because she is very fond of him,she has also generously offered to settle the matter for $6000.
B)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.
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,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.

Question 35

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 likely enforceable.

Question 36

Which of the following explains why the courts 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 37

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.Select the best answer.

A)Maria is contractually liable as long as a reasonable person in her circumstances would have agreed to pay for Hector's services.
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's promise is unenforceable because the work she subsequently agreed to pay consideration for,was not performed pursuant to a promise made by Hector to Maria,but was performed gratuitously by Hector.There is no mutuality of consideration.

Question 38

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 39

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 compel Rosie to transfer the computer to him on the basis of the doctrine of promissory estoppel.
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 40

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 41

Khalid owes Jill $60 000 and he has to repay it by June 30.On May 10,he learns that Jill is desperate for money.Khalid only has $30 000,but offers to pay that amount to her the next day,May 11,in exchange for forgiveness of the debt.Which of the following is true?

A)Even if she takes the money,Jill is still entitled to the full amount because there is no new consideration.
B)If she takes the money,the debt is paid because Khalid offered new consideration.
C)Even if she takes the money,she is entitled to the full amount because of section 16 of the Mercantile Law Amendment Act.
D)If she takes the money,despite the lack of new consideration,the debt is paid because of section 16 of the Mercantile Law Amendment Act.
E)The debt will only be forgiven if Khalid changes the method of payment to cheque rather than cash.

Question 42

The word "estop" means

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

Question 43

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

A)Archie is a party to the contract by virtue of an assignment.
B)The facts demonstrate the concept of vicarious performance.
C)The tactic that Gabriel tried to use in this case was abolished by the Privy Council in Vandepitte v Preferred Accident Insurance Co.
D)Archie can sue on the contract only if he personally provided consideration.
E)As a result of Paragraph 13 of the contract,Archie can properly be classified as trust beneficiary and can enforce the promise of PES.

Question 44

Cookie entered into a contract with Muhammad.Muhammad was required to pay $25 000 to Cookie,and he was entitled to have an engine modified and installed in his speedboat.Jane vicariously performed part of the contract.Which of the following statements is 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 caused some sort of loss to the party on the other side of the contract,then the party who suffered the loss must sue Jane rather than the other person who actually signed the contract.

Question 45

Sid and Nancy entered into a contract.Part of that contract was subsequently assigned to Johnny.Which of the following statements may be TRUE?

A)Johnny is now required to provide personal services to either Sid or Nancy.
B)One of the parties assigned the contract to Johnny even though the other party objected to that development.
C)The assignment must have happened by operation of law,rather than in response to a party's intention.
D)As a result of a statutory assignment,Johnny became entitled to receive half of the money that Nancy owed to Sid under the contract.
E)Johnny may be able to collect the same debt twice if the debtor does not provide timely notice of the assignment.

Question 46

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 47

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 48

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)Carlos is the beneficiary of a trust.
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)Mikey is entitled to enforce Keisha's promise even though he did not provide any consideration as he is the beneficiary of a trust.

Question 49

Which of the following refers to a TRUE exception to the privity doctrine,in the sense that a person is entitled to sue on a contract despite the fact that he or she is not a party to that contract?

A)equitable assignment
B)legal assignment
C)contract of insurance
D)trust
E)Himalaya clause

Question 50

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." Glengarry promised that it would not sue the named parties for more than $10 000.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)Because she was not a party to the contract between Sentinel and Glengarry,Elaine would not be entitled to limited liability if she carelessly damaged part of the mall's property while on a regular patrol
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)The facts involve the contractual concepts of an employee who is not privy to a contract being able to obtain the benefits of an exclusion clause in that contract because of the manner in which the contract was drafted,and in accordance with the reasonable expectations of the parties to the contract.
E)The facts involve the contractual concepts of privity of contract and promissory estoppel and mutuality of consideration.

Question 51

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.Anqwaan 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 much at all.He did,nevertheless,eventually agree to take on the case.As a result of his excellent service,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 was 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 TRUE?

A)Because the parties never discussed Anqwaan's fee,they could not have created a contract
B)Even though the parties never discussed Anqwaan's fee,the court may find that Susan implicitly promised to pay for Anqwaan's services and that,by taking the case,Anqwaan implicitly accepted that offer.
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 moral,family obligation to act on her behalf.
E)Because Susan had requested Anqwaan's services,she would have to pay his entire bill even if he doubled his hourly rate.

Question 52

Benson tells his son,Charles,that he will sell him his Bentley for $200 when he turns 18.On his 18ᵗʰ birthday,Charles brings his father $200,but Benson refuses to hand over the keys,arguing that,no matter what he said,a Bentley is worth more than $200.Which of the following statements is true?

A)The contract was never made because there wasn't adequate consideration.
B)The contract was never made because any agreement between relatives is just a gratuitous promise.
C)The contract was created because the consideration is sufficient.
D)The peppercorn theory allows Benson to demand any amount for the Bentley even though he offered it for $200.
E)The contract was never created because there was never an exchange of value.

Question 53

The decision in London Drugs Ltd v Kuehne & Nagel International Ltd is primarily 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 54

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 55

Herman is owed money from Victoria and owes money to Lyndon.In order to satisfy his contractual debt to Lyndon,he assigns the debt from Victoria to Lyndon.Lyndon accepts,but does not tell Victoria,assuming Herman will.Which of the following is true?

A)Because this is an equitable assignment,it is Herman's duty to inform Victoria of the assignment.
B)If Victoria pays Herman,Lyndon has no way of recovering the debt.
C)If Lyndon breaks the contract,Victoria can sue both him and Herman.
D)If Victoria pays Herman,Lyndon must sue Herman to recover his money.
E)If Victoria pays Herman,Lyndon must sue Victoria to recover the money.

Question 56

Jan's aunt writes a letter to Jan,offering to give her a new car.Jan takes the car,but after two months her aunt asks for the car back.Jan refuses and her aunt sues her,claiming there was no contract and therefore it was still her property.Which of the following statements is true?

A)Jan should write "seal" on the letter to substitute consideration.
B)Jan should argue a promissory estoppel because she had relied on the letter when accepting the car.
C)Jan cannot argue a promissory estoppel because she did not share a legal relationship with her aunt.
D)Jan could not have used a seal if her family did not have a crest.
E)Jan must return the car because she gave no consideration.

Question 57

Yusheng sends Pierre a cheque for $100 with a note saying she will buy his golf clubs if he is willing.Pierre cashes the cheque,but never delivers the clubs.Which of the following describes the situation?

A)The cheque is considered past consideration and Yusheng has no way to recoup the money.
B)By cashing the cheque,Pierre has accepted the offer by performance.
C)The cheque is not sufficient consideration for the golf clubs and Yusheng has no way to recoup the money.
D)If Pierre put forth an invitation to treat,then he must give the clubs to Yusheng.
E)Yusheng cannot recoup her money because there was an implied forbearance to sue.

Question 58

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)Even if the parties satisfy all of the usual requirements,rights under some types of contracts cannot be assigned and parties may by their contract prohibit assignment of the benefits of the contract.

Question 59

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)for some reason enforceable.

Question 60

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 61

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 62

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 63

What is the essential purpose of a seal?

Question 64

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.

Question 65

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

Question 66

Alpha Manufacturing enters into a carriage contract with Bravo Shipping.During the carriage,a mistake by a contracted stevedore caused Alpha's goods to be damaged.Alpha had property insurance on the goods.Which of the following describes the situation?

A)Alpha can only recover damages from the insurance company as long as there is a Himalaya clause.
B)Alpha can recover damages from both the insurance company and Bravo.
C)Alpha can recover damages from both Bravo and the stevedore.
D)Alpha can only recover damages from the stevedore because this is a case of negligence.
E)Alpha can only recover $500 because of the hague rules.

Question 67

"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: (i)if the existing contract was created between A and B,or (ii)if the existing contract was created between A and C? In each instance,provide two reasons for your answer.

Question 68

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 69

Stacy hires Youssef to build her home.Youssef gets five of his friends to build the house,writing an agreement between them and him.He also sends a letter to Stacy informing her of the situation.Which of the following is true?

A)This is a statutory assignment because Youssef wrote out the assignment and gave written notice to Stacy.
B)This is an equitable assignment because it is conditional.
C)This is an assignment by law because it is a construction contract.
D)This is assignment by vicarious performance.
E)This is not a case of assignment.

Question 70

Ash is moving from Canada to the UK,but before he goes he wants to buy his sister,Sasha,a ring.He finds a custom jeweler,but the ring will not be ready until after he leaves and he's worried that something might happen with the jeweler.Ash should

A)assign the collection of the ring to his sister.
B)have the ring delivered to his sister's address.
C)buy the ring in trust for his sister.
D)create a contract with his sister promising the delivery of the ring.
E)ensure that the sales contract has a Himalaya clause to protect him from liability.

Question 71

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 (i)required the retailer to sell the widgets to its own customers at a list price established by Betta,and (ii)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 72

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 73

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 74

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

Question 75

"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 76

"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 77

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 78

"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.