Deck 10: Contractual Defects

Question 1

Unconscionable transactions can be characterized as one-sided transactions obtained by unfair use of power.

Answer 1

True

Question 2

The notion of public policy is somewhat vague as it is difficult for a judge to decide what the public policy is in a democratic society.

Answer 2

True

Question 3

Across Canada,the age of majority is 19,which is a federal law.

Answer 3

False

Question 4

A minor's contract for necessaries of life is not voidable on the grounds of capacity.

Question 5

Tandindar was holding a shipment of goods that belonged to Todd and threatened not to release them unless he agreed to sign a contract to buy two more shipments over five years.Todd did not need the goods,but he decided to go through with the contrat and agree with Tandindar to Tandindar's terms.This is an instance of economic duress.

Question 6

The form and content requirements of the Statute of Frauds requires a signature from each of the parties.

Question 7

The plea of non est factum allows a person to avoid a signed contract whenever they are mistaken about a key term or condition even if they do not bother to read the contract.

Question 8

The concept of capacity

A)means the legal power that we all have just to walk away from any contractual obligation on the basis that we did not understand the contract that we signed or otherwise entered into.
B)means that the law requires parties who enter into contracts to have a legal capacity to enter into contracts,and not everyone in society necessarily has that capacity.
C)refers to when one party is mistaken about the terms of a contract.
D)refers to pre-contractual statements.
E)requires all contracts to be in writing.

Question 9

Cy and Kelly negotiate the sale of "Indian art" over the internet.Because of an electronic miscommunication,Cy thinks he is buying art from Calcutta.But it turns out upon delivery that Kelly was selling Inuit art all along.Because the mistake was material and prevented the creation of a shared contractual intent,Cy will be able to claim the contract was defective and may have a remedy.

Question 10

Whenever parties of unequal bargaining powers transact,undue influence is always presumed but can be rebutted.

Question 11

Lawrence and Jane were hammering out a deal over cocktails.Jane thought that Lawrence was totally plastered and was hoping to take advantage of this in their negotiation of the terms.However,Lawrence knew exactly what he was doing and he knew exactly what Jane was trying to do.Although quite tipsy,he pretended to be staggering drunk.His plan was to make two deals: one deal that was good for him,the second deal a bad one for him.This way he could complete the deal that was to his advantage and,later,walk away from his obligations on the second deal.Which of the following is TRUE?

A)Both deals are enforceable since Lawrence was only pretending to be drunk.However,the court will interpret the contract between the parties to give effect to their objective intentions in all of the circumstances,notwithstanding that one agreement may contradict the other agreement.
B)Neither deal is enforceable since Jane believed Lawrence to be intoxicated when she entered into them.
C)Only the first deal is enforceable as the second contract must contradict the first contract.
D)Only the second contract is enforceable because it was the last contract between the parties.
E)Neither contract is enforceable because even a person who pretends to be intoxicated does not have contractual capacity.

Question 12

The reason contracts for necessaries are enforceable is to ensure that minors do not avoid contracts with suppliers for perishable goods.

Question 13

Which of the following contracts will be enforced whether or not the purchaser has reached the age of majority?

A)purchase of groceries
B)retainer for legal services
C)registration for community college
D)purchase of a ski jacket
E)all of the above

Question 14

Sina employs Joe,who is 16.The terms of the employment contract are to Joe's benefit.Still,Joe wants to walk away from his obligations.Joe can do so whenever he wants because the contract was always void.

Question 15

The Statute of Frauds eliminates the writing requirements of the common law.

Question 16

Cy and Kelly negotiate the sale of "Indian art" over the internet.Cy thinks he is buying art from Calcutta.But it turns out upon delivery that Kelly was selling Inuit art.Because there was no misrepresentation,the sale is final and Cy has no remedy.

Question 17

Which of the following distinguishes a chartered corporation from a statutory corporation?

A)Chartered corporations have a limited contractual capacity,whereas statutory corporations do not.
B)Statutory corporations are treated the same as individuals of a majority age,whereas chartered corporations are not.
C)Statutory corporations cannot be said to act ultra vires,whereas chartered corporations can.
D)Statutory corporations are indistinguishable from chartered corporations as both have the same legal effect.
E)Chartered corporations are established by corporate law legislation and generally have full capacity so that the rule of ultra vires does not apply to their acts,whereas corporations created by special statute may be subject to the rule of ultra vires.

Question 18

Svetlana paid an advance under a contract of sale for a unique antique in Ontario,but the performance of the contract was rendered impossible because of a terrible accident that happened during delivery.Because the seller incurred expenses while trying to deliver the antique,the court is permitted to allow the seller to keep some of the advance towards those expenses.

Question 19

Which of the following groups does not have contractual capacity?

A)people who have had one or two glasses of wine or two beers but are not really intoxicated but only slightly impaired
B)corporations
C)people under the age of 25
D)adults who have been declared mentally incompetent by the courts and thus lack mental capacity
E)people over 80 years of age

Question 20

Sarah bought a stereo system in Vancouver under a payment plan that must be completed within two years.Technically speaking,the contract is enforceable only if it is evidenced in writing.

Question 21

Ariel pays Newton a $17 000 deposit as part performance of an oral contract for the sale of land and that Ariel takes possession of the land at the time of possession.According to the terms of their agreement,Ariel is to pay the balance 30 days after taking possession,failing which Newton is allowed to keep the deposit and Ariel must vacate.Suppose that the contract of sale does not complete as Newton fails to provide a transfer of title even though Ariel tenders the whole amount on the thirtieth day after possession was taken by Ariel.Which of the following is TRUE in most Canadian jurisdictions?

A)Ariel can enforce the contract of sale against Newton.
B)Newton has a defence to enforcement of the contract based on the Statute of Frauds.
C)Newton can refund the deposit and take the money back as the actions of the parties was not part performance of a contract.
D)Ariel can only sue for return of the deposit.
E)Ariel will lose the deposit and must pay rent to Newton for the month of possession and then must vacate the land.

Question 22

The doctrine of frustration applies when

A)the contracting parties are both mistaken about some future set of circumstances that are beyond the power or control of either party,and those circumstances prevent them from carrying out their obligations pursuant to their contract.
B)the contracting parties are both mistaken about some previously mutually assumed fact,in a manner that prevents them from carrying out their obligations pursuant to the contract.
C)the contracting parties are unable to reach an agreement and are forced to abandon negotiations.
D)the contracting parties agree on a purchase price for a particular good and the purchasing party fails to pay.
E)both parties agree to not perform the contract.

Question 23

Which of the following is sufficient written evidence to satisfy the Statute of Frauds in most Canadian jurisdictions?

A)a signed IOU written on a napkin
B)an unsigned letter confirming a severance arrangement
C)a notation on a cheque indicating what was purchased without any signatures
D)an unsigned standard form agreement
E)a document written in a person's handwriting making a promise but not signed by that person

Question 24

Constance and Rosemary are in a fiduciary relationship.This fact is relevant to a claim of unfairness during bargaining because

A)it means that the two of them will never be allowed to contract with each other as a result of the conflict of interest.
B)it means that Connie could never enforce her contract with Rosemary.
C)the court will presume that a contract between them was founded on the basis of duress.
D)the court will presume that a contract between them was founded on the basis of undue influence.
E)the court will presume that a contract between them was founded on the basis of an unconscionable transaction.

Question 25

Duress is distinguishable from undue influence in that

A)duress refers to the use of some kind of pressure,whereas undue influence does not.
B)duress is never defined in terms of the parties' relationship,whereas undue influence sometimes depends on the parties' relationship.
C)duress is never defined in terms of the parties' relationship,whereas undue influence always is.
D)duress refers to the use of some kind of pressure,whereas undue influence involves improvident bargains.

Question 26

Shelly hires James to steal her neighbour's dog (because it barks a lot and the owners do nothing about it).Shelley paid James according to the terms of the contract,but James did not follow through with his end of the bargain.Can Shelly get her money back?

A)No.The contract is defective because it was not in writing.
B)No.The contract is defective because it is illegal.
C)No.The contract is defective because it is a restraint on trade.
D)Yes.The parties will be returned to their pre-contractual position.
E)Yes.The lawsuit can be brought in small claims court.

Question 27

Economic duress

A)results from any exertion of financial pressure.
B)occurs when the victim of duress could not reasonably resist.
C)is automatically proved as soon as the victim of duress commences legal proceedings against the party exerting duress.
D)is impossible to prove unless the victim of duress protested at the time the duress was exerted.
E)occurs when a victim of duress seeks independent legal advice and that advice is wrong.

Question 28

Unincorporated associations

A)are always treated the same way as corporations.
B)can be given the capacity to contract through the enactment of legislation but otherwise do not have legal capacity as they are not legal entities.
C)generally have the capacity to contract.
D)are independent legal entities.
E)no longer exist in Canadian society.

Question 29

Matt just made a fortune inventing a new piece of software and has generously agreed to support his friend's application for a bank loan.Matt tells his friend he is willing to cover the debt no matter what happens.In order for this promise to be enforceable,

A)Matt's friend needs to have the promise notarized and sent to the bank by registered mail.
B)Matt's friend needs to get Matt to fax the bank.
C)Matt's friend needs to get Matt to make that same promise to the bank,and in most provinces in writing.
D)The bank needs to send Matt a letter confirming to him that they have heard a rumour that he intends to guarantee his friend's debts.
E)the bank needs do nothing.

Question 30

Joe is an Aboriginal person,born and raised on a Native reserve.After reaching the age of majority,Joe decides to move to Calgary to continue his work as an artist.After abandoning the reserve and living in Calgary for several years,Joe is asked to participate in a major art opening.Much of his art depicts life on his reserve.Which of the following is TRUE?

A)Joe is unable to sell his art anywhere other than the reserve.
B)The profits from Joe's sales will be held by the Crown.
C)Joe's art could be used as security for a credit transaction if the art is not on the reserve.
D)Joe has only a limited capacity to contract.
E)Joe lacks the capacity to contract.

Question 31

Which of the following mistakes will most likely render impossible the purpose of the contract?

A)buying a car,only to later find out that it was resold to you by some rogue who did not have title to the car
B)both parties to the contract reasonably and innocently believing that the property sold to a business is zoned commercial but it is,in fact,zoned residential
C)thinking that you ordered one copy of a software program when,in fact,you negligently ordered 10 copies
D)buying a piece of art on the basis of its aesthetic appeal,only to later find out that it was painted by a famous artist and is worth more than you paid for it
E)buying a home without inspecting it,and later finding out that the foundation requires replacement

Question 32

When may the defence of non est factum be raised?

A)when a person signs a document but his attention has not been drawn to a particularly onerous term
B)when there is a radical difference between what a person signed and what the person thought he was signing,and the signatory was not careless in signing or in not reading the documents
C)when a person signs a document but fails to read it first
D)when the defendant forgot to have the plaintiff sign the contract
E)when there is no written evidence of the contract

Question 33

Common law illegality

A)is an attempt to regulate conduct through an administrative regime.
B)aims to punish individuals who make agreements contrary to public policy.
C)requires a determination of legislative intent.
D)renders unenforceable agreements that are contrary to public policy.
E)requires proof that one party is involved in an actual crime in entering into the contract.

Question 34

Which of the following mistakes is most likely to prevent the creation of a contract?

A)A stockbroker is mistaken about the future value of a technology company and buys stock on that basis.
B)A house deal closes money and keys are exchanged,then both parties find out that the house had been completely destroyed by fire between the time of the original contract and the closing of the contract.
C)A grocery supplier fills an order for 5000 cans of beans but mistakenly sends only 500 cans.
D)A bean wholesaler ships 5000 cans of golden wax beans to a customer who thought that he was ordering 5000 cans of corn.
E)A person agrees to a standard form contract on the internet by clicking the mouse on the "I Agree" icon.

Question 35

How do courts regard restrictive covenants?

A)Courts will assume that unless there was unfairness during the bargaining process,restrictive covenants should be upheld because the parties have freedom to contract.
B)Courts will find all restrictive covenants to be against public policy.
C)Courts will presume restrictive covenants to be against public policy unless the party seeking to enforce the covenant demonstrates that the restriction is reasonable.
D)Courts will presume restrictive covenants to be reasonable unless the party seeking to avoid the covenant demonstrates that the restriction is against public policy.
E)Courts will rewrite all restrictive covenants to make them reasonable and therefore enforceable.

Question 36

Which of the following examples of a covenant in restraint of trade is most likely to be against public policy?

A)A high-tech firm has its engineers sign a contract promising not to reveal any information about patents to any other high-tech,communications,or pharmaceutical companies during their employment tenure.
B)Partners in an advertising agency sign an agreement that they will engage in advertising sales exclusively for the agency for the duration of their employment.
C)The sellers of a company sign an agreement that they will not compete directly with their former company for a period of two years.
D)An entrepreneur sells his successful home baking business to a supermarket chain.He signs an agreement that bars him from setting up a bakery business forever anywhere in the world.
E)A franchisor requires a franchisee to conduct the franchise operations solely in accordance with the written franchise agreement and not in any other manner.

Question 37

The difference between a guarantee and an indemnity is that

A)indemnities need to be in writing to be enforceable.
B)a guarantee is a conditional promise whereas an indemnity is not.
C)a guarantee is a promise to assume another's debt.
D)the Statute of Frauds applied only to indemnities.
E)a guarantee is given to a bank and an indemnity to a party that is not a bank.

Question 38

For which of the following lists would the Statute of Frauds require ALL THREE contracts to be evidenced in writing in most Canadian jurisdictions?

A)afive-year commercial property lease agreement;the sale of a house;a mortgage of a condominium
B)a guarantee to assume someone's debt upon default;an indemnity agreement;the sale of a $2000 leather sofa
C)a four-year financing agreement secured by goods but not land;purchase of a $2000 leather sofa;the sale of a house
D)an agreement to rake your neighbour's leaves;the sale of a house;an indemnity agreement
E)a contract to buy a stereo;a contract to buy a car;and a contract to buy a new pair of blue jeans

Question 39

Which of the following is LEAST LIKELY to be understood by a court as a contract for the sale of an interest in land?

A)the purchase of a home
B)the lease of a farm
C)the short-term lease of a residential apartment
D)the lease of mineral rights in an oilfield
E)the purchase of lakefront property

Question 40

Raja set up a website selling T-shirts decorated with original artwork.The website was marketed under a name very similar to a well-known professional basketball team.Raja had never heard of the team,nor had he meant to fool anyone or to infringe anyone's trademark.One day,Liz went to Raja's site and bought a number of T-shirts with her credit card.Thinking that she was getting fan apparel from her favourite ball team,Liz was quite surprised and disappointed when she saw the merchandise that she received in the mail.What should she claim in order to get her money back?

A)innocent mistake
B)non est factum
C)frustration
D)undue influence
E)duress

Question 41

Adrian and Darah entered into a contract.After the agreement was partially performed,Adrian successfully claimed that the contract is voidable.Which of the following statements may be TRUE?

A)Adrian,who is an Aboriginal living on reserve land,had created a contract to sell that land to Darah.
B)Adrian,who is 17 years old,had entered into a contract to purchase a set of computer games from Darah.
C)Adrian,who has been declared mentally incompetent by a court,entered into a contract to purchase food and shelter from Darah.
D)Adrian,who is an Aboriginal living in Toronto,entered into a contract to purchase recreational sporting goods from Darah.
E)Adrian,who is 17 years old,entered into a contract to obtain life-saving medical services from Darah.

Question 42

A fiduciary relationship

A)is exclusive to the law of corporations.
B)is exclusive to the law of employment.
C)exists whenever there is an inequality in the bargaining power of contracting parties.
D)must be established in order to prove undue influence.
E)exists when one party is in a position of dominance over another,for example a trustee and a beneficiary,a lawyer and a client,or a doctor and a patient.

Question 43

Which of the following agreements must be evidenced in writing in order to be enforceable in all jurisdictions?

A)contracts of employment and contracts for the sale of interests in land
B)loans and guarantees
C)contracts with the government and contracts for the sale of interests in land
D)guarantees and contracts that may require more than one year to perform
E)contracts concerning an interest in land where there is no other exception to the Statute of Frauds,such as part performance

Question 44

Which of the following is most likely an improvident bargain?

A)when Granny assigns all of her assets to a powerful business in exchange for the promise to take care of her in the future
B)when Granny assigns all of her assets to a convicted fraudster in exchange for the promise of the fraudster to take care of her grandson in the future
C)when Granny trades her farm for a condo in Florida
D)when Granny trades her farm for blue chip stocks
E)when Granny goes to play bingo for the third time in a week

Question 45

Malkit sold a house to Amanda.The evidence indicates that Amanda owed fiduciary obligations to Malkit both before and after the agreement was signed.Which of the following statements is TRUE?

A)Amanda has an absolute right to have the contract set aside.
B)The court will presume that Malkit entered into the contract as a result of Amanda's undue influence.
C)In order to set aside the contract,Malkit must prove that the agreement is unfair to him.
D)The contract will be set aside unless Amanda proves that she was unaware of her fiduciary obligations.
E)Malkit is entitled to receive Amanda's performance even though he is not required to perform his obligations under the agreement.

Question 46

Jerry and four of his best friends form the Inventor's Club,a private club that allows inventors to get together and share new ideas.This organization is

A)a chartered corporation,meaning that it shares the same legal rights as someone who has reached the age of majority.
B)an association,meaning that it shares the same legal rights as someone who has reached the age of majority,but still cannot contract.
C)an association,meaning that it must have someone contract for its benefit.
D)a chartered corporation,meaning that it must have someone contract for its benefit.
E)a statutory corporation,meaning that it can contract,but has limited contractual capacity.

Question 47

Jane is interested in purchasing a condominium property from Full House Real-Estate Group.She has just recently graduated college,so she does not have a credit record built.Knowing this,she goes to Version Bank with her wealthy cousin Ted,who previously agreed to assist her in buying a house after she finished school.Which statement is true?

A)Ted can indemnify the bank loan as an unconditional promise to pay only when Jane defaults on her payments.
B)Ted can guarantee the bank loan as an unconditional promise to pay only when Jane defaults on her payments.
C)Ted can guarantee the bank loan as a conditional promise to pay only when Jane defaults on her payments.
D)Ted can indemnify the bank loan as a conditional promise to pay only when Jane's obligations become due.
E)Ted can indemnify the bank loan,but the indemnification is only enforceable if the indemnity is signed under a notary public seal according to the Indemnification Acknowledgments Act.

Question 48

Which of the following contracts may be set aside for mistake or frustration?

A)Pam sells a computer for cash to a person she mistakenly thought she had known in high school.
B)Pam says nothing about the quality and history of a painting that she sells to Dave,despite knowing that he incorrectly believes the painting was worth more than its purchase price.
C)Pam enters into a contract to sell a colt to Dave,but Dave does not know that Pam has already sold the same colt to Donna.
D)Pam rents a cottage to Dave for a summer for $5000,and Pam later learns that because of winter storms,it will unexpectedly cost her $30 000 to repair the cottage so that it meets the needs of the rental contract.
E)Two parties enter into an agreement to purchase a container of goods,but completely innocently unknown to either party is the fact that the container of goods was destroyed by fire the previous night.

Question 49

Salvatore created a contract with Acme Corp.Although the parties initially performed their obligations without complaint or difficulty,a dispute has now arisen.Acme Corp claims the protection of a force majeure clause.Which of the following statements is most likely to be TRUE?

A)The company has discovered that Salvatore is under the age of majority.
B)Salvatore has argued that the contract is unenforceable because it is not evidenced in writing.
C)Salvatore claims that he made a mistake when he entered into the agreement when he thought that there was insurance for what he bought,but what he had bought was destroyed in a typhoon while it was in transit to him from the vendor,ACME Corp.
D)The company wants to escape from the contract on the grounds of frustration.
E)Salvatore has argued that he entered into the contract as a result of undue influence.

Question 50

Maeve entered into a contract with Tyler.Tyler and Maeve had equal bargaining power and Tyler did not pressure Maeve at all to enter into the contract.Although she does not suffer from a mental illness or intellectual disability,and although she is an adult,Maeve is easily victimized in some commercial dealings.She is naive,immature,and not sophisticated.As a recent immigrant to Canada,she speaks English reasonably well,but she cannot read or write in English.She now wants to set aside her contract with Tyler on the basis that it is an unconscionable transaction.Which of the following statements is most likely to be TRUE?

A)A judge may enforce the contract even if it Maeve has entered into an improvident bargain.
B)The contract will be set aside unless Tyler proves that the agreement actually favours Maeve over himself.
C)A court will presume that the transaction is unconscionable as soon as it hears evidence of Maeve's disadvantages.
D)The contract cannot be enforced unless Maeve received independent legal advice.
E)The contract will be set aside only if Maeve proves that Tyler exercised undue influence over her.

Question 51

Stewart is a fifteen-year-old boy who comes from a very wealthy family.Throughout his life,Stewart has been given expensive jewelry.In May,he and his mother got into an argument and he decided to sell some of his jewelry at Frank's Pawnshop.Excited about the collection they were about to receive,the pawnshop clerk immediately entered into a contract with Stewart to complete the transaction.Which of the following statements is true?

A)There are some contracts that minors cannot avoid and contracts involving jewelry are one example.
B)Minors that elect to avoid contracts can keep any benefit that they receive from it.
C)According to the Infancy Act,contracts with minors are never enforceable.
D)According to the Infancy Act,Stewart has a year to repudiate the contract and get his goods back.
E)Because it is a pawnshop,the contract is considered affirmed and Stewart cannot get the jewelry back.

Question 52

Tajeash and Faye entered into a contract.Before either party began to perform under that agreement,Tajesh successfully claimed that the contract is void.Which of the following statements is most likely to be TRUE?

A)Faye was drunk when the contract was created.
B)Tajesh is the name of a chartered corporation,and the contract dealt with non-essential goods.
C)Tajesh is a minor,and Faye sold a shotgun to Tajesh even though Tajesh lacked the necessary licence to purchase a shotgun.
D)Tajesh,who is 82 years old,sometimes acts unreasonably,and Faye knew that at the time the contract was entered into.
E)Tajesh is not a citizen of Canada,and the contract was made in this country.

Question 53

Which of the following have limited capacity to contract for the necessities of life?

A)minors and people who have been declared mentally incompetent by the courts
B)Aboriginals and the elderly
C)public authorities and Indian bands
D)corporations and alcoholics
E)minors

Question 54

Whether actual pressure has been exerted is

A)never relevant in a claim of unfairness during bargaining.
B)never relevant in a claim of undue influence.
C)relevant in a claim of undue influence only if there is a fiduciary relationship.
D)relevant in a claim of undue influence only if there is not a fiduciary relationship.
E)always relevant to determine if any contract exists.

Question 55

On Tony's 21ˢᵗ birthday,he decides to treat himself and visits a car dealership after spending the afternoon with some friends at the local pub.Though Tony was unaware of his actions and displayed clear signs of intoxication,the car salesman had Tony sign a contract binding him to purchase a brand new vehicle.Which of the following is true?

A)The contract is never voidable once the parties sign it.
B)The contract is voidable if Tony repudiates the contract by contacting the dealership within a reasonable time after regaining capacity.
C)The contract is not voidable because Tony is of the age of majority,which means he is held fully accountable in law.
D)The contract is voidable if Tony does not do anything to affirm the contract.
E)The contract is voidable only if it can be proven that Tony has a mental defect.

Question 56

Eugenia is spending the weekend looking for a vehicle to buy.She has spent months looking for one and it has left her impatient and frustrated.She comes across a vehicle her neighbor,Jim,is selling and without hesitating she orally offers and gives him a down payment of $900 for the car.Weeks go by and Jim has not heard back from Eugenia and he has even tried contacting her numerous times.It turns out that Eugenia has bought another vehicle from the Freedom Dealership and does not want to purchase Jim's car any more.Which of the following statements is true?

A)Eugenia is entitled to reimbursement because there is no written contract to enforce the purchase.
B)Eugenia is entitled to reimbursement because under the Statue of Frauds,some contracts are unenforceable unless they are sufficiently evidenced in writing.
C)Eugenia is not entitled to reimbursement.A down payment is refundable because it is not part of the purchase price.It is just an incentive for the buyer to perform.
D)Eugenia is not entitled to reimbursement.A down payment acts as part of the purchase price,but it also provides an incentive to perform.
E)Eugenia is entitled to reimbursement because she was obviously not serious.

Question 57

Which of the following is TRUE?

A)A transaction can be unconscionable only if there is an inequality of bargaining power between the parties and that inequality results in an improvident bargain for the weaker party.
B)A transaction can be unconscionable only if the bargain is not improvident.
C)A transaction can be unconscionable only if the presumption of unconscionability is rebutted.
D)A transaction can be unconscionable only if the contract is enforceable.
E)A transaction is always unconscionable when a big company makes a deal with a consumer that is more to the benefit of the big company.

Question 58

Napolean wanted to borrow money from the Bank of Winnipeg.The bank was not,however,fully convinced that Napolean would be able to repay the debt.It therefore wanted some assurance from Napolean's mother,Josephine,that she would repay the loan if necessary.Which of the following statements is most likely to be TRUE?

A)If it was not evidenced in writing,Josephine's promise will certainly be enforceable if it was a guarantee,but it may not be enforceable if it was an indemnity.
B)If Josephine's promise must be evidenced in writing in order to be enforceable,the bank may be able to satisfy that requirement by combining several documents even if those documents do not refer to each other.
C)If Josephine's promise is not evidenced in writing,and if such writing is required by statute,then neither Josephine nor Napolean needs to repay the loan.
D)If Josephine's promise must be evidenced in writing in order to be enforceable,then the contract will be unenforceable unless both Josephine and the bank sign the relevant document.
E)If Josephine's promise is properly classified as an indemnity,then the bank cannot demand payment from her unless Napolean has first refused to pay.

Question 59

An unconscionable transaction is

A)an agreement that is induced only by fraud.
B)an agreement that is induced only by pressure.
C)an agreement no fair-minded person would ever accept.
D)an agreement no right-minded person would ever offer.
E)unenforceable.

Question 60

A force majeure clause

A)allows a contract that has been frustrated to be rescinded.
B)overrides the effect of an event that normally would constitute frustration.
C)is important primarily because of the possibility of duress or undue influence.
D)means that if there is a dispute regarding the effect of a contract,and there are more than two parties to the contract,the majority view will prevail.
E)provides protection against the possibility of unconscionable conduct.

Question 61

Rosa immigrated to Canada as a teenager.She worked her whole life to support her family and never received a formal education.While her spoken English is good,her ability to read English is limited.An elderly woman now,Rosa lives in a care facility.A representative of the facility presented her with several pieces of paper to sign.He said that they were simply standard forms that every resident had to sign.She took the forms and returned them signed the following week.Later,she mentioned to her son,Paulo that she had signed some forms,but had been too ashamed to admit that she could not read them.The forms required Rosa to give permission to the facility,evidenced by her signature,to make automatic withdrawals from Rosa's bank accounts.Rosa is not comfortable with this.Will Rosa be bound to her signature? Why? Describe the defence she is most likely to raise and explain whether it is likely to succeed.

Question 62

What is the difference between voidable and enforceable contracts? Provide an example of each in the context of whether a minor has the capacity to contract.

Question 63

Elsa is a member of an active neighbourhood association.The association runs frequent community events,issues a monthly newsletter to residents,lobbies municipal government,and engages in fundraising.Recently,they have decided to create a staff position to coordinate their efforts.Their advisory committee has been discussing whether or not to incorporate.Outline how the association's ability to enter contracts in conducting its activities might impact its decision about incorporation.

Question 64

Paula is mentally disabled.Which of the following is true with respect to her ability to enter into contracts?

A)Paula can enter into contracts for the necessities of life and into beneficial employment contracts.
B)Any contract entered into by Paula is voidable at her option.
C)Any contract entered into by Paula is void .
D)Any contract entered into by Paula is voidable if she repudiates it within 30 days of signing it.
E)Only contracts which are illegal are voidable by Paula.

Question 65

Fred's Appliances hired a new sales clerk,Jill,to engage customers and handle the store's paperwork.Jill was hired for her sincere smile and personality,but struggles with the paperwork.One day,Jackson decides to purchase a washer and dryer from Fred's Appliances on a 3-year payment plan.Jill is filling out the contract and accidentally places Jackson's first name in the 'Last Name' column and vice-versa.However,the other information,including his contact information,is added correctly.After 6 months,Jackson stops making payments.When the store contacts him,Jackson claims that because his name was recorded incorrectly on the contract,the contract is defective.Which statement is true?

A)The contract is defective because this mistake negates the existence of an agreement between the parties.
B)The contract is not defective because the mistake made was not material.
C)The contract is not defective because the mistake made was material.
D)The contact is defective because the mistake does not create consensus ad idem,the meeting of the minds.
E)The contract is defective and the store must return the payments made for six months.

Question 66

Lucy wants to sell her furniture store in Edmonton before she moves to Calgary in six months.You offer to buy the establishment under one condition;the contract must include a restrictive covenant in the form of a non-compete clause.Lucy agrees and signs the contract making you the new owner of a furniture store.A year later,a mutual friend informs you that Lucy is operating a furniture store in Calgary and it is performing very well.When you hear this,you decide to take Lucy to court for breaching the restrictive covenant of the contract.Which statement is true?

A)Unless there is unfairness in the bargaining process,the restrictive covenant will be upheld as courts want to enforce the concept of freedom to contract between parties.
B)The restrictive covenant will be struck down as all restrictive covenants are a restraint of trade and are against public policy.
C)All restrictive covenants are presumed to be against public policy unless they can be shown to be reasonable.
D)All restrictive covenants are presumed to be against public policy unless they can be shown to be geographically reasonable.
E)All restrictive covenants are presumed to be fair unless they can be shown to be unreasonable.

Question 67

In 1824,Justice Burrough said,"Public policy ...is a very unruly horse and once you get astride it you never know where it will carry you." In 1971,Lord Denning MR said that with a good judge "in the saddle,the unruly horse can be kept in control.It can jump over obstacles.It can leap the fences put up by fictions and come up on the side of justice." Explain what each judge meant in the above quote.State which judge,in your opinion,is correct.Substantiate your answer with a brief discussion of the relevant concepts from the text.

Question 68

Outline three situations where a court might set aside a contract because of unfairness during bargaining.What are the requirements to prove each,and who has the onus to prove what in court?

Question 69

Tinh agrees to purchase a block of land that Ed plans to sever from his property.Tinh pays a large cash deposit to Ed,the closing date is set for six months away,and they shake hands on the deal.Ed falls on hard times and he realizes he cannot subdivide his land since he cannot afford to lose any equity or the bank will foreclose on his mortgage.On the agreed closing date,he sends Tinh an email to back out of the deal.Worse still,Ed lost the cash deposit at the horsetrack,and cannot afford to pay Tinh back.Ed feels terrible and avoids Tinh's calls.Tinh sues Ed for breach of contract and specific performance.How will the Statute of Frauds be applied in this case? What is the legal effect of Tinh and Ed's deal?

Question 70

Ling is about to enter into a contract that will be carried out over the next year and a half.Is it safe for her to assume that the contract will not be enforced if it is not evidenced in writing in a jurisdiction where the Statute of Frauds applies?

Question 71

Explain the distinction between the effects of a mistake that prevents the creation of a contract and a mistake that renders the purpose or performance of a contract impossible.Provide an example of each.

Question 72

Charlie has bipolar disorder (also known as manic-depression).Usually,medication helps to control her disorder.Lately,Charlie stopped taking her medication and started drinking heavily.During a manic (up)phase,she dressed in an elegant suit,went to a BMW dealership and signed a contract for the purchase of a new sports car.She financed the transaction by putting a large deposit on her credit card,and drove the car off the lot that same day.Charlie's family became very concerned.Describe the law as it pertains to Charlie's capacity to contract.What should Charlie do? What should the car dealer do?

Question 73

How should your business manage risk when contracting with an unincorporated association?

Question 74

From the perspective of risk management,what practices should be adopted by businesses transacting in jurisdictions that have a Statute of Frauds?

Question 75

Define "fiduciary relationship" and provide an example.How would a business person who has a fiduciary relationship best conduct a transaction so as to avoid legal problems?

Question 76

As part of a large multinational corporation,you are working on a deal to buy a small company from a group of young upstarts who will all benefit handsomely from the transaction.It is your custom to include a restrictive covenant in such contracts to prevent such young upstarts from directly competing with the company they just sold.Explain the approach taken by courts to covenants in restraint of trade and then provide an example of a restrictive covenant that is likely to be upheld if challenged in court,and an example of one that is likely to be struck down if challenged in court.

Question 77

Contracts are part of private law.A key concept of private law is that parties are at liberty to create and define the legal obligations they owe to one another.Discuss whether you agree that judges should be able to step in and set aside certain transactions on the basis that they think an agreement is unjust.Does this interfere with the core concept of private law? Explain your answer.

Question 78

List three types of contracts that must be evidenced in writing in most jurisdictions.Provide one example of each.