Question 1

Pulpco contracts for logs from A1 Timber Co., who later made a statutory assignment of its rights and obligations to Forest Green Co. (FGC). The quality of FGC logs was less than the fine product usually delivered by A1 Timber, and for which they were known, and Pulpco brought suit against A1 Timber on the grounds that the contract was not assignable. The court would find that the contract was assignable.

Accepted Answer

A) True 
 B)False  True

Question 2

Chris was indebted to Kirk for a loan of $1,000. Kirk assigned Chris' promise to pay to Bryce. If Bryce fails to give Chris notice of the assignment, Chris may lawfully make payment to Kirk.

Accepted Answer

A) True 
 B)False  True

Question 3

The Four Guys Garage advertised automobile repairs by "Licensed Mechanics." Terry, a car owner, took his automobile to the Four Guys Garage for repairs. The garage owner, Todd, examined the car, and indicated that extensive repairs were required. Terry left his car with Todd, and the repairs were carried out by another licensed mechanic, Rod, an employee. Terry paid $150 for the repairs, but on his way home discovered that the repairs had been negligently made, and had ruined the engine. Terry may only sue Rod, the mechanic that negligently performed the service.

Accepted Answer

A) True 
 B)False  False

Question 4

Transfer of rights can be accomplished through which of the following:

Accepted Answer

A)   novation, equitable and statutory assignment, and by operation of law
B)   novation, equitable and statutory assignment, vicarious performance, and by operation of law
C)   novation, by operation of law, and vicarious performance
D)   equitable and statutory assignment, vicarious performance, and by operation of law
E)   novation, vicarious performance, and by operation of law

Question 5

York Co. assigns a conditional contract with Bevier to Zeno Finance on November 10th. Zeno Finance notifies Bevier of the assignment on November 17th. Bevier had mailed his cheque to York Co., due on November 15th, on November 12th. If Zeno Finance gave Bevier notice on November 13th that the November 15th payment was to be made to them, but Bevier had already mailed the cheque on the 12th to York Co., then Bevier must put a stop payment on the cheque to York Co. and send a new one to Zeno Finance for the November 15th payment.

Accepted Answer

A) True 
 B)False

Question 6

Ace Engineering needed cash and assigned a block of its accounts receivable to Wellington Finance Company. A week later, it assigned another block to Bagot Finance Company. By an oversight, the second block contained an account, a receivable from Smith, which Ace had already assigned to Wellington. The notice of assignment from Bagot arrived at the Smith offices before that of Wellington. Smith should pay against the demand of Bagot Finance Co.

Accepted Answer

A) True 
 B)False

Question 7

Marion buys a very expensive television set as a gift for her mother. In the store, she explains that it is a gift to reconcile her mother to the fact that she is emigrating to Australia and to give her some company once Marion leaves. Shortly after Marion leaves, the television stops functioning and, despite heroic efforts by the T.V. repairman it never works again. Marion's mother cannot get a refund from the store, so she brings an action for breach of contract.

Accepted Answer

A)   There is no privity of contract between Marion's mother and the store so she would not win a breach of contract suit.
B)   Since Marion's mother can show the television is not working and cannot be made to do so, she can prove under the Sale of Goods Act that there has been a breach of the contract with her and she will win.
C)   Since the store knew that the television was a gift for her, and Marion cannot enforce the contract because she is in Australia, the judge will treat the contract as one between Marion's mother and the store.
D)   B and C.
E)   None of the above are true.

Question 8

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa. It designs the project and assigns the construction to Dynamic Construction Ltd. The contract has no provisions regarding assignment. Can Precision make the assignment to Dynamic?

Accepted Answer

A)   No, it can only do a novation.
B)   Yes, if it obtains the approval of WaWa.
C)   Yes, if it notifies WaWa.
D)   Yes.
E)   No.

Question 9

The Smalltown Sawmill entered into a contract with the Little Lumber Co. to supply the sawmill with logs. The sawmill produced a great deal of softwood lumber, particularly pine, for furniture making. The mill especially liked the logs supplied by Little Lumber Co. because they were from older stands of trees, which made the wood a higher quality. Little's logs were also somewhat larger, which made for less waste when cutting the larger pieces of wood required for furniture making. There was a written agreement between the parties which stipulated that the parties "for themselves, their executors and administrators and successors respectively" each covenanted to abide by and perform the terms of the agreement. The relationship continued over several years until the Little Lumber Co. assigned its rights under the agreement to another lumber company, Logs Ltd., which carried on the supply. The sawmill accepted shipments from Logs Ltd. for nearly a year when it decided not to accept any further shipments on the grounds that the contract it had with the Little Lumber Co. was not assignable.
The Little Lumber company decided to take legal action to enforce the agreement on the sawmill. Explain the nature of the action taken and the legal principles the lumber company would rely on. What arguments would the sawmill raise in its defence? Render a decision.

Accepted Answer

The answer of The Smalltown Sawmill entered into a contract...

Question 10

The Block furniture store granted credit to many customers for the purchase of furniture and appliances. It had separate categories for furniture credit and appliance credit. It statutorily assigned its furniture credit to Prestige Financing Inc. and its appliance credit to Gold Stream Financing Ltd. Karim purchased a bed for $700 and a stove for $700 from The Block and received financing for both purchases on the same contract. When The Block's contracts were assigned, Karim's was assigned to both assignees. On Monday it received a notice of assignment from Prestige Financing Inc. and on Tuesday from Gold Stream Financing Ltd. To whom should Karim make his next payment?

Accepted Answer

A)   The Block
B)   Gold Stream Financing Ltd.
C)   Prestige Financing Inc.
D)   50% to Gold Stream Financing Ltd. and 50% to Prestige Financing Inc.
E)   Karim should not make a payment.

Question 11

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?

Accepted Answer

A)   Bonds
B)   Factoring
C)   Indemnification
D)   Novation
E)   Assignment

Question 12

On March 6th, the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group, to give a performance at the Limestone U Students' Union on March 31st. On March 29th, the "Stumbling Stones" fell ill with the flu, and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place, and arrived at the Students' Union in time to perform. The privity of contract rule would entitle the Limestone Students' Society to reject the substitute rock group, and prevent them from performing.

Accepted Answer

A) True 
 B)False

Question 13

Sylvia obtained a full release from the payment of her car loan when she gave the car to her friend, Victoria, who agreed to make all the remaining payments. The arrangement was acceptable to the bank that had made the loan. The bank cancelled the loan and replaced it with one in Victoria's name. This is

Accepted Answer

A)   an example of a chose in possession.
B)   an example of a chose in action.
C)   a novation.
D)   a guarantee.
E)   an equitable assignment.

Question 14

If Alan is a beneficiary of his father's life insurance with Avuncular Life, he has the statutory right to enforce payment if his father dies and Avuncular refuses to pay on the grounds that Alan lacks privity of contract with it.

Accepted Answer

A) True 
 B)False

Question 15

Andrews, wished to sell his home and contacted Theo, one of the real estate agents associated with a busy local brokerage. Theo came to the home in order to prepare a specification sheet of the home's features, to take some photographs and to enter into a listing agreement with Andrews. The listing agreement provided that:
"In consideration of your listing and agreeing to offer my property for sale, I hereby give you sole and exclusive authority to sell my said property at the price of $189,000 and upon the terms particularly set out below or at such other price or terms to which I may agree. I further agree to pay you a commission of 6% of the sale price."
Theo held numerous open houses at Andrews' home and generated considerable interest among prospective buyers. Within a short period of time an acceptable agreement of purchase and sale for the home was entered into by Andrews with a purchaser. That agreement contained the following provision:
"THE UNDERSIGNED (Andrews) accepts the above offer and agrees with the Agent above named (Theo) in consideration for his services in procuring the said Offer, to pay him on completion of the sale, a commission of 6% of the sale price which commission may be deducted from the deposit. I hereby irrevocably instruct my solicitor to pay direct to the Agent any unpaid balance of commission from the proceeds."
On the day of closing, Andrews' solicitor received a certified cheque in the full amount from the purchaser. Before the solicitor disbursed the funds Andrews instructed him not to honour the direction in the agreement of purchase and sale to pay directly to the agent any unpaid commission from the proceeds. The solicitor complied with Andrews' instructions and did not pay the funds to the agent.
What legal issues are raised in this situation and what are the rights and liabilities, if any, of the parties involved?

Accepted Answer

The answer of Andrews, wished to sell his home and...

Question 16

Having made it clear that she would not buy any tractor that had been involved in a fatal accident, and having been assured that the one she chose had never been in such an accident, Shelly bought a tractor from Cornfeldt's Farm Machinery for $15,000 under a conditional sales contract. Cornfeldt assigned the contract to Titewood Finance which gave proper notice of the assignment to Shelly. Shortly after, Shelly found out that this tractor had rolled over on another farmer and killed him, so she immediately returned the tractor to Cornfeldt and demanded a refund because of the misrepresentation. The salesman had known of the accident when he sold the tractor to her.

Accepted Answer

A)   Shelly can get her money back but she has no right not to pay Titewood and must continue to do so.
B)   Titewood took the assignment subject to the equities and any defence to a suit for non-payment launched by Cornfeldt would also be a defence to a suit for non-payment launched by Titewood.
C)   Shelly can get her money back and does not have to pay Titewood.
D)   Titewood can get its money back from Cornfeldt even though there was no misrepresentation to Titewood.
E)   B, C and D.

Question 17

Gerry and Juanita agree that Tracey must pay each of them $10 per month. They sign a contract and show it to Tracey, who makes no objection to it. Either Gerry or Juanita may enforce the contract against Tracey if she fails to pay.

Accepted Answer

A) True 
 B)False

Question 18

Simon bought a used yacht from Marvel's Marina and Boatyard for $70,000 to be paid in installments over six years. He traded in his smaller yacht for $10,000 at the same time, but Marvel wanted to keep the two transactions separate for financial reasons and he promised to issue a cheque to Simon for the trade-in. Marvel assigned the $70,000 contract to Strait and Naro Finance (S and N). The first Simon knew of this was when he received copies of both contracts and a notice to pay the payments to S and N. In the situation given, which of the following is most correct?

Accepted Answer

A)   Simon must make the payments to S and N from now on.
B)   Simon can make the payments to either Marvel or S and N, and, if he makes them to Marvel, Marvel is obligated to forward them to S and N.
C)   Marvel cannot pass its contractual rights to someone else without Simon's agreement.
D)   S and N cannot force Simon to pay them since they lack privity of contract with him.
E)   C and D.

Question 19

Carl agrees to buy a refrigerator from his local appliance store under an installment plan, with eight monthly payments of $100. The store immediately, and properly, assigns the deal to a finance company for $750 in cash. After the refrigerator is delivered it utterly fails to operate, and Carl refuses to make his payments to the finance company. The finance company demands continued payments and indicates that any issue of faulty goods must be taken up with the store as a separate matter. In this regard, it is in Carl's best interest to continue to make his payments lest he be successfully sued for being in breach of the agreement himself.

Accepted Answer

A) True 
 B)False

Question 20

Mr. Black enters into a contract with Build-It Construction Ltd. for the construction of a house. The house is not built in accordance with the contract. Mr. Black sues Build-It Construction Ltd. seeking $200,000 in damages. He is successful, but discovers that Build-It Construction Ltd. has insufficient assets to satisfy the judgment as it regularly transfers its assets to its parent company Build-It Holding Company Inc. Can Mr. Black collect the $200,000 from Build-It Holding Company Inc.

Accepted Answer

A)   Yes, according to the doctrine of promissory estoppel.
B)   Yes, according to the Statute of Frauds.
C)   Yes, this is a statutory novation.
D)   No, according to the doctrine of privity of contract.
E)   No, according to the parol evidence rule.

Exam 12: Performance of Contractual Obligations

Chris was indebted to Kirk for a loan of $1,000. Kirk assigned Chris' promise to pay to Bryce. If Bryce fails to give Chris notice of the assignment, Chris may lawfully make payment to Kirk.

Transfer of rights can be accomplished through which of the following:

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa. It designs the project and assigns the construction to Dynamic Construction Ltd. The contract has no provisions regarding assignment. Can Precision make the assignment to Dynamic?

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?

If Alan is a beneficiary of his father's life insurance with Avuncular Life, he has the statutory right to enforce payment if his father dies and Avuncular refuses to pay on the grounds that Alan lacks privity of contract with it.

Gerry and Juanita agree that Tracey must pay each of them $10 per month. They sign a contract and show it to Tracey, who makes no objection to it. Either Gerry or Juanita may enforce the contract against Tracey if she fails to pay.