Canadian Commercial Law
Midterm Exam
Course Introduction
Canadian Commercial Law provides an overview of the legal principles and regulatory frameworks that govern business transactions and commercial relationships in Canada. This course explores key topics such as contract formation, the sale of goods, negotiable instruments, secured transactions, and the legal rights and obligations of parties engaged in commerce. Emphasis is placed on case law and statutes relevant to both domestic and international business operations within the Canadian context, equipping students with practical knowledge to identify and analyze legal issues affecting commercial enterprises.
Recommended Textbook
Canadian Business and the Law 5th Edition by Dorothy Duplessis
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Page 2
Chapter 1: Knowledge of Law As a Business Asset
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Q1) What ethical infraction is hiring a company's accounting auditors to act as the business's accounting compliance consultants an example of?
A) unfair tender of contract
B) employee privacy breach
C) conflict of interest
D) labour code violation
Answer: C
Q2) Which of the following best defines business law?
A) legal responsibility for the occurrence of an event causing loss
B) rules governing commercial relationships and the enforcement of rights
C) rules governing procedures involved when one person sues another
D) rules providing members of a society with established rights
Answer: B
Q3) Businesses that have been unable to resolve complex contractual disputes may have to turn to litigation as the last resort to, among other things, establish the liability of one business to another.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Canadian Legal System
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Q1) A provincial government cannot enact environmental legislation that would conflict with federal environmental legislation because it is an area of exclusive federal jurisdiction.
A)True
B)False
Answer: False
Q2) The rights and authority of municipal governments are protected by the Constitution Act.
A)True
B)False
Answer: False
Q3) What is a distinguishing characteristic of a treaty?
A) A treaty is the sole law governing relations between nations.
B) A treaty is a set of coded laws to regulate relations.
C) A treaty governs relationships between Canada's provinces.
D) A treaty can exist between nations governed by international law.
Answer: D
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Page 4
Chapter 3: Managing Legal Risks
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Q1) Prior to completing the financing arrangements needed to fund the purchase of an IT consulting firm, Albert Brinkman met several times with his bank and his accountant to review the terms of the bank's financing offer against the business's financial statements. What activity and corresponding step in the legal risk management process is this?
A) avoiding the possibility of loss; first step
B) transferring legal risk; fourth step
C) evaluating severity of potential loss; third step
D) identifying risk in business decisions; first step
Answer: D
Q2) Most lawyers can be expected to have the expertise necessary to head up a risk management department.
A)True
B)False
Answer: False
Q3) The point in evaluating risks is to recognize that not all risks are alike, nor should they be treated alike.
A)True
B)False Answer: True
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Chapter 4: Dispute Resolution
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Questions
Q1) A mediator attempting to negotiate a resolution to a commercial dispute has conceded that she is unable to move the dispute through the mediation process. What would the mediator most likely say is the main factor contributing to the failed mediation?
A) the parties' inability to choose effective teams of negotiators
B) the unwillingness of one party to compromise and quickly resolve the issues
C) the mediator's lack of familiarity with the industry and the businesses
D) the parties' mutual failure to include an arbitration clause in their contract
Q2) The filing and service of a defence is part of the pleadings stage of a legal action.
A)True
B)False
Q3) What litigation term is used to describe the party that has a judgment registered against them?
A) judgment indebted
B) the judgment creditor
C) judgment proof
D) the judgment debtor
Q4) Contrast the advantages and disadvantages of alternate dispute resolution.
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Chapter 5: An Introduction to Contracts
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Q1) How should a manufacturer try to salvage its reputation after it has been discovered to have knowingly produced and sold a defective product to the public?
A) Deny any wrongdoing and obtain top lawyers to defend against litigation.
B) Take ownership for the problem and voluntarily compensate affected customers.
C) Hire bloggers to create confusion about the facts on social networking websites.
D) Have a top executive issue an official apology presented on national television.
Q2) With respect to what the terms contained in a negotiated formal contract should ultimately be representative of, each parties' reasonable expectations will most likely be founded on which of the following?
A) that all of the parties to the contract have legal capacity to contract
B) the time period within which all obligations must be performed
C) that there has been a formal intention to create legal relations
D) the binding commitments that form the essence of the contract
Q3) A business should always insist on the strict observance and enforcement of its legal rights.
A)True
B)False
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Chapter 6: Forming Contractual Relationships
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Q1) Which of the following reflects one of the aims of Canada's new anti-spam legislation known as CASL?
A) Internet advertising will be illegal.
B) Sending commercial electronic messages, unless the recipient has consented to receiving them, will be prohibited.
C) Sending any unsolicited electronic messages, even when there has been implied consent, will be prohibited.
D) All electronic messages will be prohibited unless they are being sent to a commercial entity.
Q2) The concept that a contract is formed only when a complete offer is unconditionally accepted by the other side forms a fundamental rule in codified law.
A)True
B)False
Q3) In what way are a contractual promise and a contractual obligation similar?
A) Both must be adequate to be enforceable.
B) Both represent a pre-existing duty.
C) Both may be arbitrarily revoked.
D) Both must be present for validity.
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Chapter 7: The Terms of a Contract
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Q1) Bad faith is conduct that is contrary to community standards of honesty, reasonableness, or fairness.
A)True
B)False
Q2) What must be present in order for a condition subsequent to be recognized as legally enforceable?
A) sufficient detail; otherwise, the uncertain condition is unenforceable
B) sufficient fulfillment of each parties' collateral contractual obligations
C) reasonable certainty and objectivity; otherwise, the condition will fail
D) reasonable certainty of an unforeseen occurrence of an event
Q3) What is the legal term given to a clause that makes a contract enforceable against a buyer only if the buyer is able to secure a satisfactory building inspection?
A) a liquidated damages clause
B) a limitation of liability clause
C) a condition subsequent
D) a condition precedent
Q4) Briefly explain what is meant by the parol evidence rule. Identify when a court might avoid applying the parol evidence rule.
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Chapter 8: Non Enforcement of Contracts
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Q1) If a contract is one that the Statute of Frauds requires must be written in order to be enforceable, what must appear in writing?
Q2) Where circumstances surrounding a proposed commercial transaction involve an unsophisticated party, what would a court most likely accept as undisputable evidence that that party has proceeded with the transaction on a free and informed basis?
A) a certificate of individual legal advice
B) a certificate of independent legal advice
C) a certificate of indisputable legal advice
D) a certificate of indubitable legal advice
Q3) A simple oversight or error by one negotiating party does not constitute a legal mistake and provides no basis for voiding a contract.
A)True
B)False
Q4) The only basis for a contract being held to be illegal is if it is prohibited by the Criminal Code.
A)True
B)False
Q5) When is a contract considered to be contrary to public policy? Give an example.
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Page 10
Chapter 9: Termination and Enforcement of Contracts
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Q1) Aaron's $175 000 a year employment contract was terminated without notice or compensation two years before it was to expire. Within six months, he was able to secure a position under a one-year contract paying an annual consideration of $90 000. What could you reasonably expect a judge to award to Aaron for damages for wrongful termination?
A) $70 000
B) $85 000
C) $175 000
D) $260 000
Q2) Lelainy and Trax Green hired Jamey, owner of WeBuild4U Inc., to construct their new family home. Construction is underway, but the Greens have decided they would like to modify the contract by upgrading to marble countertops throughout the home. Identify and briefly explain how the Greens should proceed and what the traditional common law approach will require of them in order to ensure contractual enforceability. Identify any common law jurisdiction whose court has taken a modern approach to these contractual circumstances and briefly explain what that approach entails.
Q3) Identify four situations in which the equitable remedy of an order for specific performance may not be available.
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Chapter 10: Introduction to Tort Law
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Q1) How do Crown prosecutors serve as the gatekeepers of the criminal courts?
A) They typically determine which criminal offences to prosecute.
B) They are designated employees of the provincial governments.
C) They are designated employees of the federal government.
D) They typically work closely with police enforcement officers.
Q2) What elements must be present in order for a court to be satisfied that a party may be found to have committed the tort of deceit?
A) uttering threats of imminent physical harm
B) coming onto another person's property uninvited
C) relying on another's intentional fraud
D) unwittingly misrepresenting facts
Q3) Which of the following would immediately justify a court finding an employer vicariously liable?
A) authorized actions within the ordinary course of employment
B) evidence of unauthorized mode of performance
C) evidence establishing a significant connection
D) authorized actions outside the ordinary scope of employment
Q4) Distinguish between pecuniary and non-pecuniary losses. Which of these can lead to compensation under the principles of tort law?
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Chapter 11: The Tort of Negligence
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Q1) What would you reasonably expect a European Union state court to base its findings on when determining a matter involving defective-product liability?
A) limited liability
B) a fault-based standard
C) a no-fault standard
D) strict liability
Q2) What distinguishes how the House of Lords would address a case involving negligence from how a Canadian court would address the same case?
A) the question of whether the case is novel posed by the Canadian courts
B) the imposition of a judicial policy based on competing interests
C) the question of whether the case is novel posed by the House of Lords
D) the imposition of reasonably exacting legal standards for business
Q3) What is the law's purpose with regard to imposing a higher standard of care on a physician responsible for injuries arising from a wrongful breast removal surgery?
A) to impose the reasonable person test
B) to encourage compliance, competence, care, and caution
C) to reduce the scope and the severity of loss to victims
D) to set the standard through expert evidence
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13
Chapter 12: Other Torts
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Q1) What provincial jurisdiction has abolished occupiers' liability altogether as a specialized category in law?
A) British Columbia
B) New Brunswick
C) Newfoundland
D) Quebec
Q2) What is the most likely outcome of a court's finding of a defendant's libellous conduct as being particularly reprehensible and oppressive?
A) punitive damages
B) special damages
C) general damages
D) exemplary damages
Q3) Which of the following is synonymous with the phrase "protect the reputation of individuals against unfounded and unjustified attacks" with respect to an actionable tort?
A) the law of unfair comment
B) the tort of defamation
C) the breach of qualified privilege
D) the tort of absolute privilege
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Page 14
Chapter 13: The Agency Relationship
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Q1) Which of the following requires formal recognition with respect to an actionable claim arising from an alleged agency relationship?
A) a wide array of transactions
B) the cornerstone of a business
C) a delegation of authority
D) the commonality of occurrence
Q2) The application of which of the following is most likely to be created by the liability arising from agency principles with respect to employees and independent contractors?
A) the doctrine of vicarious liability
B) the common law principle of agency
C) the common law neighbour principle
D) the doctrine of primary liability
Q3) How will a power of attorney operate if it states that the occurrence of a specific event will make it operational?
A) as a variation of a general power of attorney
B) as a variation of an enduring power of attorney
C) as a variation of a springing power of attorney
D) as a variation of a specific power of attorney
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15
Chapter 14: Business Forms and Arrangements
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Q1) Under what circumstances will a court hold shareholders personally responsible for a corporation's actions?
A) employee misrepresentation of a product
B) fraud on customers
C) employee negligence
D) fraud on creditors
Q2) Briefly discuss the significance of "going it alone" with respect to raising capital for a business.
Q3) Which of the following strongly supports the need for each one of the partners to be aware of each and every obligation incurred by their partnership with respect to personal liability?
A) full and complete exposure
B) predetermined limited liability
C) proportional limited liability
D) full and complete impunity
Q4) Income tax on corporate revenue is assessed to the corporation, while dividends and salaries are taxable in the hands of the directors.
A)True
B)False
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Chapter 15: The Corporate Form: Organizational Matters
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Q1) Prior to incorporation, directors are required to hold an organizational meeting to complete the incorporation documents and make bylaws, which are the rules specifying the day-to-day operating procedures of a corporation.
A)True
B)False
Q2) Marjorie owns 1000 shares in Martina's business entity. Under certain circumstances, Marjorie's investment in the business will involve having the entity purchase her shares at $30. What rights are attached to Marjorie's shares?
A) redemption rights
B) preference rights
C) dividend rights
D) financial rights
Q3) Why are corporations seen as being capable of remedying many of the shortcomings found in the sole proprietorship and partnership business forms?
A) because corporations are easily formed business entities
B) because none of a corporation's assets are at risk
C) because some of the owners' assets in a corporation are at risk
D) because of a corporation's existence as a separate legal entity
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Chapter 16: The Corporate Form: Operational Matters
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Q1) A shareholders' agreement is an agreement among all shareholders that restricts the powers of the directors to manage the corporation.
A)True
B)False
Q2) Which of the following would be outside of the general authority of directors with respect to their management of a corporate entity?
A) the delegation of approval of financial statements
B) the appointment of executive managerial officers
C) the drafting of corporate bylaws
D) the preparation of corporate records
Q3) Which of the following are uncommon remedies available to a corporation's minority shareholders through common law and legislation?
A) appraisal and the return of surplus assets
B) winding up and derivative action
C) appraisal and derivative action
D) winding up and the return of surplus assets
Q4) Briefly discuss the oppression remedy. Identify the categories of conduct a court would usually find to be oppressive in nature.
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18
Chapter 17: Personal Property
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Q1) Which of the following is a distinguishing characteristic of the legislated ability of innkeepers to post liability limits in their establishments?
A) It gives shared control over guests' property through their occupation of their rooms.
B) Standard form contracts are a common feature used by innkeepers to transfer risk of liability.
C) It is lost due to innkeepers' negligent or deliberate acts or the deposit of the property for safekeeping.
D) It gives an innkeeper a common law lien against the guests' property in its possession.
Q2) Which of the following is a distinguishing characteristic of a commercial chattel lease?
A) It is regulated by consumer protection legislation.
B) It is regulated by the general law of contract.
C) Rules are implied through legislation.
D) Rules come mainly from statute law.
Q3) Describe bailment, and discuss its key issues.
Q4) Identify the common types of bailments.
Q5) Identify the elements that are applied to determine the liability of bailees.
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Chapter 18: Intellectual Property
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Q1) What is the most likely result if Sen Yuen's industrial design application is approved?
A) He will receive a 20-year certificate of registration.
B) Infringement will result in a monetary damage award.
C) Infringement will result in an injunction and monetary damages.
D) He will receive a 10-year certificate of registration.
Q2) A business with a patent monopoly to sell its invention will want to ensure it has a unique domain name on the website that will readily direct its customers to its website address.
A)True
B)False
Q3) Which of the following distinguishes a patent held by a large commercial entity from a patent held by a small commercial entity?
A) a 17-year patent is granted to a large commercial entity; a small entity receives 20 years
B) a delay is granted to a small commercial entity to facilitate the market testing of its product
C) the amount required to be paid for the approval of patent applications
D) the amount of registry's assessed annual patent maintenance fee
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Page 20
Chapter 19: Real Property
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Q1) The city has decided to green up its public transportation system by converting to light rail transit. Plans are underway to commence compensation negotiations with affected landowners. What is the legal name given to the type of authority that has been exercised in these circumstances?
A) authority to regulate zoning
B) authority of restrictive covenant
C) authority to expropriate
D) authority of easement of ownership
Q2) Identify the basic terms generally contained in an agreement of purchase and sale of real property.
Q3) A bank took immediate possession of real property for the non-payment of a mortgage installment on its due date. It is taking steps to have the property sold. The bank is aware that, due to poor market conditions, the amount of the mortgage is higher than the value of the property. What are the most likely legal matters that will come before the courts?
A) distress and equity redemption
B) default and deficiency
C) foreclosure and deficiency
D) foreclosure and court-supervised sale
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Page 21
Chapter 20: The Employment Relationship
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Q1) Rose's lawyer obtained compensation for her loss of income, emotional stress, and expenses incurred in finding a new job. Rose hadn't contemplated her position being terminated when she accepted the position 18 months ago. To receive an award for these types of damages, which of the following must Rose's lawyer have had to rely on as the grounds for her claim?
A) negligent hiring
B) inducing breach of contract
C) breach of oral promise
D) systemic discrimination
Q2) A senior commercial secretary worked 18 overtime hours on a large commercial deal. Her request for overtime pay was denied. The lawyer indicated that because he often required her to oversee the work of his junior secretary and her contract provided for salaried remuneration, her entitlement to overtime pay was effectively eliminated. In this regard, what would most likely be the position of the provincial labour board?
A) The lawyer's position is enforceable.
B) The lawyer's position is unenforceable.
C) Overtime must be paid at 1.5 times the minimum wage.
D) Managers and supervisors are not entitled to overtime pay.
Q3) List the essential content that should be included in an employment contract.
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Page 22
Chapter 21: Terminating the Employment Relationship
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Q1) Which of the following is a distinguishing characteristic of the collective agreement, with respect to challenging an employer's decision to terminate an employment relationship with a unionized employee?
A) The matter will immediately be referred to a binding arbitration process.
B) The employee is entitled to a remedy somewhere between dismissal and reinstatement.
C) The employee is limited to proceeding through the grievance process.
D) The matter is referred to a court if arbitration fails to resolve the grievance.
Q2) Briefly explain how a low-level employee may pursue an action for constructive dismissal and any benefits that may flow to that employee as a result.
Q3) Why is specific performance or reinstatement rarely an option provided by the courts to an employee claiming wrongful termination from a position in the non-unionized sector?
A) Employment standards tribunals award these remedies.
B) Courts are reluctant to interfere with business decisions.
C) Litigation is a slow process, and the employee has a duty to mitigate losses.
D) Common law views the employment relationship as irreparably damaged.
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Page 23
Chapter 22: Professional Services
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Q1) Which of the following would strongly support a systematic approach to assessing and controlling associated costs, regardless of the type of professional service relationship a given business may maintain?
A) payment by retainer
B) submitting bills to professional associations
C) regular evaluation of expense and calibre
D) submitting bills to taxing officers
Q2) What will be the result if ImaBigPharma Inc. links the fees for the external services of a lawyer to subjective factors?
A) The lawyer will be offering value-based legal services.
B) The lawyer will be charging flat fees for ad hoc work.
C) The lawyer will see increased billable hours.
D) The lawyer will offer favourable payment terms.
Q3) Identify the profession where the fiduciary obligation to give independent advice free from self-interest has a distinct meaning, and briefly discuss any additional obligations that would apply in this particular profession.
Q4) List the ways in which professionals can manage risk arising from their professional responsibilities.
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Chapter
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Q1) From what source is the labelling and packaging legislation that applies to alcohol, milk, and margarine products derived?
A) trademark law
B) federal legislatures
C) municipal lawmakers
D) provincial legislatures
Q2) Ariafyn Equestrian Farm ordered a maximum of $1200 worth of oats for delivery by October 30 from Mike, a local farmer. On October 12, Mike stopped at the grain elevator scales to weigh the truckload of oats, which indicated Ariafyn would owe $1293 for the load. Mike was inside the office obtaining the certificate of weight when a passing train derailed, sending a rail car colliding into Mike's truck. Which party will have the right to sue the railway company for the loss of the oats?
A) Ariafyn; risk transfers with the appropriation of unascertained goods
B) Mike; the buyer must be notified once the price is ascertained
C) Ariafyn; the goods are weighed and the price has been ascertained
D) Mike; Ariafyn must signal its adoption of the transaction
Q3) Identify and briefly discuss packaging laws and their impact on a business's packaging and promotion of its product.
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Chapter 24: Sales and Marketing: Price, Distribution, and Risk Management
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Q1) Identify and briefly describe the conditions under which a producer may refuse to sell to retailers that are selling its products at unreasonably low prices.
Q2) The Competition Act seeks to ensure commercial customers are free from unfair differential treatment that could seriously reduce competition in the marketplace. Which of the following is intended to be positively influenced by this legislated policy objective?
A) criminal offences
B) channel power
C) reviewable matters
D) number of competitors
Q3) The practice of setting unreasonably low prices to eliminate competition is known as price discrimination.
A)True
B)False
Q4) Discuss when an advertiser may legitimately claim a price to be the "ordinary price" of a product.
Q5) Briefly discuss abuse of dominant position, and describe the anticompetitive acts involved in this offence.
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Chapter 25: Business and Banking
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Q1) The acceptance of cheques for payment creates risk for the businesses that accepts them. The use of cheques for payment also creates risks for businesses paying for services or supplies. What are these risks?
Q2) Describe the various models for electronic cashless transactions.
Q3) Tess deposited the $75 000 she received from the sale of her business into her daily interest savings account. What is the legal nature of the relationship created between Tess and her banking institution?
A) Tess is the debtor, and the bank is the creditor.
B) The bank must report the transaction to FINTRAC.
C) The bank must verify the viable commercial source of the funds.
D) Tess is the creditor, and the bank is the debtor.
Q4) Highland Bakery Inc. has forwarded a cheque to Prairie Flour Mills Ltd. to pay Prairie's invoice for the flour it recently delivered. Prairie will deposit the cheque into its account upon receipt. How will the actual cash payment represented by the cheque be credited to Prairie Flour Mills' account?
A) through the bank's bills of exchange clearance centre
B) through the instantaneous Internet transfer process
C) through the bank's centralized clearing process
D) through the FINTRAC centralized clearing process
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Chapter 26: The Legal Aspects of Credit
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Q1) ImaBigBank has completed its risk assessment for a commercial loan application and has decided to grant the loan. What is the legal term given to the form of notice ImaBigBank will provide to the application detailing basic terms of the proposed loan?
A) letter of intent
B) letter of commitment
C) letter of acceptance
D) letter of credit
Q2) What role does legislation play with respect to enabling a creditor to begin legal action for arrears, retain or take possession of collateral, and appoint a receiver or manager?
A) confirms and supplements contractual remedies
B) protects borrowers' assets in the event of deficiency
C) protects borrowers from acceleration clauses
D) classifies the status of creditors as secured or unsecured
Q3) Which of the following is a distinguishing characteristic of an unsecured debt?
A) the loan must be advanced within a designated period
B) the financing arrangements are formal and deliberate
C) the incidental feature of routineness
D) the absence of security interest in debtor's assets
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Page 28
Chapter 27: Bankruptcy and Insolvency
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Q1) What is meant by a debtor's assignment in bankruptcy?
A) the creditor's choice between legal action and extending the time to pay
B) the trustee will try to assess the debtor's financial health
C) the voluntary assignment of all the debtor's property for the creditors' benefit
D) the debtor can carry on business or cease business
Q2) Which of the following is a distinguishing characteristic of a preferred creditor, with respect to distributing the proceeds of a bankrupt's estate to creditors?
A) Each is paid a reasonable amount for supplies according to their order of priority.
B) Preferred creditors typically have a security interest in a particular asset.
C) Each is paid a reasonable amount for services according to their order of priority.
D) Preferred creditors are guaranteed a minimum $3000 recovery.
Q3) In order for a payment made by an insolvent debtor within the six-month limitation period to be declared void, the payment must be shown to favour one or more of the bankrupt's creditors to the detriment of the others.
A)True
B)False
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Chapter 28: Insurance
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/27019
Sample Questions
Q1) An insurable interest is typically described as being the insured's financial stake in what is being insured.
A)True
B)False
Q2) Why is environmental impairment liability insurance expensive and difficult to obtain?
A) because of the lack of cap on punitive damages for environmental liability
B) because most environmental harm is intentionally caused
C) because of the extensive nature of environmental liability
D) because of the lack of environmental operational management policy
Q3) Briefly explain why the law places the duty of disclosure on the insured.
Q4) The subrogation rule provides that a criminal should not be permitted to profit from a crime.
A)True
B)False
Q5) Briefly discuss the nature and the content of insurance policies.
Q6) Discuss subrogation.
Q7) Explain the nature and purpose of business interruption loss insurance.
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Q8) List the possible kinds of liabilities and losses that a business typically seeks to insure against.