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Commercial Law Question Bank - 2024 Verified Questions

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Commercial Law

Question Bank

Course Introduction

Commercial Law explores the legal principles and frameworks that govern business transactions and commercial entities. The course covers topics such as contracts, sale of goods, agency, negotiable instruments, secured transactions, and the regulation of commerce. Students will gain an understanding of the legal rights and obligations of parties involved in commercial activities, learn how to analyze and draft commercial agreements, and examine how legal issues impact businesses in both domestic and international contexts. Emphasis is placed on practical application through case studies and real-world scenarios, preparing students to identify and address legal risks in the commercial environment.

Recommended Textbook

Managing the Law The Legal Aspects of Doing Business 5th Edition by McInnes

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27 Chapters

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Chapter 1: Risk Management and Sources of Law

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Q1) Which of the following statements is TRUE with respect to the Charter?

A)It was introduced in 1982.

B)It is a federal statute.

C)Because it is intended to protect people's rights and freedoms, it severely limits the grounds upon which courts can strike down laws.

D)It only applies in favour of a government or a government actor.

E)It applies to federal laws but not provincial laws.

Answer: A

Q2) During a trial, a lawyer raised an argument based on the concept of the "residual power." The lawyer's argument must

A)involve an issue of private law.

B)be concerned with the amending formula.

C)be based on either section 98 or section 99 of the Constitution.

D)have something to do with the municipal governments.

E)be concerned with the federal government and constitutional law.

Answer: E

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Chapter 2: Litigation and Alternative Dispute Resolution

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Q1) Jinyan has been involved in a law suit for several years.She recently sought "leave" from the Supreme Court of Canada.This means that

A)she wants the Supreme Court of Canada to grant her leave to hear her appeal at the Supreme Court of Canada.

B)she wants the court to release her from jail.

C)she wants the Supreme Court of Canada to hear a trial of her case with live witnesses.

D)she wants the Supreme Court of Canada to appoint a new lawyer to work for her.

E)she wants the Supreme Court of Canada to come to her province where she lives and to have a full new trial in front of the Supreme Court of Canada in her home province.

Answer: A

Q2) The Crown can be sued only if a statute allows an action to be brought against the Crown.

A)True

B)False

Answer: True

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4

Chapter 3: Introduction to Torts

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Q1) Suneel committed the tort of battery against Jodi.The injuries that she suffered were unexpectedly severe.Suneel may be held fully liable for Jodi's losses even if the extent of the losses were not reasonably foreseeable.

A)True

B)False

Answer: True

Q2) Lupine Inc.successfully sued Wolf Finance Ltd.in both tort and contract.In this situation, it is accurate to say that Wolf Finance owed obligations to Lupine, one that arose by operation of law and the other that arose through voluntary agreement.

A)True

B)False

Answer: True

Q3) The deterrent function of tort law is based on the belief that the high costs associated with litigation will discourage plaintiffs from starting law suits that have little chance of success.

A)True

B)False

Answer: False

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Chapter 4: Intentional Torts

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Q1) Orson is one of Hollywood's most successful movie producers.Lana is one of Hollywood's most popular actresses.Naturally, when the couple announced their plans to be married in Orson's palatial home, there was great interest in the wedding.Orson and Lana decided to profit from that interest by selling the rights to photograph the ceremony to Hi! Magazine.Both the magazine and the newlyweds were therefore very upset, two days after the ceremony and a full week before Hi! Magazine was scheduled to runs the photos, to see a set of wedding photos in a rival publication, Okay! Magazine.Okay! Magazine had obtained those photos from a freelance photographer named Cesar.Cesar had sneaked into the wedding, uninvited, by dressing up as a priest.He caught the entire ceremony on film by using a small camera that he had hidden in his priestly robe.Orson now wants to sue the parties that he believes are responsible for ruining "one of the greatest days of my life." Explain whether he can successfully sue for any of the torts discussed in Chapter 4.

Q2) Identify, explain, and compare the different torts that fall under the heading of "interference with chattels."

Q3) Necessity, consent, and provocation are all classified as complete defences. A)True

B)False

Q4) List and briefly explain the elements of the tort of malicious prosecution.

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Chapter 5: Miscellaneous Torts Affecting Business

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Q1) Which of the following statements is TRUE with respect to the tort of interference with contractual relations?

A)Liability will never be imposed unless the defendant was a party to the contract in question.

B)Liability will never be imposed unless the defendant intended to hurt the plaintiff.

C)Liability will never be imposed unless the defendant also committed a crime.

D)If the defendant is held liable for the tort, it will always be held liable for breach of contract as well.

E)Liability will never be imposed unless the defendant's actions actually caused a breach of contract.

Q2) Brad made a false and unflattering statement about Concettina.He has been sued for defamation.That action can succeed only if the court is satisfied that

A)Brad knew that his statement was false.

B)Brad made his statement without first carefully checking the facts.

C)Brad's false statement mentioned Concettina by name.

D)Brad knew Concettina's identity.

E)Concettina is still alive when the statement is made.

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Page 7

Chapter 6: Negligence

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Q1) Which of the following statements is TRUE with respect to the issue of factual causation in negligence?

A)The issue of factual causation is always decided on the basis of the but-for test.

B)Liability cannot be imposed if the defendant's carelessness was only a cause, and not the only cause, of the plaintiff's losses.

C)Liability cannot be imposed if the defendant's carelessness was only a cause, and not the most important cause, of the plaintiff's losses.

D)The issue of factual causation is decided on the basis of the reasonable person test.

E)The doctrine of joint and several liability applies if different defendants caused the plaintiff to suffer a single injury.

Q2) The defence of contributory negligence may apply even if the plaintiff carelessly contributed to the severity of the injuries that were suffered, but not to the actual occurrence of the accident that caused those injuries.

A)True

B)False

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8

Chapter 7: The Nature and Creation of Contracts

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Q1) Rosie placed an advertisement in a newspaper that said: "Five purebred Siamese kittens for sale.$200 each.First come/first served.Respond in person or by email to Rosie@netmail.com." Gig saw the advertisement and immediately sent an email message that said, "I will pay $1000 for the five kittens." However, when Gig arrived at Rosie's door with the cash in hand, she refused to hand over the kittens.She explained that while Gig's message was the only reply that she had received in response to her advertisement, she had changed her mind and had decided to keep the kittens for herself.Provide an argument on behalf of Gig that would support the creation of a contract with Rosie.

Q2) Agreements created between family members or friends are never legally enforceable.

A)True

B)False

Q3) The phrase quid pro quo means

A)something for something.

B)agreement on point.

C)professional services.

D)a thing of value.

E)an intention to contract.

Q4) List five ways in which an offer can be terminated.

Page 9

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Chapter 8: Consideration and Privity

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Q1) 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.

Q2) Laetitia agreed to provide certain services to Hans in exchange for a payment of $10 000.Although Laetitia fully performed her side of the agreement, Hans refuses to pay anything.He insists that Laetitia does not have a right to sue for breach of contract because, in performing the services, she was merely doing something that she had become obliged to do even before she entered into her agreement with Hans.Hans's position is correct if Laetitia's pre-existing obligation was

A)some type of public duty.

B)supported by a seal rather than by consideration.

C)a private obligation owed to a third party.

D)for some reason unenforceable.

E)subject to a quantum meruit.

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Chapter 9: Representations and Terms

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Q1) Nate wanted to rent a car.The attendant gave him a standard form agreement to sign.She asked him to sign three places.She indicated that his signatures were concerned with exclusion clauses, but she did not explain the content of those clauses.Nate signed without anything else being said.If Nate breeches one of these exclusion clauses, which of the following is most likely to be TRUE?

A)Since the document contains the parties' contract, the exclusion clauses would be enforceable against Nate even if he did not sign.

B)Regardless of any other facts, the exclusion clauses became enforceable as soon as Nate signed the document.

C)A court may refuse to enforce the exclusion clauses even though Nate signed beside them.

D)The exclusion clauses will be enforced unless neither party personally knew about their details.

E)To prevent unfairness, the courts never enforce exclusion clauses that are contained in standard form contracts.

Q2) In what sense might a standard form agreement be beneficial to consumers? Briefly explain the downside of standard forms.

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Page 11

Chapter 10: Contractual Defects

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Q1) 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 because the parties' actions were not part performance of a contract.

D)Ariel can only sue for return of the deposit.

E)Ariel will lose the deposit, she must pay rent to Newton for the month of possession, and she must then vacate the land.

Q2) The Statute of Frauds eliminates the writing requirements of the common law.

A)True

B)False

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Page 12

Chapter 11: Discharge and Breach

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Q1) Alpha Corp breached its contract with Beta Inc.If Beta discharges the contract on the basis of that breach, the contract no longer will be at all relevant to the relationship between the parties.

A)True

B)False

Q2) Briefly describe three ways in which a contract may be discharged by operation of law.

Q3) Gretchen, who lived in Calgary, entered into a contract with Matt, who lives in Edmonton.He paid $2500 to her at the outset and she promised that she would edit a book that he was in the process of writing.After completing slightly more than half of the job, however, Gretchen received an offer to act in a play on Broadway.Since acting had always been her dream, she pleaded with Matt to let her go to New York without finishing her project with him.She also pleaded with him to retain the $2500 that she had received from him because she needed a great deal of money to make the move.Since he was fond of Gretchen, Matt agreed.She then sold almost all of her belongings, including her computer, and moved to New York.A week later, however, Matt changed his mind when he learned that Gretchen was acting in Cats, a Broadway production that he disliked very much.He therefore now insists that she must fulfill the rest of her contractual obligations.Is he correct? Explain your answer.

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Page 13

Chapter 12: Contractual Remedies

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Q1) Restitution is

A)a cause of action that sometimes is available in a contractual context.

B)a remedy that may require the defendant to give up a benefit that it acquired from a third party as a result of committing a wrong against the plaintiff.

C)a more appropriate name for an account of profits.

D)never able to exceed the value of expectation damages.

E)available as a remedy for unjust enrichment.

Q2) The courts often award cost of cure damages in order to punish the defendant for acting outrageously.

A)True

B)False

Q3) "Reliance damages cannot be used to escape the consequences of a bad bargain." Explain the meaning of that statement.Explain the justification for that rule.Provide an example that illustrates your answers.

Q4) If the plaintiff proves an enrichment, a corresponding deprivation, and a juristic reason for the enrichment, it will be entitled to the remedy of restitution.

A)True

B)False

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Page 14

Chapter 13: Special Contracts: Sale of Goods

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Q1) Which of the following are special remedies available under the Sale of Goods Act as discussed in Chapter 13?

A)stoppage in transit

B)liquidation

C)insolvency

D)mortgage

E)injunction to perform personal services

Q2) Humbert visited Dolores's premises and saw a sample of widgets that she was offering for sale.On the basis of that sample, he agreed to buy her entire stock of ten widgets.Dolores was delighted with that sale because she had not previously dealt in widgets and she did not intend to do so again in the future.Humbert paid the price in full and Dolores delivered the widgets to his workshop the next day.Because he was busy, Humbert did not inspect the widgets when they arrived.He simply signed a receipt and placed the widgets in a storeroom.Some time later, however, he discovered that the widgets were defective.He therefore demanded a partial refund.Dolores refused that request on the basis that the defect was fairly obvious.Is Humbert entitled to complain about the defect? Explain your answer.

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Page 15

Chapter 14: Real Property: Interests and Leases

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Q1) Bhagiratha has the fee simple in a piece of land called Blackacre.She is about to create two new interests in that property.Gallahad will receive a life estate.Adeline will receive the remainder.Which of the following statements is TRUE?

A)The doctrine of waste will impose an onerous obligation on Adeline.

B)Bhagiratha will eventually receive the reversion.

C)Adeline will never receive possession of Blackacre if Bhagiratha dies before Gallahad.

D)Gallahad will receive an estate in Blackacre.

E)Adeline and Gallahad must be related.

Q2) Juan owns a piece of land.Yolanda enjoys a profit à prendre with respect to Juan's land.This must mean that

A)Juan has a life estate.

B)Yolanda is allowed to travel across Juan's land in order to reach a neighbouring property.

C)Juan's property is part of a condominium.

D)Yolanda is entitled to share in the money that Juan receives after selling his property.

E)Yolanda has a right to take something from Juan's land.

Q3) Explain the concept of "expropriation."

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Page 16

Chapter 15: Real Property: Sales and Mortgages

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Q1) A person who occupies a piece of land without any right or permission to do so is legally known as

A)a dweller in situ.

B)a sitter.

C)a resident in transitu.

D)a squatter.

E)an indigent occupant.

Q2) A mortgage under a registry system involves an immediate conveyance of title, but a mortgage under a land titles system does not.

A)True

B)False

Q3) Hiram owns a piece of land that he wants to sell to Regina.She wants to buy it for the purpose of building a shopping mall.It is not yet clear, however, whether the municipal government will give planning approval for the proposed mall.Hiram and Regina consequently will probably immediately create a contract that is subject to a condition subsequent.

A)True

B)False

Q4) Briefly explain the need for some form of land registration system.

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Chapter 16: Personal Property: Bailment and Insurance

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Q1) Every night for two weeks, a cat hung around Xavier's back door.Since the cat did not seem to have a home, Xavier decided to keep it.Which of the following is most likely to be TRUE?

A)If the cat belongs to someone else, Xavier has no property rights.

B)Xavier has property rights in the cat, but only if it is not wearing any tags.

C)If the cat arrived at Xavier's house after wandering away from its owner, then Xavier has good property rights against everyone in the world except that original owner.

D)Xavier has an absolute right to possess the cat under the rule that states "finders keepers, losers weepers."

E)Xavier cannot have property rights over a living thing.

Q2) What is subrogation? What is indemnification? How are these two concepts related?

Q3) Trans-Geo Inc is a business that operates in a number of different ways.Most commonly, however, it moves goods for customers from one part of the country to another.It will not necessarily be classified as a common carrier when it does so.

A)True

B)False

Q4) Explain the meaning and relevance of "inherent vice."

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18

Chapter 17: Intellectual Property

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Q1) Knock-offs and trademark depreciations are two examples of trademark infringement.How do the two differ? Provide an example of each.

Q2) A Canadian inventor has up to 12 months to file a patent application in another Paris Convention member state in order to gain protection in that country.

A)True B)False

Q3) Explain the meaning of the following statement: "Industrial designs cannot be registered for designs that are purely functional in nature." Using a running shoe as an example, describe an element that can be registered as an industrial design and an element that cannot.

Q4) T-Bone Steak, a Canadian pop act, just finished writing a new song.The band does not need to register their copyright ownership in order to protect their copyright. A)True B)False

Q5) In Canada, trademark protection is afforded only to registered trademarks. A)True B)False

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Chapter 18: Electronic Commerce

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Q1) Privacy laws limit the extent to which businesses can collect, use, or disclose personal information about their customers.Which of the following strategies should be adopted by a company to minimize the risks and costs associated with privacy compliance?

A)A company should appoint one person to be responsible for privacy issues so that it can completely avoid the cost of training other employees about privacy compliance.

B)When a company only collects necessary personal information, it can use that information however it wants.

C)A company should encrypt personal information whenever possible, even if there is a small financial cost to do so.

D)If the company is located in the Yukon, it is not subject to privacy legislation so should develop its privacy policy in a way that best suits its needs.

E)A company should include the maximum expected cost of privacy law claims into its calculation price of goods or services and not bother to comply with the privacy laws.

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Chapter 19: Agency and Other Methods of Carrying on Business

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Q1) Silken is a producer of snowboards.She wants to enter into a commercial representation agreement with Jason.Under the agreement, he will sell her snowboards on her behalf to retail ski shops.Which of the following is TRUE?

A)Jason will only have the authority to contract with the retail ski shops that Silken actually gives him.

B)Jason will have no authority to contract with the retail ski ships.Instead, he will buy the snowboards from Silken and resell them to the ski shops.

C)Jason will only have the authority to contract with the retail ski shops that Silken represents to the ski shops that he has.

D)Jason will have the authority to contract with the retail ski shops that Silken represents to the ski shops that he has and the authority she actually gives him.

E)Jason will have to obtain Silken's approval before any transaction he makes is valid.

Q2) What are the purposes of the rules of agency?

Q3) How can a principal manage the risk that an agent will commit the principal to contracts that it does not want to be bound by?

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Chapter 20: Basic Forms of Business Organizations

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Q1) Yasir and Rahool are partners in an accounting firm.Each contributed $10 000 in capital and Yasir has loaned the partnership a further $15 000.The partnership also owes its bank $25 000.Yasir and Rahool want to dissolve the partnership.They plan to pay themselves back $10 000 each first, then distribute $25 000 to the bank, and finally pay back Yasir's loan if there is enough money left.This plan for distribution is consistent with the default rules of partnership law.

A)True

B)False

Q2) Arthur and Francine have been partners in a pet-sitting business for several years, but since after a vicious disagreement as to whether they should accept jobs involving exotic and difficult animals (such as aardvarks and monkeys), Arthur wants to bring the partnership to an end.Can he do so? Explain your answer.If Arthur and Francine had a partnership agreement, explain how that document might be relevant.

Q3) Compare the relative advantages and disadvantages of using a partnership and a corporation to carry on a business.

Q4) Incorporation is a process that only lawyers may carry out.

A)True

B)False

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Page 22

Chapter 21: Legal Rules for Corporate Governance

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Q1) Which of the following statements is TRUE? A corporation is only bound in contract if the person acting on behalf of the corporation

A)had actual authority.

B)had actual authority and apparent authority.

C)had actual authority or apparent authority.

D)had apparent authority.

E)had written authority from the corporation.

Q2) Nigel is negotiating to sell some lighting fixtures to Abda Corporation for its offices.Nigel has been dealing with Jerome.Jerome appears to be the president of Abda, or at least so it says on his parking spot at Abda's offices.Nigel can rely on Jerome having authority to enter into a contract with him to buy the lighting fixtures.

A)True

B)False

Q3) A director's fiduciary duty is owed to the corporation.This means that directors must act with a view to maximizing the value of shareholders' investment to the exclusion of the interests of other stakeholders in the corporation.

A)True

B)False

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Chapter 22: Secured Transactions

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Q1) Orange Bank was going to lend Fasgo Inc $1 million.As security for the repayment of the loan, Fasgo was going to give Orange Bank a general security interest in all its present and future assets.The parties have decided that the agreements will be signed and the financing will be completed on Friday.Orange Bank should file a financing statement to register its interest a few days before the completion of the transaction because

A)it will save time at the completion of the transaction on Friday if the filing is done ahead of time.

B)the filing will perfect the security interest of Orange and it is in the bank's interest to perfect its interest as soon as possible.

C)the filing will prevent any other person from obtaining a security interest in the assets of Fasgo.

D)once the financing transaction is completed on Friday, the priority of the bank's security interest will be determined by reference to the date of the filing.

E)Fasgo will be bound to give the security when the filing is made.

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Page 24

Chapter 23: Dealing With Bankruptcy and Insolvency

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Q1) Milo's Pedantry Inc is in bankruptcy.The owner of the company wants to better understand the process of bankruptcy.He therefore has asked you to identify and briefly explain the various people involved in the process.Which of the following statements is TRUE?

A)The trustee will acquire legal title to the company's unsecured assets and, after assessing the various claims against the debtor, liquidate the assets and distribute the proceeds accordingly.

B)The superintendent is the person who supervises, in a hands-on manner, the administration of the bankruptcy proceedings.

C)The registrar is appointed by the federal cabinet to inspect and investigate bankrupt's estates.

D)The inspectors are appointed by the debtor for the purpose of verifying the creditors' claims.

E)The debtor remains in possession and control of the assets until the bankruptcy is completed.

Q2) Explain why a creditor would accept a proposal in bankruptcy.

Q3) Explain the difference between bankruptcy and insolvency.Your answer should focus on how the two concepts are related, if at all.

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Chapter 24: Government Regulation of Business

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Q1) Edgardo runs a fish store in Toronto's Kensington Market.That store purchases its supplies from a wholesaler and then re-sells the goods to the public.Because he knows the market well, Edgardo is able to offer low prices.As a result, his store is always full of customers.Lately, however, Edgardo has had difficulty getting wild, as opposed to farmed, salmon.When he asked for an explanation, his wholesaler said, "Your prices are too low and you're making the other fishmongers look bad.If I let you carry on that way, you'll ruin the business for everyone else." Edgardo, who is furious, asked you what he should say to the Competition Bureau.You told him that, out of the following options, his BEST solution is to complain about

A)the monopoly that the other fish retailers have created.

B)a criminal conspiracy to drive him out of the market.

C)the reviewable practice of exclusive dealing, because the wholesaler is only willing to sell wild salmon to Edgardo's competitors.

D)the reviewable practice of price maintenance, because the wholesaler refuses to sell wild salmon to Edgardo because of his low pricing policy.

E)the reviewable offence of tied-selling, because the wholesaler's decision is tied to its desire to help Edgardo's competitors.

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Chapter 25: Individual Employment

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Q1) Explain the concept of a "job description." In which phase of the employment relationship is it created? What are the advantages of having a well-drafted job description for an employer?

Q2) Which of the following entitlements are employees but not independent contractors provided for by statute?

A)reasonable notice of termination

B)severance pay

C)overtime pay

D)vacation pay

E)employment standards

Q3) Which of the following is the best example of a conflict of interest?

A)teaching a college course based on skills learned at the workplace

B)accepting gifts from competitors

C)giving common sense advice to a friend who is trying to get a job with your employer

D)not telling your employer that you have been accused of a criminal offence

E)taking a part-time night job unrelated to your full-time employment

Q4) Can an employee claim to have been dismissed even if they were not fired? Are there any remedies available in such circumstances?

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Chapter 26: Organized Labour

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Q1) After years of failure, the employees at the Cherryville branch of MegaStore, an international chain of discount stores, finally succeeded in becoming unionized.They are very anxious to ensure that the collective agreement, which is currently being negotiated, does everything possible to solidify their position and to prevent the company from undermining their recent success.Which of the following statements is TRUE with respect to a union security clause?

A)An approach sometimes referred to as an "agency shop" will ensure that the store contains only unionized employees.

B)Under a closed shop clause, MegaStore will be required to allow an employee at another one of its branches join the Cherryville store without having to join the union.

C)The collective agreement will not necessarily include such a clause.

D)It would be unlawful for a collective agreement to prohibit a non-union person from being an employee at the Cherryville branch.

E)Such a clause is relevant only in the event of a grievance.

Q2) What should an arbitrator do when asked by the parties to interpret an ambiguous clause in a collective agreement?

Q3) Distinguish between lawful and unlawful strikes.

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Page 28

Chapter 27: Online: Special Contracts: Negotiable Instruments

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Q1) You and I have entered into a contract for the sale of a boat.We have agreed that I will deliver possession of the vessel to you at the same time that you pay the purchase price of $10 000.You have the option of paying with either cash or a certified cheque.Which of the following statements is TRUE?

A)You would prefer to pay with a cheque because $10 000 in cash does not easily fit into your pocket.

B)You would prefer to pay with cash because cash is less risky than a cheque if a theft occurs.

C)I would prefer to receive a cheque because it is more difficult for me to transfer cash to a stranger.

D)I would prefer to receive cash because a certified cheque would not give me any rights against the drawee bank.

E)Certification of a cheque would be relevant only if I intended to negotiate the cheque to someone other than a bank.

Q2) Jordan bought a widget from Sara.He paid the purchase price of $25 000 by giving her a cheque drawn upon his account at the Bank of Saskatoon.The facts involve three contracts.Identify those contracts and briefly explain the rights that each involves.

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Page 29

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