Commercial Law
Study Guide Questions
Course Introduction
Commercial Law examines the legal principles and regulations governing business and commercial transactions. This course explores the framework of laws related to contracts, agency, sale of goods, negotiable instruments, partnership, and company law, with particular attention to practical applications in corporate and business environments. Students will gain a thorough understanding of legal concepts affecting commerce, dispute resolution mechanisms, and the rights and obligations of parties engaged in trade. Emphasis is placed on case law, statutory interpretation, and recent developments that impact commercial activities both locally and internationally.
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) Windy Energy Inc. recovered most of its property stolen by a former employee. The employee was placed on probation and ordered to pay restitution. What type of law determined the employee's punishment?
A) employment law
B) business law
C) criminal law
D) contract law
Answer: C
Q2) A supplier who commits to a contract is free of any legal obligations for direct and foreseeable financial consequences the other party to the contract may experience should the supplier breach the contract.
A)True
B)False Answer: False
Q3) A legal risk management plan involves a business strategy that may require legal supervision to reduce the probability and severity of loss.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Canadian Legal System
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Q1) A hospital board of directors granted absolute authority to physicians to arbitrarily withdraw life support from patients. The board's authority to grant such power was quickly challenged and overturned in the courts. What type of law had to be applied to constrain the hospital board's authority?
A) criminal law
B) constitutional law
C) administrative law
D) equity law
Answer: C
Q2) What are the rules of equity?
A) rules that set out the correct procedures to follow in court
B) rules that require wrongdoers to compensate their victims for losses
C) rules that focus on what would be fair given the specific circumstances of the case
D) strict rules that dictate the outcome of particular disputes
Answer: C
Q3) All municipalities in Canada are created by provincial legislation.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Managing Legal Risks
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Q1) Why will a legal risk management plan be an effective tool for a business experiencing a breach of customer security data?
A) A plan to address the risk is already in place.
B) Senior management must manage the risk.
C) Security breaches are considered commonplace, low-level risks.
D) Computer security breaches generally pose less serious risk.
Answer: A
Q2) The fact that an organization's human resource department is typically exposed to potentially serious risks supports the need for a legal risk management plan.
A)True
B)False
Answer: True
Q3) What set of methods is used when forming a risk management plan to limit exposure to legal risks?
A) avoid, reduce, transfer, and absorb
B) divert, decrease, and align risk
C) avert, tolerate, and lessen risk
D) reduce, shift, diversify risk
Answer: A
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Page 5
Chapter 4: Dispute Resolution
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Q1) Identify the party on whom the burden of proof rests with respect to a trial of a commercial dispute. Briefly explain what satisfying the burden of proof will entail in the trial process, how the opposing party is entitled to respond at this stage, and what is required of the judge presiding over the litigation of the matter.
Q2) John is hoping for an opportunity to settle his lawsuit based on the strength of his evidence before an actual trial takes place. How should he instruct his lawyer to proceed with respect to the litigation process?
A) undertake the informal pre-trial discovery of evidence process
B) complete formal discovery involving the disclosure of supporting evidence
C) file formal evidence for presentation to the judiciary to support a claim
D) initiate the informal disclosure process of all supporting evidence
Q3) The suitability of disputes for alternative dispute resolution is not dependent on the type of law involved.
A)True
B)False
Q4) How does a person who wins a case in civil court actually collect on the judgment? What limitations are there on his/her ability to collect?
Q5) Contrast the advantages and disadvantages of alternate dispute resolution.
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Chapter 5: An Introduction to Contracts
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Q1) Explain how the operation of contract law makes it possible for the wheels of commerce to turn efficiently and effectively.
Q2) Which of the following has the most influence on the negotiators' statements made during contractual negotiations?
A) the business game is not subject to ethical standards
B) their communications form legal obligations
C) the concealment of facts
D) the compulsion to practice deception when negotiating
Q3) Identify and briefly explain the legal rules that apply to a commercial relationship between a for-profit figure skating club and the skating instructors it has contractually hired for the current fiscal year. Identify the methods available to these parties for resolving disputes that may arise, including which method is the least expensive and which is recommended as a last resort and the procedure that method entails.
Q4) Contract law principles will be applied by a judge to resolve disputes based on a contract, whether the parties were aware of those principles or not.
A)True
B)False
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Chapter 6: Forming Contractual Relationships
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Q1) In his decision, Lord Wilberforce stated, "No universal rule can cover all such cases; they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgment of where the risks should lie...." What legal rule did Lord Wilberforce establish in his ruling on this case?
A) the postage rule
B) the postman rule
C) the postbox rule
D) the post office rule
Q2) Which of the following would immediately let you know that a promise is gratuitous?
A) the lack of sufficient consideration
B) the absence of consideration
C) the lack of adequate consideration
D) the absence of formalization
Q3) A firm offer differs from an offer because it contains a promise to leave the offer open for a set period of time.
A)True
B)False
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8
Chapter 7: The Terms of a Contract
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Q1) EcoGrow Inc. contractually agreed to deliver two tons of organic fertilizer on March 16 to Organics Inc. The contract provided for the payment of $1000 for each day the delivery may be delayed. An ice storm closed highways, causing Eco to deliver four days late. What could you likely expect a lawyer representing Organics to argue before the court hearing a dispute over the non-payment of the late fee?
A) to have the court apply the parole evidence rule to the contract
B) to ignore the parties' intentions and apply the plain-meaning rule
C) to have the court apply the rules of construction to the contract
D) to ignore the rules of construction and apply the entire contract rule
Q2) The use of electronic communications creates difficulties in the application of contract law. Some jurisdictions have implemented legislation based on the recommendations of the Uniform Law Conference of Canada. Discuss.
Q3) Identify and briefly describe the situations in which the court will disregard the parole evidence rule and consider evidence outside the contract.
Q4) An implied term may be imposed by the court in order to give effect to the parties' intentions.
A)True
B)False
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Page 9
Chapter 8: Non Enforcement of Contracts
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Q1) Identify and describe four classes of contracts that must be written in order to be enforceable in most provinces.
Q2) Even though Dalbert knew Rahim had consumed copious amounts of alcohol during the afternoon, both signed a contract written on a napkin whereby Rahim agreed to buy Dalbert's old car for top dollar. Upon regaining his legal capacity, if Rahim opts to repudiate the contract on the basis of an improvident agreement, how must he proceed to void the contract?
A) He must claim relief due to the effects of duress.
B) He must claim relief due to economic duress.
C) He must claim relief due to undue influence.
D) He must claim relief due to unconscionability.
Q3) What is the legal definition of a "guarantee"?
A) a fair contract formed by one advantaged party over another
B) a pledge evidencing the capacity to enter into legally binding contracts
C) a pledge to pay another's liability in the event of default of such duty
D) a contract made enforceable by performance over a period of time
Q4) Identify and briefly explain the relevance of a misrepresentation of relevant facts with regard to an insurance contract.
Q5) What must be proven in order to have a contract set aside for misrepresentation?
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Chapter 9: Termination and Enforcement of Contracts
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Q1) A breach can have the effect of terminating a contract.
A)True
B)False
Q2) Both parties to the original contract must agree to an assignment for it to be enforceable.
A)True
B)False
Q3) Which of the following would a court consider the common law duty to mitigate to be imposed upon?
A) the assignee to a contractual agreement
B) the party causing a contractual breach
C) the party affected by contractual breach
D) the third party unaffected by the breach
Q4) What must be used as the determining factor upon which a court will rely to settle a dispute involving the classification of a contractual term?
A) the conditions specified in the contract
B) the warranties set out in the contract
C) the implied terms relevant to the contract
D) the intentions of the contractual parties
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Chapter 10: Introduction to Tort Law
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Q1) Marion ran a red light, colliding with Amand's vehicle. Amand had consumed four beers before getting behind the wheel. He suffered two broken legs in the accident and missed work for 14 months. Marion filed a defence seeking to reduce the amount of any damage award made against her. What would the court need evidence of in order to accept Marion's defence?
A) joint tort-feasors
B) contributory negligence
C) vicarious liability
D) intentional tort
Q2) Which of the following circumstances is synonymous with the legal term "joint tort-feasor"?
A) A culpable party has committed more than one tort.
B) It is a form of court order prohibiting certain conduct.
C) All blameworthy parties to the tort share joint liability.
D) A victim is found responsible for a portion of the loss.
Q3) Generally, supporting expert evidence is required to sustain an action for damages for emotional distress.
A)True
B)False
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Page 12
Chapter 11: The Tort of Negligence
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Q1) Why is the application of strict liability necessarily limited by Canadian tort law?
A) Canadian tort law takes contributory negligence into consideration.
B) Canadian tort law is founded on a strict liability system.
C) Canadian tort law is founded on a fault-based system.
D) Canadian tort law is imposed irrespective of proof of negligence.
Q2) What explanations have been suggested for the fact that, generally, damages are not available to compensate for pure economic loss sustained as a result of negligence?
Q3) Businesses affected adversely by product liability face claims arising from both negligence law and the law of contract.
A)True
B)False
Q4) 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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Chapter 12: Other Torts
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Q1) Explain the common law duty to warn owed by an occupier to an invitee. Identify the common law tort that occupier's liability is most similar to in jurisdictions where statute law prevails.
Q2) In order for a claim for a tort of nuisance to be actionable, the offending intrusion must be significant and unreasonable.
A)True
B)False
Q3) An owner of a building who uses one of the offices for his own business purposes is an occupier.
A)True
B)False
Q4) The Trade-marks Act contains a statutory form of action that bears a strong resemblance to the tort of passing off.
A)True
B)False
Q5) Any person who comes onto the property to provide the occupier with a benefit is legally described as a licensee.
A)True
B)False
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Chapter 13: The Agency Relationship
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Q1) Actual authority is a relationship that exists when one party represents another party in the formation of legal relations.
A)True
B)False
Q2) Which of the following is considered, as a general rule, to be within the scope of an agent's fiduciary duties?
A) full disclosure of acceptance of each secret commission and profit
B) absolute prohibition against acting for two principals
C) sending a client's file for storage with an outside storage facility
D) personal interests supersede the interests of the principal
Q3) A springing power of attorney is a form of power of attorney that springs into life when an event specified in the power of attorney has taken place.
A)True
B)False
Q4) Briefly describe the types of duties owed by an agent to his principal and indicate which of those duties would be considered to be the most important. Contrast the agent's duties with those owed to the agent by his principal.
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Chapter 14: Business Forms and Arrangements
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Q1) Which of the following is a provision of the Partnership Act in matters relating to Sheps & Shaps Law Offices?
A) The managing partner is the authorized agent of the firm.
B) Each partner is an agent of the firm.
C) Each partnership must designate a managing partner.
D) The partners are the firm's fiduciary agents.
Q2) Triston and Quinn jointly own property under a documented agreement. If a dispute arises between the parties, which of the following would immediately alert a lawyer to the possibility of a court concluding a partnership exists?
A) the restriction on ability to share joint liability
B) a concurrent incidental relationship
C) a restriction on unilateral ability to sell
D) the co-ownership of other property
Q3) List at least 6 of the 10 optional rules prescribed by the Partnership Act in each province with respect to the relations between partners.
Q4) Briefly discuss the significance of "going it alone" with respect to raising capital for a business.
Q5) Discuss the distribution of the profits of a corporation.
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Chapter 15: The Corporate Form: Organizational Matters
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Q1) What is required to be set out in the incorporation documents with respect to the number of shares for each class that can be issued?
A) unlimited number and type of classes of shares
B) maximum number or designation of unlimited for each class
C) minimum number or designation of unlimited for each class
D) limited number of shares for each class
Q2) Which of the following reflects the opinion held by the court with respect to the concerns of creditors in the historical case of Salomon v. Salomon Ltd., [1897] A.C. 22 (H.L.)?
A) Incorporation is undertaken to limit risk of business bankruptcy.
B) Shareholders are prohibited from becoming highly protected creditors of the company.
C) The fact that one or several shareholders limit their liability is irrelevant.
D) Shareholders are totally responsible for their own as well as the entity's obligations.
Q3) Briefly explain how a corporation can be financed, including the source of regulation with respect to public share issuance or debt offerings.
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17
Chapter 16: The Corporate Form: Operational Matters
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Q1) Of the 1000 issued and outstanding common voting shares of Trunda Adventures Corp., Isaac holds 501, Marielle holds 250, and Lorenzo holds the remaining 249.Which of the following rests only with Isaac based on this arrangement?
A) the right to ask questions
B) the right to attend meetings
C) the right to control the company
D) the right to introduce motions
Q2) Ravi Inc. has been fined 10 percent of the amount it owed because it was the organization's first offence. What offence has Ravi most likely committed?
A) a workplace safety offence causing the loss of a worker's limb
B) wilfully neglecting to pay fines for parking violations
C) failing to remit income tax deducted at source
D) failing to create a buffer zone to prevent damage to a wildlife habitat
Q3) What do primary liability and vicarious liability have in common?
A) A corporation is subject to accountability for both.
B) A corporation cannot be assessed for either using the identification theory.
C) Both require the directing mind to share liability from the corporation.
D) Both are irrelevant to actual or apparent authority.
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Chapter 17: Personal Property
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Q1) Marcella delivered her suits to the drycleaners and arranged for them to be available for pickup three days later. In this bailment for value, Marcella is a bailor and the drycleaner is a bailee.
A)True
B)False
Q2) The burden placed on a common carrier to care for the goods of the bailor is determined by the concept of benefit of the relationship. If the bailment benefits the bailor exclusively, the common carrier is required to exercise slight care and is liable only for gross neglect.
A)True
B)False
Q3) Which of the following is a distinguishing characteristic of the requirement to take reasonable care with respect to the obligations arising from ownership and possession of property?
A) It is non-applicable in arrangements that lack a formal contract.
B) It is applicable regardless of the absence of a contractual arrangement.
C) The damages are always payable to the owner by way of compensation.
D) It is the sole method for meeting the business needs of both parties.
Q4) Identify the risks relating to personal property.
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Chapter 18: Intellectual Property
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Q1) A word used in combination with a symbol to distinguish a business as the source of goods is known in intellectual property law as a trade name.
A)True
B)False
Q2) Sun Power Generation Corp. has applied for the registration of its trademark. The company includes a disclaimer as part of its mark and has noted the disclaimer in the trademark application. Which of the following disclaimers would have the strongest influence on Sun Power's application?
A) Disclaimer of exclusive rights to a distinctive component affects registrability.
B) Disclaimer of exclusive rights to use of descriptive words affects title.
C) Disclaimer of exclusive rights to descriptive words affects registrability.
D) Disclaimer of exclusive rights to a weakly distinctive component affects title.
Q3) A licence of intellectual property permits the transfer of a right by an assignor to the assignee.
A)True
B)False
Q4) Discuss the rights attributable to a registered industrial design.
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Page 20
Chapter 19: Real Property
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Q1) Which of the following is synonymous with equity of redemption with respect to real property law?
A) the right to have legal ownership restored upon the repayment of the mortgage
B) damages based on the value of the property on the date of equity redemption
C) the right of owners to exclusively control land during the term of a lease
D) damages substituted for the court's decree of a right to equity redemption
Q2) Identify the key features of the registry system.
Q3) In what way is a registry system different from a land titles system?
A) conversion of paper records to microfiche records
B) sequence of registration is used solely in registry system
C) constitutional jurisdiction of the registry system
D) absence of responsibility for validity of documents
Q4) Exclusive possession is the mortgage lender's remedy to terminate the borrower's interest in land due to default.
A)True
B)False
Q5) Briefly discuss joint tenancy.
Q6) Briefly discuss tenancy in common.
Q7) Identify the basic terms generally contained in an agreement of purchase and sale of real property.
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Chapter 20: The Employment Relationship
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Q1) The Criminal Code provides that it is an offence to intercept a private communication, but the section does not apply to communications that are not private or to an interception that is consented to by one of the parties.
A)True
B)False
Q2) Laws designed to improve the status of certain designated groups are contained in employment standards legislation.
A)True
B)False
Q3) A body that administers labour relations legislation and recognizes certification of a union as a bargaining agent for a group of employees is typically described as the industrial labour relations board.
A)True
B)False
Q4) Ontario and Quebec are the only provinces in which pay equity legislation applies to the private sector.
A)True
B)False
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Page 22
Chapter 21: Terminating the Employment Relationship
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Q1) An investigation into habitual absenteeism revealed Howard had a second, part-time job. When the work schedules occasionally conflicted, he claimed absence due to illness from his full-time job. By doing so, he received sick pay from one employer while earning a wage from the second. Would the employer be justified in terminating Howard?
A) Dishonesty on Howard's part would justify termination in this instance.
B) Howard cannot be dismissed unless his employer expressly prohibited this behaviour.
C) The employer can terminate Howard only if it first applies progressive discipline.
D) Howard can be immediately terminated because he has breached his fiduciary obligations.
Q2) In circumstances involving the termination of an employment relationship, the duty to mitigate strictly rests with the employee, who is required to a take lower-level employment to offset financial losses.
A)True
B)False
Q3) Explain what "just cause" means, and identify the types of employee conduct that would be considered just cause.
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Chapter 22: Professional Services
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Q1) The self-regulating model applied to professions has come under attack for its alleged failure to protect the public interest by the sacrifice of professional accountability in favour of self-interest and protection of members.
A)True
B)False
Q2) Dr. Walton, a practising psychologist, prepared a report for litigation purposes, as requested by Hayley's lawyer. Hayley has been receiving disability benefits, which the insurer would like to terminate if it can prove she has recovered sufficiently. The insurance company has written to Dr. Walton, requesting a copy of the report prepared for Hayley's lawyer. What will most likely be the appropriate response?
A) The report must be forwarded, or Hayley will lose entitlement to benefits.
B) The duty of professional-client privilege is inapplicable to psychologists.
C) The request is denied, as the report is subject to professional-client privilege.
D) All professionals are bound by a duty of confidentiality.
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.
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Chapter 23: Sales and Marketing: the Contract, Product, and Promotion
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Q1) Due diligence is a defence based on adopting reasonable steps to avoid the violation of a legal duty.
A)True
B)False
Q2) Discuss regulation relating to the product component of the marketing mix.
Q3) Which of the following is considered to be a valid limitation of sale of goods legislation?
A) imposition of a strict warranty of durability for a reasonable period of time
B) failure to permit contracting out of implied terms
C) failure to address pre-contractual terms
D) imposition of stronger warranties relating to quality and fitness for purpose
Q4) Which of the following strongly supported the creation of principles set out in a specialized branch of contract law intended to provide a measure of protection for the purchaser of goods?
A) the need for modern law concerning the sale of goods and services
B) historic legislation titled the Sale of Goods Act, enacted in England in 1893
C) the civil code set of exceptions to the doctrine of caveat emptor
D) unfair results of the strict application of the doctrine of caveat emptor
Page 25
Q5) Briefly discuss how the Sale of Goods Act enacted in 1893 protected buyers historically.
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Chapter 24: Sales and Marketing: Price, Distribution, and Risk Management
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Q1) Which of the following has jurisdiction to regulate unsolicited telemarketing communication as a result of the Canadian National Do Not Call List becoming operational on September 30, 2008?
A) Competition Bureau
B) provincial privacy legislation
C) Canadian Association of Internet Providers
D) Canadian Radio-television and Telecommunications Commission
Q2) What is the most significant consequence when a seller refuses to sell to a purchaser on the same terms as those that are offered to the purchaser's competitors?
A) exclusive selling is a reviewable matter under the Competition Act
B) refusal to deal is a reviewable matter under the Competition Act
C) a surplus supply of product
D) damage to the reputation of the business
Q3) Convictions for unfair pricing offence under s. 45 of the federal Competition Act have occurred despite the fact that most offenders entered not guilty pleas.
A)True
B)False
Q4) Briefly discuss the regulation of door-to-door selling.
Page 26
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Chapter 25: Business and Banking
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Q1) 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.
Q2) Individuals who conduct contractual business with banks need to appreciate the importance of the contract and become familiar with their basic rights and obligations, and they should understand that not only is the contract written largely to protect the bank but also their bargaining power is very limited.
A)True
B)False
Q3) Which of the following distinguishes a cheque from an Internet transaction?
A) Electronic transfers are instantaneous.
B) A cheque leaves a paper trail.
C) A cheque increases efficiency.
D) Verification is absent.
Q4) Discuss the purpose of the banking agreement.
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Chapter 26: The Legal Aspects of Credit
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Q1) A loan granted to an individual for a non-commercial purpose is governed primarily through provincial consumer protection legislation.
A)True
B)False
Q2) In the event of default involving a commercial loan, the potential claims against any shareholders personally are defined by the contracts of guarantee they sign with the bank.
A)True
B)False
Q3) Which of the following would strongly influence the borrower's ability to challenge an improvident sale?
A) the borrower's right to an ongoing accounting of the state of the loan
B) the Ombudsman for Banking Services and Investments (OBSI)
C) the creditor's insistence on the provision of personal guarantees from a borrower's owners
D) the Model Code for Bank Relations with Small- and Medium-Sized Businesses
Q4) Identify the new federal government regulations that apply to credit cards issued by federally regulated institutions.
Q5) Explain the environmental due diligence process.
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Chapter 27: Bankruptcy and Insolvency
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Sample Questions
Q1) Which of the following is a characteristic that distinguishes a trustee in bankruptcy from a lawyer and an accountant?
A) lawyers and accountants have insolvency expertise
B) lawyers and accountants typically recognize greater return alternatives
C) trustees have formal professional training as debt counsellors
D) trustees have the legal authority to administer legal proceedings
Q2) What is the nature of a relationship in which a business sells inventory to a customer to which it is not related or connected in anyway?
A) intercommercial
B) arm's length
C) commercially reasonable
D) consumer transaction
Q3) Explain the circumstances that would allow a payment that appears to fraudulently favour one creditor to the detriment of the others to stand.
Q4) What is the term for an order of a court declaring a person to be bankrupt?
A) bankruptcy order
B) order of insolvency
C) assignment into bankruptcy
D) creditor assignment in bankruptcy
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Chapter 28: Insurance
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
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Source URL: https://quizplus.com/quiz/27019
Sample Questions
Q1) Discuss subrogation.
Q2) Briefly explain why the law places the duty of disclosure on the insured.
Q3) Which of the following is a distinguishing characteristic of a duty to disclose?
A) It is applicable to the point in time the insurance application is made.
B) It is considered by law to be an insured's ongoing obligation.
C) It requires the prompt, oral communication of material changes to the insurer.
D) Compliance automatically adjusts the policy coverage.
Q4) Which of the following would strongly support an insured's insurable interest?
A) The property has been given as security for commercial financing.
B) The insured's beneficial interest would be prejudiced by its destruction.
C) The validity of the special nature of the insurance contract has been determined.
D) The property is the subject of any form of financing security.
Q5) Describe the major distinguishing feature among automobile insurance systems from province to province, and explain the major difference between the insurance systems.
Q6) List the possible kinds of liabilities and losses that a business typically seeks to insure against.
Q7) Identify and briefly describe the basic kinds of insurance.
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