Contract Law for Business Chapter Exam Questions
Course Introduction
Contract Law for Business provides an in-depth exploration of the legal principles governing contracts within the commercial context. The course examines the formation, execution, and enforcement of business agreements, emphasizing key concepts such as offer, acceptance, consideration, capacity, legality, and remedies for breach. Students will analyze real-world scenarios to understand how contract law shapes business transactions and risk management. By the end of the course, learners will be equipped with the knowledge to draft, interpret, and assess contracts effectively, ensuring compliance and safeguarding the interests of their organizations.
Recommended Textbook
Managing the Law 4th Edition by
Mitchell McInnes
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Page 2
Chapter 1: Risk Management and Sources of Law
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Q1) The notwithstanding clause
A)is contained in section 1 of the Charter.
B)is applied to Canadian laws regularly.
C)must be reinvoked every ten years in order to remain in effect.
D)can be applied with respect to each and every the right and freedom contained in the Charter.
E)is seldom used by governments because it involves a potentially controversial political decision to override fundamental rights and freedoms protected by the Constitution of Canada.
Answer: E
Q2) 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
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3
Chapter 2: Litigation and Alternative Dispute Resolution
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Q1) Screaming Eagle Inc,a company based in Los Angeles,wants to sue Canuck Manufacturing Inc in a court in Vancouver.While the American company may be entitled to sue in Canada,it must be represented by a litigation guardian.
A)True
B)False
Answer: False
Q2) Justice Major dissented in the case of Dobson v Dobson.This means that A)he was hearing the case as a trial judge and rejected the plaintiff's claim.
B)he disagreed with the result reached by the majority of his colleagues in an appeal that a panel of Justices of the Supreme Court of Canada heard.
C)he held that a statute was invalid because it violated the Charter.
D)he rejected a party's application for leave to appeal an earlier decision.
E)he was unable to decide the case because he had some personal connection to it so he recused himself from the panel that heard the case.
Answer: B
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4
Chapter 3: Introduction to Torts
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Q1) Most alternative compensation schemes apply only if an injury is the result of a wrongful act.
A)True
B)False
Answer: False
Q2) Pierre has just won a court case against a tortfeasor,Elizabeth,who has been found guilty of battery.In the judgment,the judge said the tort undoubtedly caused Pierre to stop working for 2 months and that Elizabeth acted maliciously.Which of the following remedies would be appropriate?
A)An injunction to stop Elizabeth from committing the tort again
B)Compensatory damages for the time lost at work,assuming Pierre exercised his duty to mitigate
C)Compensatory damages for the time lost at work and punitive damages
D)Just punitive damages because,in Canada,this is the most likely remedy
E)Nominal damages because Pierre did not suffer a monetary loss
Answer: B
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Chapter 4: Intentional Torts
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Q1) Johan owns an antique chair that has been in his family for generations.During a party at his house,Esther carved her initials into the underside of the chair's seat.She did so because she felt publicly humiliated after Johan had refused to dance with her.The chair has not been destroyed,but it will cost $10 000 to repair the damage.Johan would like to repair and retain the chair.Which of the following statements is TRUE?
A)For remedial purposes,Johan should sue for the tort of detinue.
B)For remedial purposes,Johan must sue for the tort of conversion.
C)For remedial purposes,Johan should sue for the tort of trespass to chattels.
D)Johan should ask the court to award an injunction.
E)Because the damage can be repaired,Esther cannot be held liable for punitive damages.
Q2) As a practical joke on April Fools' Day,Hannah put a mask over her face,carried a toy gun,and knocked on the door of her good friend,Woody.When Woody opened the door and saw the apparent intruder,he fainted and hit his head on a wall.Hannah may be held liable for assault even though she did not intend to cause any harm to Woody.
A)True
B)False
Q3) List and briefly explain the elements of the tort of malicious prosecution.
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6
Chapter 5: Miscellaneous Torts Affecting Business
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Q1) Connor and Sierra operated competing garages.Most of the work at Sierra's garage was performed by Vanessa,who was an excellent mechanic.One evening,Connor saw Vanessa at a bowling alley.He waited for the right moment and then dropped a bowling ball on her hand.Vanessa suffered a severe and permanent injury that will prevent her from working as a mechanic.Sierra wants to sue Connor for the tort of interference with economic relations.To succeed in that action,Sierra must prove that A)she paid Vanessa a higher salary than Connor was willing to pay Vanessa for the same work.
B)Connor intended to hurt Sierra's business.
C)Connor knew the full details of Vanessa's employment contract with Sierra.
D)Connor intended to persuade Vanessa to work for him.
E)Connor's actions were taken with the intent to cause injury to Sierra,the actions were unlawful,and that the Sierra actually suffered loss as a result of those unlawful actions.
Q2) The tort of intimidation always requires proof that the defendant used a threat to cause a third party to act in a way that hurt the plaintiff.
A)True
B)False
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Page 7
Chapter 6: Negligence
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Q1) A duty of care may be imposed on a person but not on a corporation.
A)True
B)False
Q2) Aisha suffered a stroke after consuming allergy medicine manufactured by Upsilon Inc.The evidence indicates that the stroke was caused by the combined effect of the medicine and Aisha's poor diet.The evidence also indicates that the stroke would not have occurred unless both of those factors were present.Finally,the evidence indicates that the medicine was 40 percent to blame for the stroke,while Aisha's poor diet was 60 percent to blame.The court held that Upsilon negligently failed to warn Aisha of the risk that its medicine could cause a stroke to people who have a diet like Aisha.If the total value of Aisha's losses is $100 000,she will be entitled to receive $100 000 from Upsilon.
A)True
B)False
Q3) Which of the following is a defence to the tort of negligence?
A)strict liability
B)mental incapacity
C)inexperience
D)res ipsa loquitur
E)volenti.
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Page 8
Chapter 7: The Nature and Creation of Contracts
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Q1) The phrase quid pro quo means
A)something for something in return.
B)agreement on point.
C)professional services.
D)a thing of value.
E)an intention to contract.
Q2) Which of the following statements is TRUE?
A)An offer is automatically terminated as soon as it is accepted by one person.
B)An invitation to treat indicates that the offeror is willing to receive an acceptance.
C)The courts sometimes recognize a difference between an offeree's harmless inquiry and a counter offer.
D)The courts use a subjective test to determine whether a statement is an offer or an invitation to treat.
E)An invitation to treat indicates that the offeree is willing to receive an acceptance.
Q3) Agreements created between family members or friends are never legally enforceable.
A)True
B)False
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9
Chapter 8: Consideration and Privity
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Q1) Cookie entered into a contract with Muhammad.Muhammad was required to pay $25 000 to Cookie,and he was entitled to have an engine modified and installed in his speedboat.Jane vicariously performed part of the contract.Which of the following statements is TRUE?
A)Jane almost certainly vicariously performed on behalf of Cookie.
B)One of the parties undoubtedly breached the contract.
C)Vicarious performance occurs only under an assignment.
D)Vicarious performance will be recognized by a court of equity but not by a court of law.
E)If Jane performed carelessly and caused some sort of loss to the party on the other side of the contract,then the party who suffered the loss must sue Jane rather than the other person who actually signed the contract.
Q2) Explain the relationship between offer and acceptance on the one hand and consideration on the other.Your answer should focus on the concepts of cross offers and mutuality of consideration.
Q3) Identify the circumstances in which an employee can take advantage of an exclusion clause that is contained in a contract that was created between an employer and a customer.
Q4) What is the essential purpose of a seal?
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Chapter 9: Representations and Terms
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Q1) Jane was at the international terminal of the airport when she realized that she had forgotten to purchase travel insurance for her trip.After checking-in early,Jane was browsing at some of the shops and happened upon a vending machine selling travel insurance.On the outside of the machine was a sign that indicated "Full coverage for $2 per day." Jane plugged in three toonies to cover herself for the weekend.Out from the machine dropped a standard form agreement.After boarding the plane,Jane examined the fine print and noticed that the coverage was limited to travel within Canada.Like every other potential customer in the international terminal of the airport,Jane was not travelling within Canada.Concerned that she would not be covered,as soon as the plane landed Jane used her cellphone to dial the 1-800 number on the back of the printed form.All she got was a recorded message.If Jane got injured while traveling in the United States,will the exclusion clause prevent her from making a successful claim?
Q2) A contractual term
A)is made with the intention to induce a contract.
B)is a promissory statement.
C)does not impose a contractual obligation.
D)is a form of misrepresentation.
Q3) What does it mean to say that a pre-contractual representation is NOT promissory in nature?
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Page 11
Chapter 10: Contractual Defects
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Q1) Contracts are part of private law.A key concept of private law is that parties are at liberty to create and define the legal obligations they owe to one another.Discuss whether you agree that judges should be able to step in and set aside certain transactions on the basis that they think an agreement is unjust.Does this interfere with the core concept of private law? Explain your answer.
Q2) Ling is about to enter into a contract that will be carried out over the next year and a half.Is it safe for her to assume that the contract will not be enforced if it is not evidenced in writing in a jurisdiction where the Statute of Frauds applies?
Q3) A minor's contract for necessaries of life is not voidable on the grounds of capacity. A)True B)False
Q4) Whenever parties of unequal bargaining powers transact,undue influence is always presumed but can be rebutted. A)True
B)False
Q5) List three types of contracts that must be evidenced in writing in most jurisdictions.Provide one example of each.
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Page 12
Chapter 11: Discharge and Breach
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Q1) Jonah entered into a contract with Sporting Videos Inc to appear in an instructional video about rugby.Under the terms of that agreement,he was required to participate in a filming session on March 1.Two weeks before that date,however,he telephoned Sporting Videos and explained to the company's president that he no longer was interested in the project.Which of the following statements is TRUE?
A)Jonah has committed an anticipatory breach of a warranty.
B)The contract has been frustrated.
C)If Sporting Video does not respond to Jonah's statement within six weeks,the contract will be discharged under the statute of limitations.
D)Jonah has rescinded the contract.
E)Sporting Videos ultimately will be held liable if it immediately insists upon performance,but finds,on March 1,that it cannot perform even though Jonah has changed his mind and is ready to perform.
Q2) An accord and satisfaction is effective only if both parties provide fresh consideration.
A)True
B)False
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Page 13
Chapter 12: Contractual Remedies
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Q1) Which of the following statements is TRUE?
A)Cost of cure damages will never be awarded unless the plaintiff has already spent money to cure the defect in the defendant's performance.
B)Cost of cure damages will always be less than loss of value damages.
C)Cost of cure damages will always be awarded if the plaintiff's only loss is intangible.
D)Cost of cure damages are more likely to be awarded if the innocent party has a reasonable and legitimate reason for wanting to have a defect actually cured.
E)Cost of cure damages are a form of reliance damages.
Q2) Alpha Corp has sued Beta Inc for breach of contract.The judge imposed liability as a result of relying upon the concept of a fundamental breach.The case must have dealt with
A)punitive damages.
B)unjust enrichment.
C)an exclusion clause.
D)liquidated damages.
E)an injunction
Q3) When will punitive damages be available for a breach of contract?
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Chapter 13: Special Contracts: Sale of Goods
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Q1) The implied term regarding fitness for intended purpose
A)applies any time that the buyer relied upon the seller's skill or judgment.
B)applies only if the buyer relied upon the seller's skill or judgment and the seller knew of that reliance.
C)applies only if the buyer purchased the goods for a business purpose.
D)never applies if the buyer mentions the trade name for a particular type of goods.
E)cannot be reduced or eliminated by a limitation clause or an exclusion clause.
Q2) Because of the need for commercial certainty,it generally is not possible for the parties to a sale of goods contract to exclude the terms implied by the Sale of Goods Act.
A)True
B)False
Q3) Which of the following transactions falls OUTSIDE the scope of the Sale of Goods Act?
A)the exchange of a painting for a cheque
B)a trade of a boat for a car
C)the exchange of a diamond ring for a series of monthly cash payments
D)the exchange of a new truck for $10 000 cash and an old car
E)a cash purchase of crops that will be harvested
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Chapter 14: Special Contracts: Negotiable Instruments
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Q1) Which of the following statements is TRUE with respect to bills of exchange?
A)A bill of exchange must be drawn upon a bank,a trust account,or some other financial institution.
B)A bill of exchange is usually used only for relatively small domestic transactions.
C)Once a bill of exchange is accepted,the drawer becomes known as the acceptor.
D)Unlike a promissory note,a bill of exchange cannot be used to create a credit arrangement between the parties.
E)Whereas a cheque must be drawn on a bank,a bill of exchange may be drawn on a bank or anyone else.
Q2) Alexandra bought a snow blower from Rajeev.The price was $5000.As payment,she gave him a document entitled "Promissory Note" that contained her unconditional promise to pay $5000 to him "when the snow next falls." Even though that document does not satisfy the requirements of the Bills of Exchange Act,Rajeev is still entitled to receive $5000 from Alexandra if the condition is met.
A)True
B)False
Q3) What is the difference between a demand draft,a sight draft,and a time draft?
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Chapter 15: Real Property: Interests and Leases
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Q1) Téa and David are co-tenants of Blackacre.There are no other co-tenants.Blackacre has been leased to the Bland Corp for $50 000.That profit does not necessarily have to be split equally between Téa and David.
A)True
B)False
Q2) Dulcy has an estate in a piece of land called Blackacre.That means that she must own that land,though not necessarily as the holder of a fee simple.
A)True
B)False
Q3) Land is called "real" property
A)because it is impossible to fake the existence of land.
B)after the word "res," which means "thing" in Latin.
C)because the usual remedy for a trespass to land is compensation,which provides the plaintiff with an effective remedy.
D)after the word "reus," which means "action" in Latin.
E)after the word "real," which means "royal" in Latin.
Q4) Why is land sometimes called "real property"? In terms of the enforcement of legal rights,how is real property treated differently than other forms of property?
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Page 17
Chapter 16: 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) Which of the following statements provides the best definition for "the mirror principle"?
A)The only valid interests in a piece of land are the ones that are listed in the certificate of title.
B)The terms of a subsequent mortgage must reflect the mortgagor's equity of redemption.
C)The interests listed in a certificate of title cannot be defeated.
D)All of the interests listed in a certificate of title reflect valid interests.
E)A contract for the purchase and sale of a piece of land must fully reflect the terms of the parties' agreement.
Q3) Briefly explain the need for some form of land registration system.
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Chapter 17: Personal Property: Bailment and Insurance
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Q1) Zelig owns a widget worth $25 000.He purchased property insurance from Superior Insurance Co.The widget was irreparably damaged as a result of an accident that was caused by Zoe.Zoe has a liability insurance policy from Erie Insurance Co.Which of the following statements is TRUE?
A)Zelig cannot claim a benefit from Superior Insurance Co unless Zoe caused the accident in a way that exposed her to liability in tort.
B)If it is required to pay a benefit of $25 000 to Zelig,Superior Insurance Co can claim the same amount of money from Erie Insurance Co even if Zoe could not be held liable to Zelig for damaging the widget.
C)If Superior Insurance Co sues Zoe,it will do so on the basis of the concept of contribution.
D)The concept of subrogation means that if Zelig successfully sues Zoe in tort,she will be able to claim a benefit from Superior Insurance Co.
E)If Superior Insurance Co pays a benefit to Zelig,it will be entitled to exercise subrogated rights against Zoe.
Q2) Surinder rented a boat from Aqua Inc.Is the parties' relationship better described as a sale or as a bailment? Explain your answer.
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Page 19
Chapter 18: Intellectual Property
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Q1) While visiting his parents in Toronto,Egon went to a see a local band at a bar.He purchased the compact disk they had for sale,and took it back to his hometown in Victoria,BC.Once there,Egon made copies of the compact disk onto tapes and sold them at his record store for $5 each.Which of the following is TRUE?
A)It is likely that Egon infringed the band's copyright,because in Canada it is illegal to make a copy of an audio recording without permission from the artist.
B)It is likely that Egon infringed the band's copyright,because in Canada it is illegal to make a copy of an audio recording without permission from SOCAN.
C)It is likely that Egon infringed the band's copyright,because in Canada it is illegal to make a copy of an audio recording for commercial purposes.
D)It is unlikely that Egon infringed the band's copyright because BC and Ontario are subject to separate copyright regimes.
E)It is unlikely that Egon infringed the band's copyright because audio recordings are not protected by copyright.
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Page 20
Chapter 19: Electronic Commerce
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Q1) Which of the following propositions is supported by the decision in Zhu v.Merill Lynch?
A)The fact that a party clicked "I Agree" without actually reading the terms of the agreement will render the contract unenforceable.
B)The fact that a party receives an automated response confirming a transaction is cancelled is not binding on the party sending the notice if that party has made a mistake.
C)Computer-generated transactions are not generally binding.
D)A party must verify significant transactions made on the Internet by telephone or other communication with the counterparty for those transactions to be binding.
E)All computer transactions are binding based on the messages sent between the parties.
Q2) Briefly explain how Canada's Uniform Electronic Commerce Act (UECA)emerged.What role does it play in online contract formation?
Q3) What is the significance of Time magazine's choice for "Person of the Year" for 2006? What does this choice signify for electronic commerce?
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Chapter 20: Agency and Other Methods of Carrying on Business
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Q1) A commercial representation agreement
A)occurs anytime that an agency relationship is created.
B)occurs when someone sells goods to a retailer on behalf of a manufacturer.
C)is always a type of franchise relationship.
D)is always governed by provincial partnership law.
E)is no longer legal in Canada.
Q2) Explain how a third party can determine the scope of an agent's authority to bind the principal it represents?.In your answer,specifically identify barriers make it difficult for a third party to discover an agent's authority.
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?
Q4) The concept of "apparent authority" is also sometimes known as
A)actual authority.
B)ostensible authority.
C)reflective authority.
D)delegable authority.
E)mirror authority.
Q5) What are the purposes of the rules of agency?
Page 22
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Chapter 21: Basic Forms of Business Organizations
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Q1) Alice is the sole shareholder of AliCo Inc,a corporation incorporated under the Canada Business Corporations Act.She has elected Samra as the director and Samra has appointed Ezra to be the president of the corporation,responsible for its day-to-day business.Which of the following actions by Alice would be inconsistent with the separate legal existence of the corporation?
A)Alice lending money to the corporation
B)Alice selling some real estate belonging to the corporation and keeping the money
C)Alice selling some real estate to the corporation and keeping the profits
D)Alice providing consulting services to the corporation and keeping the profits
E)Alice selling her shares in the corporation to Samra
Q2) Where shareholders are not the same people as the directors and the officers,one of the ways that shareholders ensure that directors and officers manage the corporation in a manner which most effectively promotes shareholder interests is through their power to elect the directors.
A)True
B)False
Q3) Explain the meaning of the requirement for the existence of a partnership that the people carrying on the business have a "view to a profit."
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Page 23
Chapter 22: Legal Rules for Corporate Governance
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Q1) Daniel has worked as a computer programmer and senior officer of Litem Systems Inc for several years.He has built up a close relationship with a number of Litem clients.One of them asks Daniel if he can do some programming work on the side.It is the same kind of work that Daniel does for clients of Litem.The client would hire and pay Daniel directly.Daniel would do the work on nights and weekends.Daniel is interested,but he cannot take the work because it would be a breach of his fiduciary duty and,if he does take it,he could be forced to pay over all of his profits to Litem.
A)True
B)False
Q2) Which of the following statements best describes the role of the auditor?
A)Auditors help management prepare the financial statements for the corporation.
B)Auditors prepare the financial statements of the corporation.
C)Auditors advise the directors on whether management has done a good job in managing the corporation's business
D)Auditors provide an independent assessment of the corporation's financial statements prepared by management usually for the benefit of shareholders.
E)Auditors advise the corporation on how to set up its bookkeeping system.
Q3) What does the fiduciary duty require of directors and officers?
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Chapter 23: Secured Transactions
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Q1) Banks take collateral to secure the obligations of people who owe them money as a way to reduce the risks associated with non-payment.Having a security interest in collateral will not prevent a debtor from defaulting but will reduce the risk that the bank will be unable to recover what it is owed.
A)True
B)False
Q2) Which of the following is TRUE? A conditional sale is
A)a sale in which the seller refuses to give possession of the goods to the buyer until the buyer meets certain conditions,including providing assurances that the seller will get paid.
B)a sale in which the buyer gets possession of some goods but the seller retains title until the buyer pays the purchase price.
C)a sale in which the buyer gets possession of the goods and title to them but payment of the purchase price is deferred.
D)a sale in which the buyer refuses to buy the goods until certain conditions are met.
E)a sale in which the buyer has the option to return the goods for a refund.
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Chapter 24: Dealing With Bankruptcy and Insolvency
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Q1) For many years,A&P Travel Inc was a large and successful travel agency.After the events of September 11,2000,however,the company began to struggle.Its difficulties were attributable to several causes: (i)increased airport security and heightened fears of terrorism discouraged some people from travelling,(ii)the introduction of new travel-related taxes reduced the volume of air travel,and (iii)the corporation's owners,brothers by the name of Aristotle and Plato Socratii,began to squabble over the operation of A&P Travel.The accumulated burden of these problems eventually became too much to bear,and the company went into bankruptcy.Aristotle and Plato are certainly sad to see their company disappear,but they take some solace in their belief that,even though they are the sole shareholders and directors of the corporation,they cannot be held personally liable for any debts or obligations associated with A&P Travel.Are they right? Can they be held personally liable? If so,explain the basis of that liability.
Q2) What are two differences between corporate and personal bankruptcy?
Q3) Jim owns a chain of diners that does reasonably good business.Times are changing,however,and he watches with disbelief as more and more of his customers abandon the traditional diner format for "lite" fare and donuts at competitor establishments.Creditors are now biting at Jim's heels.He is worried that his creditors will seek a bankruptcy order against him and wants to know what this will entail.Discuss.
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Page 26
Chapter 25: Government Regulation of Business
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Q1) Under the Competition Act,reference to "dual" category matters is taken to mean
A)matters that are criminal in nature but subject to civil penalties.
B)matters that are civil in nature but subject to criminal penalties.
C)purely regulatory offences.
D)matters involving a combination of either criminal or civil offences and an alleged violation of the Canadian Charter of Rights and Freedoms.
E)matters that may be pursued criminally or civilly at the discretion of the Commissioner of Competition.
Q2) Government regulation of business involves recognition of the fact that
A)federal laws are always preferable to provincial regulation.
B)cost-effectiveness is the sole goal of regulation.
C)regulation should take into account the burden of regulation on the businesses that must comply.
D)unlimited competition is necessary for markets to function effectively.
E)government power to regulate is unlimited by any law.
Q3) Why are mergers reviewed by the Competition Bureau?
Q4) Federal legislation always prevails over provincial legislation.
A)True
B)False
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Chapter 26: Individual Employment
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Sample Questions
Q1) In deciding whether or not a non-competition clause is enforceable,a court will A)examine only the terms of the parties' agreement and not the likely effect of that agreement.
B)enforce the clause only if the former employee received independent legal advice before signing the agreement.
C)be influenced by the employer's personal interests but not by its proprietary interests.
D)be less likely to enforce the clause if the employer could have been sufficiently protected by a non-solicitation clause.
E)not be influenced by the fact that the employer wrongfully terminated the employee's contract of employment.
Q2) An employer found by a court to owe its employee money in lieu of notice will never owe more than the amounts set out in employment standards legislation.
A)True
B)False
Q3) What is a release? Who signs it? The employer or the employee? Why?
Q4) List several items that may be included in an employee's severance package.
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Chapter 27: Organized Labour
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Sample Questions
Q1) Which of the following best distinguishes labour law from employment law?
A)Employment law is governed by common law,whereas labour law is governed exclusively by statute.
B)Labour law is governed by common law,whereas employment law is governed exclusively by statute.
C)Employment law involves trade unions,whereas labour law does not.
D)Employment law governs collective relations amongst management,trade unions,their members,and the institutions involved in such relations.
E)"Labour law" refers to collective bargaining with unions.
Q2) Collective agreements are best thought of as contracts between multiple parties. A)True
B)False
Q3) Management and unions have some say as to the procedure for dealing with grievances so long as they stipulate the procedure in their collective agreement. A)True
B)False
Q4) Distinguish between lawful and unlawful strikes.
Q5) What is rectification and when can it occur?
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