Deck 5: An Introduction to Contracts

Question 1

When resolving contractual conflicts,what laws do the courts usually apply?

A) the Contracts Act
B) the Sale of Goods Act
C) Judges make all decisions based on principles of fairness and equity.
D) Judges apply common law and occasionally statutory law.

Answer 1

D

Question 2

Fatima needs to copy and bind five sets of legal submissions with beige covers,but none are left in the supply cabinet.The office manager offers to reimburse Fatima for the cost of the covers and buy her lunch from petty cash if she will dash to the nearby office supply store to buy them.Fatima agrees.What is the nature of the arrangement negotiated between Fatima and the office manager?

A) a formal accord
B) an informal business arrangement
C) a haphazard promise
D) a binding agreement

Answer 2

B

Question 3

Two accomplished software developers want to combine their talents on a lucrative project offered by a large document storage firm.The developers will have their agreed roles and responsibilities incorporated into a formal contract to be prepared by their respective lawyers.Which of the following is a valid representation of the legal significance of the relationship between the parties that will be evidenced by the contract?

A) Each party will get exactly what it bargained for.
B) There has been a deliberate meeting of the minds.
C) Some of the parties to a contract can be sued under it.
D) No element of coercion exists between the contracting parties.

Answer 3

B

Question 4

Juha agreed to hire Zen Home Builders Ltd.(Zen)to construct his new home.Juha,Zen,and their lawyers met to review and sign a contract that provided for specific types of environmentally safe construction materials to be used.In many instances,Zen failed to use the stipulated "green" construction materials.What would a court,faced with determining a resolution to the ensuing dispute,rely on the existence of to establish the existence of the contract?

A) Juha's entitlement to rescind the contract due to poor contractual performance.
B) A framework of rules created by the parties and which judges automatically enforce.
C) Mandatory rules which every type of contract is subject to.
D) An intention between the parties to create a legal relationship.

Question 5

What is the primary benefit of contract law to business?

A) Contract law allows businesses to transfer risk.
B) Once a contract is created,it permits both parties to rely on the terms they have negotiated and plan their business affairs accordingly.
C) Contract law guarantees that others will follow through with their promises.
D) It ensures that businesses treat each other as equals and do not take advantage of one another in business relationships.

Question 6

What test will a court apply when asked to determine a matter involving a dispute between parties regarding the formation of a contract?

A) whether the contract is sufficiently complete to provide certainty to all parties
B) whether the terms of the contract provide sufficient mutual consideration
C) whether a reasonable person could conclude that an offer and acceptance occurred
D) whether the parties to the agreement have legal capacity to enter into contracts

Question 7

Which of the following is a good reason to use a contract as opposed to having a casual understanding?

A) Casual understandings require lengthy negotiations and time to perform.
B) All contracts typically involve arrangements that are unlikely to be repeated.
C) Casual understandings are casually conducted and completed instantly.
D) All contracts are subject to the same set of compulsory legal rules.

Question 8

Which of the following statements regarding written contracts is correct?

A) Written contracts must be filed at the appropriate registry in order to be enforceable.
B) Only certain types of contracts must be in writing in order to be enforceable in court.
C) All contracts must be in writing in order to be enforceable in court.
D) Written contracts are usually less cost-effective than verbal contracts.

Question 9

Which of the following is a defining characteristic of the principle of equality of bargaining power?

A) Judicial assistance is readily available to all disadvantaged parties to a contract.
B) It is applied to adjust the terms so that the contract is fair and then enforces it.
C) It is applied to reject unfair contracts and return the parties to their prior positions.
D) It generally applies regardless of some distinct advantage favouring one party.

Question 10

Which of the following is an example of an alternative method of dealing with a breach of contract,rather than starting a lawsuit?

A) Treat the subject matter of the contract as a standard or ordinary commodity.
B) Maintain the project's profitability by insisting on full compensation for any loss.
C) Seek sufficient compensation for any resulting loss,but extend the time for payment.
D) Show respect for the other party while seeking a standard of reasonableness in return.

Question 11

Which of the following best explains the requirement that "contracts must be supported by mutual consideration"?

A) There must always be at least two parties to a contract.
B) Contracts require that the parties treat each other fairly.
C) A contract involves a bargain or exchange between the parties.
D) Contracts must be in writing to be enforceable.

Question 12

Which of the following best describes the relationship between bargaining power and the law of contract?

A) The law of contract is not generally concerned with the parties' relative bargaining power.
B) The law of contract seeks to correct inequalities in bargaining power.
C) The law of contract is very concerned with the relative bargaining power of the parties.
D) The goal of the law of contract is to reduce the bargaining power of the parties.

Question 13

Goto Supplies Ltd.has determined that,because of increased production costs,it will actually lose money if it fulfills its contract to supply parts to Nova Manufacturing Inc.and is considering breaching the contract.What term used to describe the type of contract breach Goto is contemplating?

A) economic repudiation
B) reputation management
C) economic breach
D) specific performance

Question 14

With respect to what the terms contained in a negotiated formal contract should ultimately be representative of,each parties' reasonable expectations will most likely be founded on which of the following?

A) that all of the parties to the contract have legal capacity to contract
B) the time period within which all obligations must be performed
C) that there has been a formal intention to create legal relations
D) the binding commitments that form the essence of the contract

Question 15

Which of the following has the greatest influence on creating the flexible relationship that exists between contract law and economic reality?

A) Contractual obligations must be performed or compensation paid for non-performance.
B) Courts assess the fairness of the contract terms chosen by the parties.
C) A party's need for judicial assistance or judicial intervention must be justified.
D) Parties must be responsible for themselves and work to maximize self-interest.

Question 16

Matt purchases a car for his son from an auto dealership.A week later,his son discovers a defect that renders the car unsafe.The defect is one that a court would consider to be a breach of contract.What legal recourse is available to remedy this problem?

A) The court's resistance to imposing ethical business standards leaves no recourse.
B) Matt may commence a lawsuit against the dealer for breach of contract.
C) Matt's son may file a lawsuit against the auto dealer for breach of contract.
D) Mat's son can sue the manufacturer of the car for breach of contract.

Question 17

With respect to the relationship that exists between contractual parties,what is meant by the phrase "meeting of the minds"?

A) There is an agreement between two or more persons.
B) The legal cornerstone of the commercial operation has been formed.
C) There is an informing idea behind the contractual relationship.
D) There is agreement upon the intrinsic responsibilities owed to each other.

Question 18

Under what circumstances would a court apply the objective standard test?

A) when deciding the amount of damages to award the winning party
B) if there is inequality of bargaining power between the parties
C) where it is unclear whether the parties intended to form a contract
D) if the enforcement of the contract might cause harm to a third party

Question 19

Under which of the following circumstances would a court be likely to set a contract aside?

A) if there is a lack of sufficient equality of the benefits received by each party
B) if there is an attempt to take advantage of a handicapped,vulnerable person
C) if there were witnesses to the contract
D) if the parties put their contract in writing

Question 20

Avatar Productions Ltd.has had a long and successful relationship with Facades Inc.,a set designing company.Recently,Facades failed to complete one of its contractual obligations within the time limit set out in the contract.What overriding factor should Avatar consider when deciding whether to sue Facades?

A) whether it makes business sense to sue Facades
B) that failure to immediately sue Facades will result in giving up its right to sue
C) the impact of the litigation on the industry
D) whether it can prove that the breach was due to negligence on the part of Facades

Question 21

If someone has suffered a legal wrong,he or she should automatically sue the wrongdoer.

Question 22

As a general rule,only parties to a contract can sue and be sued on it.

Question 23

A large greenhouse grower that wants to source a suitable organic liquid fertilizer contacts Organics.The grower is willing to pay a premium price for Organics's product.Accepting the order would mean Organics will not be able to completely fill existing orders to its current customers.Organics desires the new business but wants to maintain its existing customer base.Which of the following strategies should Organics use to solve this problem?

A) Abandon all but the most important of the existing orders and fill the new order.
B) Present an ultimatum on existing orders offering delivery on a later date or nothing at all.
C) Comply with existing obligations,fill the orders,and offer the new business what is left.
D) Offer a price break on existing orders in return for varying quantity and delivery date.

Question 24

The purchase of stationery supplies from a retailer for cash,without an invoice or a receipt being provided in return,is an example of which of the following?

A) an incomplete agreement
B) a formal contract
C) a standard form agreement
D) an informal agreement

Question 25

Which of the following would most likely have the greatest influence in orchestrating the occurrence of an economic breach in a contractual business relationship?

A) seeking methods of maintaining profits when entering into new business relationships
B) taking an intractable position and forcing an ultimate favourable settlement
C) finding practical ways of interpreting contracts to arrive at higher profit margins
D) deciding to secure greater profits through non-performance of an existing contract

Question 26

Traditionally,contract law focuses its attention on the need to preserve long-term business relationships.

Question 27

How should a manufacturer try to salvage its reputation after it has been discovered to have knowingly produced and sold a defective product to the public?

A) Deny any wrongdoing and obtain top lawyers to defend against litigation.
B) Take ownership for the problem and voluntarily compensate affected customers.
C) Hire bloggers to create confusion about the facts on social networking websites.
D) Have a top executive issue an official apology presented on national television.

Question 28

Rachel decides to sell her home,so she meets with several real estate agents.She has decided to select the agent who offered a reduced commission rate and a guarantee that her home will sell within three months without a price reduction.How will Rachel's rights be impacted if she fails to enter into a formal contract with the agent?

A) As long as the agent's promise is witnessed,it will be enforceable.
B) Unless the agent's promise is formalized in a contract,it will not be enforceable.
C) Rachel will be in an ideal situation because then she cannot be forced to fulfill her own promises to the agent.
D) Rachel will not be impacted negatively because real estate agents can be sued for breaching the code of conduct that applies to real estate agents.

Question 29

In most instances,the rules governing contractual disputes are based on the common law.

Question 30

What is the most important factor for a retailer to consider when deciding whether to file a lawsuit against a supplier for a breach of a business contract?

A) the significance of the economic harm caused by the defaulting party's breach
B) the ability to secure an adequate supply of the stock from another supplier
C) the costs associated with obtaining the stock from a different supplier
D) the impact of the lawsuit on the reputation of the defaulting company

Question 31

Individuals who negotiate a contract on behalf of their employer are bound to the contract along with their employer.

Question 32

What sequence of procedures will a court follow when asked to determine a matter involving a contractual dispute between two large corporations?

A) review the conduct of the parties,evaluate the relevant law and the contract terms,then reach a decision
B) evaluate the contract terms and the conduct of the parties,then apply relevant law to arrive at a determination
C) review the relevant law,evaluate the conduct of the parties,then apply the contract terms to arrive at a decision
D) evaluate the conduct of the parties,review the contract terms,then apply the rules of law to arrive at a decision

Question 33

Which of the following statements is true regarding legally enforceable contracts?

A) The agreement must have been witnessed.
B) The agreement must have been in writing.
C) The agreement must have been voluntary.
D) The agreement must have been signed by the parties.

Question 34

Which of the following is an example of a contract that would be governed by legislation and NOT by common law?

A) a contract involving the sale of goods governed by the Sale of Goods Act
B) a contract involving the supply of services governed by the Employment Act
C) a contract retaining a lawyer to perform legal services on behalf of a client
D) a verbal contract involving an exchange of services for a set monetary price

Question 35

What types of employees should a company's head of risk management choose when putting together a negotiating team?

A) executives with highly developed abilities to deceive when necessary in order to secure a favourable agreement
B) experienced individuals who want to win and are willing to bluff and bluff hard to have a successful career
C) individuals with adequate legal knowledge for the negotiation of an enforceable contract that meets needs and protects interests
D) individuals who know the game and are not shy in demonstrating a complete lack of ethical standards

Question 36

What is the likely outcome when a court is asked to resolve a dispute involving parties that have reached an incomplete agreement?

A) The court will decline jurisdiction to provide a remedy derived under contract law.
B) The court will refer to statute law that will be applied to formulate a binding contract
C) The court will lack jurisdiction to refer the issue to alternative dispute resolution.
D) The court will apply the principles of the common law to constitute a binding contract.

Question 37

It is important for a business person to know when simple communications crystalize into legal obligations.

Question 38

All contracts are complex documents that must be prepared by lawyers.

Question 39

When hearing a case,the court will generally assume equality of bargaining power,even though it is not always a valid assumption.

Question 40

Contract law ensures that all parties concerned may rely on the terms included in the contract.

Question 41

Issues can arise in contractual relationships that will require owners and managers to be conscious of the fact that business relationships are long-term,and so is reputation.

Question 42

Identify and briefly describe the necessary elements that must be present in order for a court to recognize a contract as a legally binding agreement.

Question 43

It is a legal assumption in contract law that parties to a contract are able to look out for their own interests.

Question 44

A business should always insist on the strict observance and enforcement of its legal rights.

Question 45

Identify the role that a contract plays in any commercial operation.Provide several examples of what activities a business is able to do through a contract.Identify and briefly explain the role contract law plays with respect to contractual participants and their commercial operations.

Question 46

Identify and briefly explain the circumstances where a party might opt to deliberately breach a contract by refusing to honour its promises to the other side.Provide an example and a possible alternative to an outright breach of existing contractual obligations.

Question 47

Courts will take into account the impact on the long-term relationship between the parties when applying contract law principles.

Question 48

Luna Quan has been directed to attend a meeting tomorrow for the purpose of negotiating a new supply contract.It is vitally important that Luna pay particular attention during those negotiations to when simple business communications transform into legal obligations.

Question 49

An alternative to a contract is a casual understanding between the parties.Explain the disadvantages of casual understandings and outline the advantages of ensuring a business understanding is formalized by a contract.

Question 50

The fact that one party has less bargaining power than the other does not generally affect the enforceability of their concluded contract.

Question 51

Business people regularly breach contracts because the decision to breach a contract is both a business and legal decision.

Question 52

Alberta Carr,in his well-known article published in the Harvard Business Review,encouraged businesspeople to break the law to seek advantage in business negotiations.

Question 53

Explain how the operation of contract law makes it possible for the wheels of commerce to turn efficiently and effectively.

Question 54

Most Canadian jurisdictions require contracts regarding interests in land to be in written form.

Question 55

In order for a court to recognize a contract as a binding agreement between the contracting parties,there must be clear evidence of each party having given something of value in exchange for receiving something of value.

Question 56

Explain the notion of equality of bargaining power and its impact on the operation of contract law.

Question 57

The principle of equality of bargaining power follows the rationale that parties should be able to rely on contractual commitments.

Question 58

Identify and briefly describe the objectives that owners and managers should keep in mind when dealing with a customer who is attempting to expand or restrict an existing contract.

Question 59

What is the primary source of law used by the courts when deciding contract law disputes?