Question 1

In what way is a void contract different from a voidable contract?

Accepted Answer

A void contract is one that is invalid from the beginning due to a fundamental defect, such as illegality or lack of capacity of one of the parties. It is of no force or effect and cannot be enforced by either party. On the other hand, a voidable contract is initially valid and enforceable, but may be cancelled or avoided by one of the parties due to defects such as mistake, fraud, undue influence, or lack of capacity.

Question 2

In recent Alberta and Ontario appellant court decisions, the courts have regarded unconscionability as involving a four-step procedure. Which of the following will a judge now recognize as an additional step to be considered over and above the traditional two-step procedure?

Accepted Answer

B

Question 3

What is the definition of the legal term "voidable contract"?

Accepted Answer

A voidable contract is a contract that is initially valid but may be rescinded or voided by one or both parties due to some legal defect, such as fraud, misrepresentation, duress, undue influence, or a mistake. The party who has been wronged has the option to either enforce the contract or void it.

Question 4

Which of the following would immediately let you know that a contract contains an element that would cause a court to hold that the contract is unenforceable?

Accepted Answer

An inequitable relationship between the parties, such as a situation where one party has significantly more bargaining power than the other, would indicate that the contract may not have been entered into voluntarily or with mutual consent, which could render it unenforceable.

Question 5

In the case of Bank of Montreal v. Duguid (2000), 47 O.R. (3d) 737 (C.A.), the court was asked to consider whether a wife who had signed a guarantee on a loan for her husband's business was entitled to be released from the guarantee on the basis of undue influence exerted by her husband. Why did the majority of the court find that the guarantee was enforceable against the wife?

Accepted Answer

The answer of In the case of Bank of Montreal...

Question 6

A sales representative knowingly entered into a contract for an alarm system during a door-to-door sales campaign with an obviously mentally ill individual. Why could the contract be immediately rendered voidable at that individual customer's request?

Accepted Answer

The individual's mental illness may have made them unable to comprehend the terms of the contract and therefore establish true consent. This would render the contract voidable at the individual's request.

Question 7

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?

Accepted Answer

The answer of Even though Dalbert knew Rahim had consumed...

Question 8

What exerts the greatest influence on the law's focus on the enforcement of a contract after negotiations are complete and the formal contract is executed?

Accepted Answer

The preservation of the integrity, predictability, and reliability of contractual relationships exerts the greatest influence on the law's focus on the enforcement of a contract after negotiations are complete and the formal contract is executed. This means that the law seeks to uphold the terms of the contract as agreed upon by the parties, in order to maintain the stability and trustworthiness of contract law as a whole.

Question 9

Cory, aged 17, plays hockey under contract with the Northern Manitoba Huskies junior hockey team. What is the legal term given to this particular type of contractual arrangement?

Accepted Answer

A beneficial contract of service is a contract in which a minor provides services in exchange for compensation. In this case, Cory is playing hockey for the team in exchange for a contract. Option A and D are not correct because they do not specifically address the type of contract in question. Option B is not correct because it does not accurately describe the nature of the contract as being one of service.

Question 10

While negotiating a commercial agreement, Juan made a misrepresentation that goes to the heart of the ensuing formal contract between the parties. How do you think the other party to the contract will act, once it becomes aware of the misrepresentation?

Accepted Answer

The other party may opt to enforce the contract or have it set aside, depending on the severity of the misrepresentation and whether it goes to the heart of the agreement. If the misrepresentation is deemed to be material, the other party may choose to have the contract set aside and pursue legal action for damages. Alternatively, if the misrepresentation can be remedied through renegotiation or amendment of the contract, the other party may choose to enforce the agreement. Seeking legal advice may also be a prudent step for the other party to take. Mediation may be an option if both parties are willing to work towards a mutually beneficial resolution.

Question 11

How will a court that hears a matter involving one party allegedly taking advantage of another party's unsophistication in relation to commercial matters arrive at a determination as to whether such an advantage actually existed?

Accepted Answer

In cases involving unsophisticated parties, courts often apply the doctrine of presumed undue influence, where the burden shifts to the more powerful party to prove that there was no undue influence or pressure.

Question 12

Holding a gun to someone's head to induce them to enter a contract exemplifies which of the following legally exceptional circumstances?

Accepted Answer

The scenario described in the question is an example of undue influence resulting from actual pressure. Undue influence refers to the exercise of improper pressure or persuasion by one person upon another, with a view to inducing that person to enter into a contract. In this case, the gun held to the person's head would be considered actual pressure, rather than presumed pressure as in the case of unconscionability or misrepresentation.

Question 13

What is the definition of "undue influence" with respect to contractual relationships?

Accepted Answer

Undue influence refers to unfair manipulation that compromises someone's free will in the contractual relationship. It can involve a variety of tactics, such as coercion, persuasion, or pressure that interfere with the contracting party's ability to make an independent and voluntary decision.

Question 14

Which of the following would affect the status of a contract entered into by a minor upon that individual attaining the age of majority?

Accepted Answer

Upon reaching the age of majority, a minor can choose to ratify a contract, which means they accept and confirm the contract, making it binding.

Question 15

The case of Atlas Supply Co. of Canada v.Yarmouth Equipment (1991), 103 N.S.R. (2d) 1 (N.S.C.A.) disallowed the reliance on the defendant's exclusion clauses to prevent evidence of the plaintiff's reliance on misleading information provided by the defendant. The dissenting appellant court judge cautioned against setting aside business deals such as this one. What was the dissenting appellant court judge advocating by taking this position?

Accepted Answer

The dissenting appellant court judge in the case of Atlas Supply Co. of Canada v. Yarmouth Equipment was advocating that bad faith misrepresentations should not be an acceptable legal commercial negotiating practice as it could have negative consequences on business deals. The judge did not specifically mention protection for small businesspeople or multinational businesses being disadvantaged.

Question 16

Why is it necessary for Canadian law to grant children and mentally ill individuals special legal protection?

Accepted Answer

The answer of Why is it necessary for Canadian law...

Question 17

In the case of Atlas Supply Co of Canada v. Yarmouth Equipment (1991), 103 NSR (2d) 1 (CA), the court considered whether a franchise agreement was unconscionable and therefore unenforceable because financial projections given by the franchisor were overly optimistic. Why did the court find that the contract was unconscionable?

Accepted Answer

The answer of In the case of Atlas Supply Co...

Question 18

What are the elements of importance emphasized by contract law as it pertains to the legal capacity to form contracts?

Accepted Answer

Contract law emphasizes the importance of consent and voluntariness when it comes to the legal capacity to form contracts. This means that all parties involved in the contract must agree to the terms of the agreement without any coercion or undue influence. Offer and acceptance and essentials of a contract are important components of contract law, but they do not pertain specifically to the legal capacity to form contracts. Immunity from liability is not a consideration in the formation of contracts, but rather a potential consequence of contractual obligations being met.

Question 19

Where circumstances surrounding a proposed commercial transaction involve an unsophisticated party, what would a court most likely accept as undisputable evidence that that party has proceeded with the transaction on a free and informed basis?

Accepted Answer

A certificate of independent legal advice would be the most reliable evidence that an unsophisticated party has proceeded with a transaction on a free and informed basis. This certificate indicates that the party has had the opportunity to consult with an independent lawyer who has advised them on the nature of the transaction and its potential consequences. This helps to ensure that the party has not been taken advantage of due to their lack of experience or knowledge in the matter. The other choices do not accurately convey the same level of assurance that an independent legal advice certificate does.

Question 20

In contract law, the presence of which of the following elements would immediately alert a court to the possibility that an agreement may be voidable due to duress?

Accepted Answer

The use of a threat of physical harm is a classic example of duress, which is a situation where one party is coerced into entering a contract due to fear or pressure. Courts are likely to view such contracts as voidable because they do not reflect the genuine agreement of both parties.

Quiz 8: Non Enforcement of Contracts