Question 1

On March 6^th, the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group, to give a performance at the Limestone U Students' Union on March 31^st. On March 29^th, the "Stumbling Stones" fell ill with the flu, and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place, and arrived at the Students' Union in time to perform. The contract, by its nature, is not subject to assignment.

Accepted Answer

The statement "the contract, by its nature, is not subject to assignment" indicates that it cannot be transferred to another party, therefore making it true that the contract is not subject to assignment.

Question 2

On March 6^th, the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group, to give a performance at the Limestone U Students' Union on March 31^st. On March 29^th, the "Stumbling Stones" fell ill with the flu, and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place, and arrived at the Students' Union in time to perform. The contract, by its nature, is not subject to vicarious performance.

Accepted Answer

True

Question 3

Mr. Black enters into a contract with Build-It Construction Ltd. for the construction of a house. The house is not built in accordance with the contract. Mr. Black sues Build-It Construction Ltd. seeking $200,000 in damages. He is successful, but discovers that Build-It Construction Ltd. has insufficient assets to satisfy the judgment as it regularly transfers its assets to its parent company Build-It Holding Company Inc. Can Mr. Black collect the $200,000 from Build-It Holding Company Inc.
A) Yes, according to the doctrine of promissory estoppel.
B) Yes, according to the Statute of Frauds.
C) Yes, this is a statutory novation.
D) No, according to the doctrine of privity of contract.
E) No, according to the parol evidence rule.

Accepted Answer

The doctrine of privity of contract states that only the parties to a contract have rights and obligations under it. Therefore, Mr. Black cannot collect the $200,000 from Build-It Holding Company Inc. as it was not a party to the original construction contract.

Question 4

Marion buys a very expensive television set as a gift for her mother. In the store, she explains that it is a gift to reconcile her mother to the fact that she is emigrating to Australia and to give her some company once Marion leaves. Shortly after Marion leaves, the television stops functioning and, despite heroic efforts by the T.V. repairman it never works again. Marion's mother cannot get a refund from the store, so she brings an action for breach of contract.
A) There is no privity of contract between Marion's mother and the store so she would not win a breach of contract suit.
B) Since Marion's mother can show the television is not working and cannot be made to do so, she can prove under the Sale of Goods Act that there has been a breach of the contract with her and she will win.
C) Since the store knew that the television was a gift for her, and Marion cannot enforce the contract because she is in Australia, the judge will treat the contract as one between Marion's mother and the store.
D) B and C.
E) None of the above are true.

Accepted Answer

Marion's mother cannot win a breach of contract suit because there is no privity of contract between her and the store; the contract was between Marion and the store.

Question 5

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa. It designs the project and assigns the construction to Dynamic Construction Ltd. The contract has no provisions regarding assignment. Can Precision make the assignment to Dynamic?
A) No, it can only do a novation.
B) Yes, if it obtains the approval of WaWa.
C) Yes, if it notifies WaWa.
D) Yes.
E) No.

Accepted Answer

Since the contract does not have any provisions regarding assignment, Precision Engineering can make the assignment to Dynamic Construction Ltd. without the need for approval or notification to WaWa. Therefore, option D is the correct answer.

Question 6

Transfer of rights can be accomplished through which of the following:
A) novation, equitable and statutory assignment, and by operation of law
B) novation, equitable and statutory assignment, vicarious performance, and by operation of law
C) novation, by operation of law, and vicarious performance
D) equitable and statutory assignment, vicarious performance, and by operation of law
E) novation, vicarious performance, and by operation of law

Accepted Answer

The answer of Transfer of rights can be accomplished through...

Question 7

Kathy sells her business to Lucy for $40,000 including the stock, the goodwill, and the remainder of the lease. The landlord agrees that Kathy may end her involvement with the leased premises and that Lucy may take over the remainder of the lease on the same terms, and a new lease reflecting this is drawn up and signed by the landlord and Lucy. This new lease is an example of
A) an equitable assignment.
B) a statutory assignment.
C) a novation.
D) a constructive trust.
E) a negotiable instrument.

Accepted Answer

A novation is a new contract that replaces the original contract and releases one party from liability while transferring obligations to another party. In this case, the new lease between the landlord and Lucy replaces the original lease between the landlord and Kathy, and the landlord agrees to release Kathy from any further obligations under the lease while transferring those obligations to Lucy. This is an example of a novation.

Question 8

Carten Printing receives an unexpectedly large order for shipping envelopes from one of its regular clients, a major Canadian CD-ROM retailer. In order to meet the order delivery date, Carten farms out part of the printing to another firm, Serger Printing. Serger, in an attempt to raise its own profit margin on the deal, uses lower grade adhesive and cuts corners on printing quality. The faulty shipping envelopes show up as returns made to the retailer from dissatisfied customers. The retailer takes action against Carten for damages. What is the most likely outcome?
A) The retailer will not succeed against Carten, but will have a right of recovery against Serger.
B) The retailer will succeed against Carten, and Carten will have no right of recovery against Serger.
C) a novation.
D) The retailer will succeed against Carten, and Carten will have a similar right of recovery against Serger.
E) The retailer will have a right of recovery against both Carten and Serger.

Accepted Answer

The retailer's contract is with Carten, making Carten responsible for the quality of the product delivered, regardless of whether Carten subcontracted part of the work. Carten, in turn, can seek recovery from Serger for not meeting the agreed-upon standards, assuming there was an agreement on the quality of work between Carten and Serger.

Question 9

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?
A) Bonds
B) Factoring
C) Indemnification
D) Novation
E) Assignment

Accepted Answer

This method of raising capital is called factoring, where a company sells its accounts receivable to a third-party (collections company or bank) at a discount in exchange for immediate cash.

Question 10

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the
A) beneficiary.
B) trustee.
C) rights holder.
D) guarantor.
E) principal.

Accepted Answer

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the trustee. The other options, such as beneficiary and rights holder, refer to the party who benefits from the trust, not the party holding the property. The guarantor is usually someone who provides a guarantee or surety for something, but not necessarily related to a trust. The principal is a term commonly used in finance and refers to the amount of money borrowed or invested.

Question 11

Simon bought a used yacht from Marvel's Marina and Boatyard for $70,000 to be paid in installments over six years. He traded in his smaller yacht for $10,000 at the same time, but Marvel wanted to keep the two transactions separate for financial reasons and he promised to issue a cheque to Simon for the trade-in. Marvel assigned the $70,000 contract to Strait and Naro Finance (S and N). The first Simon knew of this was when he received copies of both contracts and a notice to pay the payments to S and N. In the situation given, which of the following is most correct?
A) Simon must make the payments to S and N from now on.
B) Simon can make the payments to either Marvel or S and N, and, if he makes them to Marvel, Marvel is obligated to forward them to S and N.
C) Marvel cannot pass its contractual rights to someone else without Simon's agreement.
D) S and N cannot force Simon to pay them since they lack privity of contract with him.
E) C and D.

Accepted Answer

When Marvel assigned the contract to S and N, Simon became obligated to make payments to S and N. Therefore, Simon must make the payments to S and N from now on. Option B is incorrect because once the contract is assigned, Simon must pay the new assignee. Option C is incorrect because Marvel is allowed to assign contractual rights, and in this case, Simon became obligated to make payments to S and N once the contract was assigned to them. Option D is incorrect because S and N are now the rightful recipients of the payments and Simon is obligated to make payments to them.

Question 12

The Block furniture store granted credit to many customers for the purchase of furniture and appliances. It had separate categories for furniture credit and appliance credit. It statutorily assigned its furniture credit to Prestige Financing Inc. and its appliance credit to Gold Stream Financing Ltd. Karim purchased a bed for $700 and a stove for $700 from The Block and received financing for both purchases on the same contract. When The Block's contracts were assigned, Karim's was assigned to both assignees. On Monday it received a notice of assignment from Prestige Financing Inc. and on Tuesday from Gold Stream Financing Ltd. To whom should Karim make his next payment?
A) The Block
B) Gold Stream Financing Ltd.
C) Prestige Financing Inc.
D) 50% to Gold Stream Financing Ltd. and 50% to Prestige Financing Inc.
E) Karim should not make a payment.

Accepted Answer

Since The Block statutorily assigned its furniture credit to Prestige Financing Inc., Karim should make his payment to Prestige Financing Inc. Gold Stream Financing Ltd. cannot claim the payment for the purchase of the bed since it was assigned to Prestige Financing Inc.

Question 13

On March 6^th, the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group, to give a performance at the Limestone U Students' Union on March 31^st. On March 29^th, the "Stumbling Stones" fell ill with the flu, and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place, and arrived at the Students' Union in time to perform. The privity of contract rule would entitle the Limestone Students' Society to reject the substitute rock group, and prevent them from performing.

Accepted Answer

The answer of On March 6^th, the Limestone Student Society...

Question 14

Having made it clear that she would not buy any tractor that had been involved in a fatal accident, and having been assured that the one she chose had never been in such an accident, Shelly bought a tractor from Cornfeldt's Farm Machinery for $15,000 under a conditional sales contract. Cornfeldt assigned the contract to Titewood Finance which gave proper notice of the assignment to Shelly. Shortly after, Shelly found out that this tractor had rolled over on another farmer and killed him, so she immediately returned the tractor to Cornfeldt and demanded a refund because of the misrepresentation. The salesman had known of the accident when he sold the tractor to her.
A) Shelly can get her money back but she has no right not to pay Titewood and must continue to do so.
B) Titewood took the assignment subject to the equities and any defence to a suit for non-payment launched by Cornfeldt would also be a defence to a suit for non-payment launched by Titewood.
C) Shelly can get her money back and does not have to pay Titewood.
D) Titewood can get its money back from Cornfeldt even though there was no misrepresentation to Titewood.
E) B, C and D.

Accepted Answer

Shelly can get her money back due to the misrepresentation, and Titewood, having taken the assignment subject to the equities, cannot enforce payment against Shelly. Titewood can seek reimbursement from Cornfeldt due to the misrepresentation.

Question 15

On March 6^th, the Limestone Student Society entered into a contract with the "Stumbling Stones," a rock group, to give a performance at the Limestone U Students' Union on March 31^st. On March 29^th, the "Stumbling Stones" fell ill with the flu, and were unable to travel to Limestone City. Another rock group was contacted by the Stumbling Stones to appear in their place, and arrived at the Students' Union in time to perform. The Limestone Student Society must allow the substitute rock group to perform by virtue of the legal doctrine of vicarious performance.

Accepted Answer

The given statement is incorrect. The legal doctrine of vicarious performance applies when a party provides a substitute performer to fulfill their obligations under a contract, but in this case, it was the Stumbling Stones who provided a substitute. The Limestone Student Society is not obligated to allow the substitute rock group to perform unless it is agreed upon by both parties in a separate contract or agreement.

Question 16

Simon bought a used yacht from Marvel's Marina and Boatyard for $70,000 to be paid in installments over six years. He traded in his smaller yacht for $10,000 at the same time, but Marvel wanted to keep the two transactions separate for financial reasons and he promised to issue a cheque to Simon for the trade-in. Marvel assigned the $70,000 contract to Strait and Naro Finance (S and N). The first Simon knew of this was when he received copies of both contracts and a notice to pay the payments to S and N. Assume there was a valid assignment. Simon still has not received the $10,000 and, when he calls Marvel, he finds the Marina has been sold to someone else and Marvel's whereabouts is unknown. He has a copy of the trade-in contract.
A) Simon can try to find Marvel and get his money from him but he must pay S and N.
B) Simon may deduct $10,000 from what he owes S and N and make payments to them totaling $60,000.
C) S and N must try to find Marvel and get the $10,000 from him, but if they cannot, Simon must pay them.
D) A and C.
E) B and C.

Accepted Answer

The answer of Simon bought a used yacht from Marvel's...

Question 17

Hammond sells her house to Mendoza for $165,000 subject to a mortgage from Imperial Bank for $90,000. Hammond's mortgage had been arranged at a time when interest rates were low, and prevailing interest rates are now much higher. Mendoza would very much like to assume Hammond's obligation to pay under the existing mortgage, rather than arrange a more costly replacement from his own banker. Imperial Bank is indifferent as to who is repaying the debt as Mendoza is just as acceptable a credit risk as was Hammond. Mendoza pays Hammond the $75,000 difference and takes over both the house and her mortgage. This arrangement is an example of
A) a statutory assignment.
B) a chose in possession.
C) an equitable assignment.
D) a constructive trust.
E) a novation.

Accepted Answer

This arrangement is an example of a novation, where a new contract replaces an old one, with the consent of all parties involved, including the bank. In this case, Mendoza assumes Hammond's mortgage obligations under a new agreement, with the bank's consent.

Question 18

Acme Engineering needed cash and on March 14^th assigned a block of its accounts receivable to Wellington Finance Company. On March 21^st, it assigned another block to Bristol Finance Company. By an oversight, the second block contained an account, a receivable from Smith, which Acme had already assigned to Wellington. The notice of assignment from Bristol arrived at the Smith offices on March 24^th, and Wellington's notice arrived on March 28^th. What is the most correct action that Smith should take? A) Pay any demand of Acme made on March 16^th or 23^rd; pay any demand of Bristol on or after March 24^th. B) Pay any demand of Acme made on March 13^th; pay any demand of Wellington on or after March 28^th. C) Refuse to pay all Wellington demands. D) Refuse to pay all Acme demands made after March 24^th. E) A, C, D.

Accepted Answer

The answer of Acme Engineering needed cash and on March...

Question 19

Luxury Homes Ltd. contracts with Eliza to build her house. The electrical work is completed by Firefly Electric Ltd. under a contract it entered into with Luxury Homes Ltd. The electrician was Wilbur, an employee of Firefly. Eliza moves into the house and three months' later it burns to the ground as a result of faulty wiring. Who can Eliza sue for breach of contract?
A) Luxury Homes Ltd.
B) Firefly Electric Ltd.
C) Wilbur
D) Luxury Homes Ltd., Firefly Electric Ltd. and Wilbur
E) Firefly Electric Ltd. and Wilbur

Accepted Answer

Eliza can sue Luxury Homes Ltd. for breach of contract because her contract was directly with Luxury Homes Ltd., not with the subcontractor (Firefly Electric Ltd.) or the employee (Wilbur).

Question 20

Sylvia obtained a full release from the payment of her car loan when she gave the car to her friend, Victoria, who agreed to make all the remaining payments. The arrangement was acceptable to the bank that had made the loan. The bank cancelled the loan and replaced it with one in Victoria's name. This is
A) an example of a chose in possession.
B) an example of a chose in action.
C) a novation.
D) a guarantee.
E) an equitable assignment.

Accepted Answer

This is a novation, which is a type of contract where the original contract is replaced with a new one, with a new party taking over the obligations and rights of the original party. In this case, the original car loan contract was replaced with a new one in Victoria's name, effectively releasing Sylvia from her obligation to the bank.

Quiz 12: Performance of Contractual Obligations

Precision Engineering receives a contract to design and build a sewage treatment plant from the town of WaWa. It designs the project and assigns the construction to Dynamic Construction Ltd. The contract has no provisions regarding assignment. Can Precision make the assignment to Dynamic?

Transfer of rights can be accomplished through which of the following:

Businesses may raise capital by assigning its existing accounts receivable to a collections company or bank in return for an immediate lump-sum percentage payment. What is this method of raising capital called?

The party who holds property for the benefit of another under a trust agreement or arrangement is known as the