Law Midterm 2

Leigh Miller operates a coffee shop called Coffee Crazed in a trendy area of town. She wants to change coffee suppliers and recently met with Juan Carlos, a sales representative for Columbia Coffee Beans Wholesale Supply Ltd., to discuss the company's products and prices. She agrees orally to purchase a two-year supply of coffee beans. She wants to reduce the agreement to writing. Which of the following is not an essential term of the contract as required by the Statute of Frauds? a. price of the coffee beans. b. adequate description of the beans being purchased. c. the colour of the boxes the coffee beans will be shipped in. d. identity of the parties. e. they are all essential terms of the contract

C Diff: 3 Type: MC Topic: Requirements for a Written Memorandum Skill: Applied 25

Regarding misrepresentation in a sale of land, a. the purchaser must take it with all its faults. b. all defects must be revealed. c. rescission is liberally given for misrepresentation. d. caveat emptor. e. the seller is required to disclose all interests in ownership.

a Diff: 1 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Recall 56

You innocently have made some misstatements that others are relying on. Legally speaking, you can change your situation from innocent misrepresentation into one of fraudulent or negligent misrepresentation by a. doing nothing when you learn about the truth. b. immediately trying to set things right. c. trying to mitigate the situation. d. filing a writ of claims with the court. e. letting the other party know you were in error.

a Diff: 1 Type: MC Topic: Misrepresentation and Torts Skill: Recall 40

Which of the following is NOT one of the kinds of conduct that must be established by a party who seeks to enforce an agreement, under the Sale of Goods Act, that is not in writing? a. the provision of consideration b. acceptance by the buyer c. actual receipt of the goods by the buyer d. part payment tendered by the buyer and accepted by the seller e. something by way of earnest given by the buyer to the seller

a Diff: 1 Type: MC Topic: Requirements of the Sale of Goods Act Skill: Recall 23

The domination of one party over the mind of another to such a degree as to deprive the latter of the will to make an independent decision is a. undue influence. b. domination. c. supervision. d. control. e. being pushy.

a Diff: 1 Type: MC Topic: Undue Influence Skill: Recall 28

George owes Michael Moneybags $1000. Susan, George's sister, goes to Michael Moneybags and makes this statement: "I shall pay the debt of my brother." This statement is a. a promise of indemnity. b. a promise of guarantee. c. a misrepresentation. d. a promise of guarantee and indemnity. e. a representation.

a Diff: 2 Type: MC Page Reference: 190 Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 11

Both rescission and damages are available remedies for misrepresentation only when the misrepresentation is a. fraudulent or negligent. b. innocent or fraudulent. c. innocent only. d. innocent, negligent, and fraudulent. e. innocent or negligent.

a Diff: 2 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Applied 41

Jonathan sells crates of tomatoes on board the SS Apapa to Margaret. At the time of the sale, both parties are unaware that the crates were washed overboard. What is the status of the contract between Jonathan and Margaret? a. Jonathan is still the owner of the shipment. Jonathan bears the loss and will have to refund Margaret's money. b. Margaret has to pay the agreed price and recover from her insurance. c. The ownership passed to Margaret, but Jonathan is still in possession, and so he is liable. d. Margaret is the new owner of the tomatoes and has to bear the loss. e. Margaret may sue Jonathan for the tort of deceit.

a Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 25

James says to Jack, "I am selling my Toyoda for $500. Would you like to buy it?" Jack, believing that James was referred to his automobile, replies, "Yes, I'll buy your Toyota for $500." Jack pays $500 and James presents him with a Japanese doll called Toyoda. Jack asks for his money back because he misunderstood James. Should this matter go to court, the court will most likely find that a. no contract arose because a reasonable person would not believe that James would offer to sell his car for $500. b. Jack's refusal to pay is a breach of contract. c. there is a binding contract for the sale of the Toyoda because that is what James meant when he made the offer. d. there is a binding contract for the sale of the Toyota car because James should have made it clear what he was selling. e. there is a binding contract for the sale of the Toyota because that is the offer Jack believed he was accepting.

a Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 17

Rectification will be ordered where a. there is a complete unambiguous agreement that was recorded incorrectly. b. the parties wish to change certain terms in the contract. c. one of the parties to the contract lacks legal capacity. d. the offeror misrepresented certain facts. e. the wrong party performs the contract.

a Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 21

Use the fact situation in Q4 to answer the related question that follows. Based on the fact situation above, to ensure that A's argument succeeds and he gets the house from B, A will ask the court for a. rectification. b. an injunction. c. rescission. d. specific performance. e. damages.

a Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 6

Use the fact situation in Q15 to answer the related question that follows. In Fact Situation 2, in a lawsuit by Gus to get ownership of the land, a. Gus will succeed by virtue of the doctrine of part performance. b. Gus will not succeed because the agreement between Dick and Gus is unenforceable under the Statute of Frauds. c. Gus will not succeed because the agreement between Dick and Gus is void under the Statute of Frauds. d. Gus will not succeed, but will be entitled to a quantum meruit claim for the work and services he did for Dick. e. the agreement between Dick and Gus does not contain all the essential terms necessary to create a binding agreement.

a Diff: 2 Type: MC Topic: The Doctrine of Part Performance Skill: Applied 17

In contract law, a mistake is a. an error about the terms of the contract, or the assumptions regarding important facts related to the contract. b. the threat of physical or economic harm that results in a contract. c. a false statement made by one party that causes someone to enter a contract. d. unfair manipulation that compromises someone's free will. e. an error of judgment about the benefits of a contract.

a Diff: 2 Type: MC Topic: The Narrow Meaning of Mistake Skill: Recall 18

A makes a contract under which B Company is to repair and repaint A's pier. Under the contract, A has the right to specify the materials to be used. B Company induces A to specify the use of a particular paint that it made, giving A assurances of its quality. The paint is supplied by B Company, but it is found to be unsuitable, and A has to spend $40 000.00 to correct the matter. In a lawsuit by A against B, a. the court will find that the inducement of the quality of paint was a collateral contract that formed the consideration for the main contract to repair and repaint A's pier. b. the court will find that B Company's inducement of the quality of the paint was a mere invitation to treat and nothing more. c. the court will be unable to get around the parol evidence rule and A will lose her or his law suit. d. the court will find that A should have ensured that the inducement of the quality of the paint was put into the written contract. e. the court will find that B Company's assurances about the quality of the paint is a condition precedent to the contract.

a Diff: 2 Type: MC Topic: The Parol Evidence Rule Skill: Applied 33

Scott, an independent businessman, is asking his wife to pledge her inherited family homestead towards a business loan he has arranged at the bank. She seems perfectly willing to do this. Yet, to avoid a possible later legal claim of undue influence by Scott's wife, which would be wisest for the bank to do? a. have Scott's wife get independent legal counsel b. explain very carefully what would transpire c. place all transactions under seal d. have the wife sign a paper to the effect that she was not unduly influenced e. have Scott's lawyer thoroughly explain to Scott's wife the legal implications

a Diff: 2 Type: MC Topic: Undue Influence Skill: Recall 60

in 30 days. Two days later, John gives Mary a note saying, "I know that you are buying the land to develop it." Five days after this, John tells Mary he has changed his mind and refuses to sell her the land, and Mary accepts this. In a lawsuit by Mary to recover her deposit, a. the deposit will be recoverable on the basis of a total failure of consideration. b. the deposit will not be recoverable because the time for completion has not yet occurred. c. the deposit will not be recoverable because the agreement is not in writing. d. the deposit will be recoverable because Mary has done nothing wrong. e. none of the above

a Diff: 3 Type: MC Topic: Requirements for a Written Memorandum Skill: Applied 14

Use the fact situation in Q15 to answer the related question that follows. Review Fact Situations 1 and 2. What is the difference between them? a. In Fact Situation 1, John's performance is strictly referable to 121 Thornton Lane, while in Fact Situation 2, Gus's performance is not strictly referable to Dick's farm. b. In Fact Situation 1, the essential terms of the agreement are not present, but they are present in Fact Situation 2. c. In Fact Situation 1, John's performance is not strictly referable to 121 Thornton Lane, while in Fact Situation 2, Gus's performance is strictly referable to Dick's farm. d. In Fact Situation 1, all of the essential terms of the agreement are present, but they are not present in Fact Situation 2. e. There is no difference between the two fact situations.

a Diff: 3 Type: MC Topic: The Doctrine of Part Performance Skill: Applied 18

A enters into an oral contract under which A is to sell his land to B, and B gives A a deposit of $100 000.00. B now changes his mind and wants his deposit back from A. In an action by B to recover the deposit, a. A can raise the validity of the agreement as a defence to B's action. b. A cannot use the validity of the agreement as a defence to B's action. c. A cannot use the validity of the agreement as a defence to B's action because the agreement is unenforceable. d. B cannot sue A at all because the contract is unenforceable to B's action. e. none of the above

a Diff: 3 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 13

When will the courts presume that there has been undue influence in the signing of a contract that favours the dominant party? a. Where the parties stand in a special relationship to each other; one party possessing a special skill, position or knowledge causing the other to place confidence and trust in him, the one against whom the undue influence is alleged. b. In all contracts made between a husband and wife. c. The courts will never presume undue influence. The party alleging undue influence must always prove it has occurred. d. Only when the contract is oral. e. none of the above

a Diff: 3 Type: MC Topic: Undue Influence Skill: Applied 31

Damages are not generally awarded in cases of innocent misrepresentation; however, "out-of-pocket" expenses might be awarded. These are referred to as a. expense benefits. b. compensation or indemnity. c. trivial damages. d. an expense supplement. e. rescission expenses.

b Diff: 1 Type: MC Page Reference: 176 Topic: Consequences of Misrepresentation in Contracts Skill: Recall 46

An innocent party can lose her or his right to repudiate a contract made with undue influence by a. declaring that the special relationship between the parties no longer exists. b. not repudiating promptly after coming out from under the undue influence. c. tearing up the contract before its execution. d. physical retaliation after the contract's formation. e. reversing the role of the dominant party.

b Diff: 1 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Recall 57

Linda took out a new auto insurance policy. She signed without reading each of the papers presented to her by the agent. What she didn't realize was that the insurance only covered accidents on "public roads." This term in no way was brought to her attention nor explained. A few days later she got into a serious accident in a large housing development where the roads had not as yet been turned over to the municipality. The insurance company refused to pay the claim. Can Linda get damages under misrepresentation? a. Yes, she can, since Linda is fully aware of the distinction between public and private. b. Yes, she can, since this is an example of misrepresentation by omission. c. No, she can't, because Linda is presumed to have read and understood the document. d. Yes, she can, since the terms correspond to commonly understood principles. e. No, she can't, because this is a standardized document that has been fully approved.

b Diff: 1 Type: MC Topic: Silence as Misrepresentation: Contracts Requiring Disclosure Skill: Recall 50

The substance of a contract may have a variety of a. statutes. b. forms. c. parties. d. attributes. e. beneficiaries.

b Diff: 1 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall 2

Under the Statute of Frauds, a "promise to answer for the miscarriage of another" has been interpreted to mean a. a promise to pay for goods not paid for by a purchaser. b. a promise to pay for the injury caused by the tort of another. c. a promise to perform a contract that has been breached by another. d. a promise to pay for the injury caused by the tort of another and a promise to perform a contract that has been breached by another. e. a promise to settle a debt owed by another.

b Diff: 1 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Recall 21

With the issue of undue influence, what must the victim do to shift the burden of proof to the dominant party? a. show the unfairness of the bargain b. show that circumstances likely were to lead to undue influence c. show there was "constructive fraud" d. indicate how the decision would be different without the influence e. give prima facie evidence

b Diff: 2 Type: MC Page Reference: 180 Topic: Undue Influence Skill: Recall 58

Use the fact situation in Q33 to answer the related question that follows. Referring to the above fact situation, in a lawsuit by Alice against Marvin, Alice will seek a. damages in tort. b. rescission in contract and damages in tort. c. damages in contract. d. rescission in tort. e. rescission in contract.

b Diff: 2 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Applied 36

At common law, a mistake by an innocent party as to the identity of the other party usually involves a. a mistaken assumption. b. fraud. c. the element of surprise. d. an ambiguous term. e. the element of risk.

b Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 13

When a court grants rectification of a contract, it a. declares a contract to be unenforceable. b. changes the part of the document that was incorrect in the written document. c. sets aside the contract. d. declares the contract to be voidable. e. interprets the contract for the parties.

b Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 22

A pleas of non est factum a. is applicable only where both parties have made a mistake. b. means it is not my doing. c. is not a good defence against third parties. d. means the contract is not correct. e. can only be raised if there is a misrepresentation.

b Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 23

A agrees to buy a share in B's invention for a certain sum on the condition that C first approves the invention. However, the written contract makes no reference to C's approval. C never gives his approval. B now sues A for the purchase price. In this situation, a. whether or not C gives his approval is not relevant to the main contract between A and B. b. C's approval is a condition precedent that must be met before there is a contract between A and B c. the parol evidence rule applies to exclude the condition of C's approval. d. C's approval would be a warrantee used to overcome the parol evidence rule. e. A cannot rely on C's approval as a condition to the contract with B, because C is not a party to the contract.

b Diff: 2 Type: MC Topic: The Parol Evidence Rule Skill: Applied 32

George owes Michael Moneybags $1000. Susan, George's sister, goes to Michael Moneybags and makes this statement: "If my brother is unable to pay, I shall make payment." Susan's statement is a. a representation. b. a promise of guarantee. c. a promise of indemnity and a promise of guarantee. d. a promise of indemnity. e. a misrepresentation.

b Diff: 2 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 10

Cindy bought a car from Ben, who had bought it from John. When Ben bought the car, John lied to Ben and told him that the car had a new engine. As a result, believing that the engine was new, Ben told this to Cindy. Before she bought the car, Cindy had her mechanic inspect it and when Cindy asked him about the engine, he got her car confused with another customer's car and told her that it did indeed have a new engine. Cindy, who has owned the car for two months, has just discovered that the engine is not new and will need to be replaced soon. What remedy or remedies would Cindy most likely be entitled to and why? a. rescission only from Ben for breach of contract b. damages from the mechanic for negligent misrepresentation c. rescission and damages from Ben for fraudulent misrepresentation d. rescission from the mechanic for negligent misrepresentation e. damages only from Ben for fraudulent misrepresentation

b Diff: 3 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Applied 47

It has often been said that by defeating the reasonable expectation of the parties, the Statute of Frauds promotes a. certainty and predictability. b. more frauds than it prevents. c. guarantees and indemnities. d. good faith bargaining. e. binding contractual relations.

b Diff: 3 Type: MC Topic: The Statute of Frauds Skill: Recall 6

An innocent party can lose her or his right to repudiate a contract formed as a result of undue influence by a. physical retaliation after the contract's formation. b. not repudiating promptly after being freed from the domination. c. tearing up the contract before its execution. d. reversing the role of the dominant party. e. declaring that the special relationship between the parties no longer exists.

b Diff: 3 Type: MC Topic: Undue Influence Skill: Recall/Applied 4

Brandy wants to buy a car. Her credit rating will not allow her to borrow from a bank, so she goes to a private lender. This lender asks her to sign a contract that has lots of restrictive terms, which he rushes by without explaining or allowing her to read them. What is the issue? a. innocent misrepresentation b. undue influence c. misrepresentation by omission d. fraudulent misrepresentation e. duress

c Diff: 1 Type: MC Topic: Signed Documents and Misrepresentation by Omission Skill: Applied 51

The Statute of Frauds a. requires that contracts with minors be in writing. b. prevents contracts with minors. c. renders unenforceable certain types of contracts unless they are in writing. d. is an English law that does not apply in Canada. e. renders unenforceable contracts with minors.

c Diff: 1 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall 7

The doctrine of part performance as it relates to the Statute of Frauds means that a. if the plaintiff can show that it has partly performed a contract, then the defendant will have to pay for the portion of the contract performed. b. a defendant who partly performs an oral contract is entitled to enforce the oral contract. c. if a plaintiff can show that he or she has partly performed an oral contract concerning land in reliance on the contract, the court will accept the part performance as evidence of the contract in place of the written contract. d. a plaintiff who partly performs an oral contract is entitled to rely on such performance as evidence of the contract. e. if a plaintiff can show that he or she has performed part of any oral contract, the court will accept such part performance as evidence of the contract in place of the written contract.

c Diff: 1 Type: MC Topic: The Doctrine of Part Performance Skill: Recall 22

A guarantee is a. a promise to be primarily liable for the debt of a debtor. b. a promise to enter into an agreement when a debtor defaults. c. a promise to pay only if the debtor defaults. d. a promise to purchase goods. e. a promise to add one's signature to a legal document.

c Diff: 1 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Recall 20

Jaime has agreed to buy Steve's 4x4 truck. When Steve used the truck last, it ran quite well, so he says "it is in good condition." Unfortunately, the truck sat in the humid weather for some time and the head gasket had rotted away to where the truck won't run. What, legally, should Jaime do? a. nothing, since statements of opinion do not amount to misrepresentation b. sue for breach; the contract was corrupted by undue influence c. promptly demand rescission of the contract d. sue for fraudulent misrepresentation e. nothing, since this is a clear case of caveat emptor

c Diff: 2 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Recall/Applied 43

Use this fact situation to answer the related questions that follow it. John lives with his wife, Mary, and regularly beats her, leaving Mary in a constant state of fear when John is around. John needs to borrow some money for his business, and so he goes to his bank and meets with the manager, who agrees to loan him the money, but only if both John and his wife sign a guarantee of the loan. John signs the guarantee in front of the manager and then takes it home to be signed by Mary. At home, John tells Mary to sign the guarantee "or else you know what will happen to you," so Mary signs the guarantee. Mary's signing the guarantee under these circumstances is a classic example of a. assault. b. fraud. c. duress. d. undue influence. e. diminished capacity.

c Diff: 2 Type: MC Topic: Duress Skill: Applied 32

Albert has agreed to sell his car to Larry for $14 000.00. Albert told Larry that the car had never been in an accident, was in good condition, and drove like a dream. Albert knew that this was untrue, but wanted to get as much money as he could for the car. In fact, the car had been in two accidents, had substantial frame damage, and could not be driven safely on the road. Assume that Harry had no way of checking on the condition of the car and that the principle of caveat emptor does not apply. In this situation, Albert's statement about the car is a. a negligent misrepresentation. b. an innocent misrepresentation. c. a fraudulent misrepresentation. d. a mere invitation to treat. e. none of the above

c Diff: 2 Type: MC Topic: Misrepresentation and Torts Skill: Recall/Applied 44

If, at the time a contract was made, the subject matter did not exist, without the knowledge of the seller, the contract is a. a mistake in terms of fact and not assumption. b. subject to the tort of deceit. c. void, according to the Sale of Goods Act as well as under the common law. d. valid; the purchaser stands the loss. e. voidable at the option of the court.

c Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Recall 27

In executing its discretion to grant relief when a party makes a mistake about terms, a. the court will correct the document. b. the court will determine the burden of proof. c. the court will consider the hardship that will be suffered by each party. d. the court will adopt the position of the plaintiff. e. the court will determine each party's interpretation of the terms.

c Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Recall 3

A agrees to buy 1000 shares in a telephone company from B for $3.00 a share. A believes that the value of the shares in the company is going to go up to $15.00 in a day or two. However, B believes that the value of the shares is going to go down to $1.50 and wants to get as much money as he can. Unknown to either A or B, at the time of the agreement, the value of the company and thus the shares has dropped below $1.50, to $0.75. A now wishes to get out of the agreement. In this case, a. A will succeed because A was mistaken about the value of the shares in the company and has been adversely affected. b. A will succeed because there was a mistake as to the subject matter of the contract and A has been adversely affected. c. A will not succeed because A was adversely affected and took a risk about the company and the value of its shares. d. A will succeed because a change in circumstances of the company does not affect the agreement. e. A will not succeed because both A and B took a risk about the value of the shares in the company.

c Diff: 2 Type: MC Topic: Mistakes in Assumptions Skill: Applied 8

Allan and Nora enter into an oral agreement for the sale of Allan's land to Nora for a price to be decided on later, and Allan sends Nora a written memorandum setting this out. In the memorandum Allan goes on to state that settling on the price of the land is very important. In a lawsuit by Nora to get the land, a. Nora will succeed on a quantum meruit basis. b. Nora will not succeed since the memorandum is not sufficient compliance with the Statute of Frauds. c. Nora will not succeed since the essential terms of the contract are not present. d. Nora will succeed since the essential terms of the contract are present. e. Nora will succeed since the memorandum is sufficient compliance with the Statute of Frauds.

c Diff: 2 Type: MC Topic: Requirements for a Written Memorandum Skill: Applied 15

In law, "utmost good faith" means a level of trust in a. not using undue influence. b. not making false assertions. c. disclosing all pertinent information concerning the contract. d. only giving factual statements. e. being aboveboard with all affairs.

c Diff: 2 Type: MC Topic: Silence as Misrepresentation: Contracts Requiring Disclosure Skill: Recall 52

Paul, a poor farmer, has just learned he has a serious medical problem. The medication needed is extremely expensive and not covered by medical insurance. Hearing of his plight, the next-door neighbour offers to buy Paul's prize steer, but at half its value. Paul feels he has no choice but to sell the steer, because he needs the money, so he agrees to sell it for half its value. Legally speaking, what has this neighbour done? a. failed to act in the "utmost good faith" b. committed a morally objectionable, yet perfectly legal, act c. exerted undue influence over Paul d. coerced Paul into selling under duress e. exploited a "special relationship"

c Diff: 2 Type: MC Topic: Undue Influence Skill: Recall/Applied 59

Contracts between parties of unequal bargaining power that are unfairly advantageous to the powerful parties have long been considered a. bilateral contracts and void. b. unilateral contracts and voidable. c. unconscionable contracts and voidable. d. non est factum. e. contrary to the Criminal Code of Canada.

c Diff: 3 Type: MC Topic: Consumer Protection Skill: Applied 2

Mistake about terms does NOT include a. the attribution by the parties of different meanings to words used in a contract. b. errors that are made in the recording of an agreement between parties. c. the error of judgment that a party makes when he or she enters into a bad contract. d. misunderstandings about the meanings of words used in a contract. e. words used inadvertently in stating the terms of a contract.

c Diff: 3 Type: MC Topic: Mistakes About the Terms Skill: Applied 16

The plaintiffs were growers of oranges in Spain and the defendants were ship owners. The plaintiffs wished to export their oranges to England and shipped them to the defendants' vessel, relying on an oral promise by the defendants' agent that the vessel would sail straight to London. In fact, the vessel went first to Antwerp, so that the oranges arrived late in London and the plaintiffs lost a favourable market. When the plaintiffs claimed damages for breach of contract, the defendant owners relied on the bill of lading, which expressly allowed them to proceed "by any route whether directly or indirectly" to London. In this case, a. the bill of lading is evidence of the entire contract between the plaintiffs and ship owners. b. the bill of lading contains an express term, and the defendants are bound by that term. c. the contract consists of both the written bill of lading and the oral promise by the defendant's agent. d. evidence of the oral promise of the defendant's agent cannot be admitted because of the parol evidence rule. e. the court will find that there is no contract at all.

c Diff: 3 Type: MC Topic: The Parol Evidence Rule Skill: Applied 31

Use the fact situation in Q28 to answer the related question that follows. Change the fact situation by assuming that Edward's conduct towards his father is designed to make his father enter into a contract with a third party. Also assume that Mary and George convince John that what Edward has been telling him about how they feel about him was a lie. In this situation, the contract is a. valid but unenforceable by the third party. b. void. c. voidable at the option of John only. d. voidable at the option of the third party. e. voidable at the option of John, Mary, and George.

c Diff: 3 Type: MC Topic: Undue Influence Skill: Applied 30

If a party to an existing contract discovers he or she had made an incorrect statement during the contract negotiations, then he or she should a. rescind the contract immediately. b. declare the contract voidable at the option of the other party. c. call his or her lawyer before he or she is sued for negligent misrepresentation. d. inform the other party of the true situation as soon as possible. e. offer to make allowances for any misunderstandings.

d Diff: 1 Type: MC Topic: Misrepresentation and Contracts Skill: Recall 39

Christi was told by the store's produce manager that the oranges were of a variety that had a extremely high level of vitamin C. So she bought a case for her health club's garden party. At the party, the guests enjoyed eating up all the oranges. When Christi was next in the store, the manager corrected his prior statement, saying the oranges were of a different variety than what he had thought. Does Christi have a legal claim for rescission? a. Yes, she does, because it is the only legal avenue to pursue. b. Yes, she does, because this is innocent misrepresentation. c. Yes, she does, since the store admits to the error. d. No, she doesn't, because rescission is impossible. e. No, she doesn't, because this is a case for damages.

d Diff: 2 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Recall/Applied 42

If an incident of misrepresentation is neither fraudulent nor negligent, yet it resulted in harm, then a. a claim of tort can only be made with evidence the victim relied on the misrepresentation. b. the victim's one hope is to show that a provision in the contract was misrepresented. c. it is innocent misrepresentation, which has no legal significance d. it does not qualify for a tort action. e. the victim is guilty of having unreasonable reliance on the misrepresentation.

d Diff: 2 Type: MC Topic: Misrepresentation and Contracts Skill: Recall 37

. A now wants to sell the 1965 Corvette and to this end begins negotiations with B, who knows that A owns both a 1965 and a 2009 Corvette. In discussions with B, A says "I'm thinking of selling my Corvette for $65 000.00." B believes A is talking about his 2009 Corvette, so B says "I'll buy it at that price," and pays A the $65 000.00. Later A calls B asking him when he is going to pick up the 1965 Corvette. Having thought that he was buying the 2009 Corvette, B now tells A he wants his money back. In this situation, a. only B has made a mistake, and he can seek rectification of the contract and get the 2009 Corvette from A. b. only B has made a mistake as to the subject matter of the contract, so he cannot get his money back if A delivers the 1965 Corvette. c. both A and B have made a mistake as to the subject matter of the contract, and the contract is voidable. d. both A and B have made a mistake as to the subject matter of the contract, and the contract is void. e. only A has made a mistake as to the subject matter of the contract, so B cannot get out of the contract so long as A delivers the 1965 Corvette.

d Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 11

A has a Tom Thomson painting that he wishes to sell. A has heard that B is an art lover and takes very good care of the paintings of Canadian masters. As a result, A decides that he will only contract with B. So he calls B and they make a deal over the telephone. Unfortunately, B's servant C overhears the conversation and before B can get to A's house, C arrives there pretending to be B. A sells the painting to C believing that C is B. Just after C leaves A's house, B shows up and A realizes his error. This situation is a classic example of a. breach of contract. b. fraud or deceit. c. mistake by both parties as to the subject matter of the contract. d. unilateral mistake as to identity. e. all of the above

d Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 14

McKenzie purchases goods from Dormond. Later McKenzie goes to court and the court declares that the contract between McKenzie and Dormand is void. This means that a. Dormond has to return all money received from McKenzie, but McKenzie does not have to return the goods. b. the court has declared that there was a valid contract between Dormond and McKenzie from the date of the purchase until the date of the Court ruling. c. the court has declared that Dormond breached the contract. d. McKenzie can return all or the remainder of the goods to Dormond in exchange for reimbursement of payment. e. McKenzie can keep the goods and can demand his money back from Dormond.

d Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Recall 24

Which of the following is not a condition that must be met by a plaintiff who request rectification of a contract? a. The plaintiff must satisfy the court that there was a complete agreement between the parties, free from ambiguity. b. The plaintiff must establish that the parties did not engage in further negotiations to amend the contract. c. The plaintiff must satisfy the court that the agreement is not subject to, or conditional on, any further adjustments. d. The plaintiff must satisfy the court that all attempts to reach some understanding between the parties have failed. e. The plaintiff must establish that the change in the written document appears to be an error in the recording of the document and is easily explained as such.

d Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 15

James purchases an antique chair at a garage sale for $150.00. Later he sells it to Jacqueline for $300 and makes a nice profit. A few months later the Antiques Road Show comes to town and Jacqueline takes the chair to the show to be valued. She is advised that the chair dates as far back as 1866 and is worth approximately $5000. Which of the following is true? a. James made a mistake about the value of the chair and so the contract will be set aside by a court. b. James did not make a legal mistake because he was careless in determining the right price. c. James can plead non est factum. d. James did not make a mistake about the value of the chair because the radically different price is one of the risks expected in the contract. e. If Jacqueline sells the chair, the court will order that Jacqueline pay a portion of the proceeds of sale to James because James made a mistake.

d Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 26

Use this fact situation to answer the related questions that follow it. A and B are negotiating a settlement under which A is to give B money and in return B is to give A his house and his car. The negotiations are by faxes back and forth between A and B, who agree to put the settlement in writing. A prepares the written settlement agreement, which, unfortunately, does not refer to his house, so B quickly signs it. In this situation, if A argues that the house was part of the settlement and was left out by mistake, a. B need not give his house to A, because there really was no error by A at all. b. B need not give his house to A, because the written settlement agreement superseded the negotiations. c. B need not give his house to A, because it was not reasonable for A to have relied on the house as part of B's settlement obligation. d. B must give his house to A, because B knew of A's error and took advantage of it. e. B need not give his house to A, because that term is not in the written contract.

d Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 5

Regarding insurance contracts, utmost good faith is important because a. insurance records follow the policy holder for life. b. the insurance company is in a position of superior knowledge. c. the insured must calculate her or his risks. d. third parties may be involved—especially with liability policies. e. without it, there is fraudulent omission.

d Diff: 2 Type: MC Topic: Signed Documents and Misrepresentation by Omission Skill: Recall 53

A distinction must always be drawn between the substance of a contract and its a. parties. b. benefits. c. principles. d. form. e. beneficiaries.

d Diff: 2 Type: MC Topic: The Distinction Between Substance and Form Skill: Applied 3

The phrase "no action shall be brought" in the Statute of Frauds applies to procedure and not validity. This means that a. a party can bring a legal action, but only if a new contract is proven to supersede the original. b. a party cannot bring a legal action, since the contract is void. c. a party cannot bring a legal action, because the Statute affects the validity of the contract. d. although no action may be brought on the contract itself, the contract may still affect the legal relations between the parties in several ways. e. a party cannot bring a legal action at all because one or more of the essential terms of the contract are missing.

d Diff: 2 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall/Applied 19

In a legal sense, mistake is a. a mistake of fact. b. an error of judgment. c. a misunderstanding. d. narrowly defined and limited in scope. e. a misrepresentation.

d Diff: 2 Type: MC Topic: The Narrow Meaning of Mistake Skill: Applied 20

to each of his three children, Mary, George, and Edward. Harry told the children what he was leaving them just after he made his will. Since that time, Edward has been unhappy about getting only one-third of his father's estate, and for the past two years he has been telling his father that Mary and George really hate their father and cannot wait until he dies. Lately John has become ill, and because Edward is the only son in Ontario, he has been taking care of his father. Each time that Edward sees his father, which is two to three times a week, he reminds him about Mary's and George's feelings towards him and tells John that he is the only child who really loves his father. John, seeing how much care Edward is giving him, begins to believe Edward and decides to make a new will in which he leaves his entire estate to Edward and nothing to Mary and George. George's changing his will under these circumstances is a classic example of a. duress by Edward. b. fraud by Edward. c. deceit by Edward. d. undue influence by Edward. e. misrepresentation by Edward.

d Diff: 2 Type: MC Topic: Undue Influence Skill: Recall/Applied 29

Dot sold her land to Seth. Three weeks before making the contract, she told Seth that the well on the property has a flow of 40 litres per minute. Dot had obtained the information from a certified water surveyor. Two months after taking title to the property, Seth discovered that the flow in the well was only 4 litres per minute. What remedy might Seth be entitled to from Dot? a. damages only b. damages and rescission c. damages or rescission d. no remedy e. rescission

d Diff: 3 Type: MC Topic: Consequences of Misrepresentation in Contracts Skill: Applied 49

Use the fact situation in Q30 to answer the related question that follows. Using the fact situation above, assume that shortly after signing the guarantee, Mary leaves John so that he can no longer abuse her and decides that she really should not have to guarantee John's loan. If Mary acts quickly by bringing a lawsuit against the bank, Mary may succeed because a. the guarantee is unenforceable. b. the guarantee is void. c. the guarantee is voidable at both her option and the bank's option. d. the guarantee is voidable if Mary acts immediately to repudiate it. e. all of the above

d Diff: 3 Type: MC Topic: Duress Skill: Applied 33

enters into an oral employment agreement with Albert under which Albert becomes the managing director of HGLC for a period of two years. The employment agreement provides that both Albert and HGLC have the right to terminate the contract on six months' notice to the other. After working for the company for eight months, HGLC gives Albert two months' notice of termination. In this situation, a. the Statute of Frauds does not apply because the essential terms of the contract are present, so Albert can enforce the term that he be given six months' notice. b. the Statute of Frauds applies, because there has not been part performance by Albert, so Albert cannot enforce the term that he be given six months' notice. c. the Statute of Frauds does not apply, because the contract is one for an indefinite period, so Albert can enforce the term that he be given six months' notice. d. the Statute of Frauds applies, because the contract extends over a period of more than a year, so Albert cannot enforce the term that he be given six months' notice. e. none of the above

d Diff: 3 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 9

Which of the following is true about consumer protection statutes? a. Provincial legislation is not as encompassing as federal legislation. b. The federal government believes there is the need to be a big brother upon which one can call. c. It covers businesses as well as consumers. d. It only addresses the buying and selling of goods. e. It is concerned with only one party to the contract, the purchaser.

e Diff: 1 Type: MC Topic: Consumer Protection Legislation Skill: Recall 29

Misrepresentation can affect the contract only if the misrepresentation is a. known by the defendant. b. negligent or fraudulent. c. in writing, not oral. d. prior to the contract negotiations. e. a statement of fact, not opinion.

e Diff: 1 Type: MC Topic: Opinion Versus Fact Skill: Applied 48

Acceptance under the Sale of Goods Act means a. an unconditional willingness to enter into an agreement with the seller on terms specified. b. conduct by the buyer to accept the offer made by the seller. c. accepting the goods. d. accepting the terms of the contract of sale. e. any conduct by the buyer in relation to the goods that amounts to a recognition of the existence of a contract.

e Diff: 1 Type: MC Topic: Requirements of the Sale of Goods Act Skill: Recall 26

With respect to sale of goods, the doctrine of caveat emptor offers buyers the right to rescind the contracts in situations where a. both a dominant and subservient party exist. b. there is a clear title in the sale of goods. c. one party is in a vastly superior position of knowledge with respect to some matter that is of vital importance to the other party. d. there is an unconscionable transfer of goods. e. there is a failure to disclose a problem with the ownership of goods.

e Diff: 1 Type: MC Topic: Silence as Misrepresentation: Contracts Requiring Disclosure Skill: Recall 55

When a contract is wholly oral, the first problem of the court is a. to determine the liberal meaning of the words. b. to speak to the parties. c. to read the contract. d. to determine the dictionary meaning of the provisions. e. to determine what exactly the parties agreed to.

e Diff: 1 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall 27

A and B have just signed a written agreement for the purchase by A of B's house. During the negotiations, A made it clear to B that his purchase was conditional on A conducting a building inspection of house within five days of the date of the agreement, which was satisfactory to A. However, this condition is not included in the agreement. In this situation, a. evidence of the building inspection would be admissible because it is a collateral agreement, the consideration for which is the agreement of purchase and sale. b. evidence of the building inspection would not be admissible because, since this is an agreement for land, the Statute of Frauds applies to bar evidence of the building inspection. c. evidence of the building inspection cannot be given because of the parol evidence rule. d. evidence of the building inspection would be admissible because it is a subsequent agreement. e. evidence of the building inspection would be admissible because it is a condition precedent to the agreement of purchase and sale.

e Diff: 1 Type: MC Topic: The Parol Evidence Rule Skill: Applied 34

If a preliminary bargaining statement is expected to influence the decision of the other party, then it is said to be ___________ to the contract. a. subject b. tangible c. consequential d. substance e. material

e Diff: 2 Type: MC Topic: Misrepresentation Skill: Applied 7

If rescission is unavailable in a case of innocent misrepresentation, and the misstatement was an important inducement, and the aggrieved party has suffered substantial loss, the court may look at the misrepresentation as a. negligent, and award damages. b. a contractual nuisance. c. an obligation in tort. d. a breach of contract. e. a term to the agreement.

e Diff: 2 Type: MC Topic: Misrepresentation and Contracts Skill: Applied 45

The parking enforcement officer gave Jim a parking ticket. But as it turns out, the NO PARKING sign had been placed in error on private property. Can Jim recover damages in a tort action? a. No, he can't, since damages are not of a pecuniary nature. b. Yes, he can, since he was terribly inconvenienced by this affair. c. Yes, he can, because the ticket was totally misrepresented. d. Yes, he can, because no negligence or fraud is present. e. No, he can't, since there was no fraud nor carelessness on the part of the parking enforcement officer.

e Diff: 2 Type: MC Topic: Misrepresentation and Contracts Skill: Recall 38

would go up a great amount in value. As a result, without even checking to ensure that VBC was a good company to invest in, this morning Marvin called Alice and told her to put all of her money into VBC, which Alice did. Later that day VBC declared bankruptcy and Alice lost all of her money. In these circumstances, Marvin's advice to Alice is a. an example of undue influence. b. an innocent misrepresentation. c. a fraudulent misrepresentation. d. a mistake. e. a negligent misrepresentation.

e Diff: 2 Type: MC Topic: Misrepresentation and Torts Skill: Recall/Applied 35

Use the fact situation in Q10 to answer the related question that follows. Based on the above fact situation, the court will a. restore A and B to their original positions before the contract. b. make B give back the car. c. rescind the contract. d. make A give back the money. e. all of the above

e Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Applied 12

A voidable contract is a contract that, a. like a void contract, never exists so as to give rise to rights under it. b. unlike a void contract, cannot be rectified. c. unlike a void contract, exists but does not give rise to legal rights. d. unlike a void contract, exists but can only be set aside by agreement of the parties to it. e. unlike a void contract, exists but can be set aside at the option of one of the parties to it.

e Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Recall/Applied 10

A contract that is void a. is one that exists, but by reason of some mistake can be set aside. b. is one that exists, but is merely unenforceable. c. is one that does not exist, but can still be set aside. d. is one that does not exist unless a party wants it to, at which time it becomes enforceable. e. is one that never exists so as to give rise to rights under it.

e Diff: 2 Type: MC Topic: Mistake and Innocent Third Parties Skill: Recall/Applied 9

A court will not enforce a contract if a. a party is mistaken as to what the subject matter of the contract was. b. one party was unreasonable in using certain words. c. the meanings of the words are not clear. d. the parties disagree as to the interpretation of important terms. e. there are two reasonable interpretations of words in the contract and no indication which is correct.

e Diff: 2 Type: MC Topic: Mistakes About the Terms Skill: Applied 19

Which of the following is true with regard to a contract that has to be in writing? a. If the contract is handwritten, it must be in ink. b. All implied terms must be carefully identified. c. If the contract is a guarantee, consideration must be identified. d. The parties must meet to discuss the terms. e. The contract does not have to be wholly within a single document. Several written notes may be taken together to satisfy the Statute of Frauds.

e Diff: 2 Type: MC Topic: Requirements for a Written Memorandum Skill: Applied 28

In respect of a contract to which the Statute of Frauds applies, which of the following is NOT true? a. Both parties must sign the contract. b. The essential elements of the contract must be in writing. c. The defendant must sign the contract. d. The contract must be under seal. e. Both A and D are not true.

e Diff: 2 Type: MC Topic: Requirements for a Written Memorandum Skill: Recall 24

The form of contract includes a. contracts whose terms are entirely in writing in several documents. b. contracts whose terms are entirely oral. c. contracts whose terms are entirely in writing in one document. d. contracts whose terms are both oral and in writing. e. all of the above

e Diff: 2 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall 4

It is good business practice of have a written record of a contract because a. provisions of long-term contracts will not have to be committed to memory. b. many disputes can be avoided by keeping an accurate record. c. a written record is more accurate than human memory. d. human memory is fallible. e. all of the above

e Diff: 2 Type: MC Topic: The Distinction Between Substance and Form Skill: Recall 5

Use these fact situations to answer the related questions that follow. Fact Situation 1: John is the 20-year-old nephew of Mary, who is 80 years of age and unable to get around or do things herself. Mary owns two properties in Toronto: 121 Thornton Lane and 122 Thornton Lane. Mary, who lives at 121 Thornton Lane, orally agrees with John that if he is good to her and does whatever services for her that she asks him to do from time to time during the rest of her life, she will leave John 121 Thornton Lane. John does not live with Mary, but does a number of things that Mary asks him to do, including taking her on trips, doing some errands, and also doing some odd jobs for both properties over the course of a year, after which Mary dies without leaving John 121 Thornton Lane. Now John sues her estate to get the house. Fact Situation 2: In 1921 Gus met Dick, and in the spring of 1922 Gus went to work for Dick as a farm labourer. For the first two years after that, Gus was paid $50.00 a month, plus room and board and meals. In 1924, Dick was in an accident and became disabled. Although Dick could not pay Gus wages, he promised to leave Gus his farm after he died if Gus stayed and worked the land. From 1924 on, Gus, who often considered leaving Dick's farm and had ample opportunity to do so, stayed and worked the farm on Dick's continued promise that if he stayed and worked the farm, the farm would be his after Dick's death. During this time Gus planted the fields, decided on what crops to plant, did repairs to Dick's house, and on Dick's behalf purchased livestock and then took care of it. Dick died in 1930 before he had a chance to make a will leaving Gus the land. In Fact Situation 1, if John sues Mary's estate to get the house, a. John's acts of taking Mary on trips and doing the errands and odd jobs on the properties are immaterial because the contract was one of services for an indefinite period, so he will succeed. b. the agreement between John and Mary is one for a period of a year and John cannot succeed. c. John's acts of taking Mary on trips and doing the errands and odd jobs on the properties come within the doctrine of part performance and John will succeed. d. the agreement between John and Mary contains all the essential terms necessary to create a binding agreement that does not come within the Statute of Frauds, so John will succeed. e. John's acts of taking Mary on trips and doing the errands and odd jobs on the properties do not come within the doctrine of part performance and John will not succeed.

e Diff: 2 Type: MC Topic: The Doctrine of Part Performance Skill: Applied 16

Use the fact situation in Q30 to answer the related question that follows. Assume that before Mary signs the guarantee, she sees a lawyer for independent legal advice. Assume also that just before she signs the guarantee, the lawyer asks her if she is signing the guarantee freely and without threat of harm, duress, or undue influence and that Mary replies, "Yes, I am signing it freely and without threat of harm, duress, or undue influence." In these circumstances, if Mary changes her mind and does not want to be bound by the guarantee, a. she will succeed because the bank cannot rely on the independent legal advice she received. b. she will succeed because the guarantee is void for duress. c. she will not succeed because of the doctrine of caveat emptor. d. she will succeed because the guarantee is voidable for duress. e. she will not succeed because the bank can rely on the independent legal advice she received.

e Diff: 3 Type: MC Topic: Duress Skill: Applied 34

Kevin was desperate to save his business records and equipment from the rising flood waters. Just then, a stranger with a large truck drove by, and Kevin, feeling that he had little choice, said, "I'll give you your choice of my equipment if you help me save my business records and equipment." The stranger agreed and chose some equipment and a laptop computer. After the flood, Kevin demanded everything back. The stranger refused to return the new laptop computer. On what legal grounds can Kevin get his computer back? a. undue influence b. duress c. coercion d. dire circumstances e. no basis; this is a valid contract that has fair consideration on both sides

e Diff: 3 Type: MC Topic: Misrepresentation and Contracts Skill: Applied 54

Allen was negotiating to rent a flat in Bob's house. During the negotiations, Allen told Bob that if he took the flat, he would have use of two basement rooms for the storage of his surplus furniture and also the use of the garden. Subsequently, a written agreement was drawn up for the lease of the flat that made no reference to either the storage rooms or the garden. In this case, a. because the negotiations were not included in the contract, Allen will get the flat, not the storage rooms or garden. b. because of the parol evidence rule, Allen cannot give evidence of the use of the storage rooms and garden as being part of the contract c. although the parol evidence rule applies, the contract being partly oral and partly written, Allen can give evidence about the storage rooms, but not the garden. d. although the parol evidence rule applies, the contract being partly written and partly oral, Allen can provide evidence of the oral part of the contract about the storage rooms and garden. e. none of the above

e Diff: 3 Type: MC Topic: The Parol Evidence Rule Skill: Applied 30

Edward and his wife, Mary, go into a bank. Edward wants to loan $10 000.00 from the bank, but the bank manager wants some kind of security. Because they are in a hurry, Mary says, "Give Edward the money and I will pay Edward's loan." The bank manager looks at her and, being afraid that the bank will not loan Edward the money, Mary says, "Please, if Edward does not pay the loan, I will." The bank manager has Mary sign a document with both of her statements in it. In this situation, a. Mary is an indemnifier. b. Mary has indemnified the loan to the bank. c. Mary is a guarantor of Edward. d. Mary has guaranteed the loan to the bank. e. all of the above

e Diff: 3 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 12

When dealing with the prohibition in the Statute of Frauds regarding oral contracts not to be performed in a year, which of the following is true? a. An oral contract that is for an indefinite period, but could be performed within a year, is not prohibited by the Statute. b. An oral contract that is to be performed over a period of one year, commencing the day after the formation of the contract, is not prohibited by the Statute. c. An oral contract that is to be performed over a period of one year, but commences two days after the conclusion of the contract, is prohibited by the Statute. d. An oral contract that provides for a specific period for performance of more than a year, but also confers a power of determination that may be exercised within the year, is prohibited by the Statute. e. all of the above

e Diff: 3 Type: MC Topic: The Types of Contract Affected by the Statute of Frauds Skill: Applied 8