chapter 8

2) A fraudulent misrepresentation which induces another person to enter into a contract can result in which of the following remedies? A) Rescission and/or damages B) Rescission only C) Damages only D) Rectification E) There is no remedy available for fraudulent misrepresentation.

A Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

16 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 35) Jones offers to sell Smith his car. Smith thinks Jones is selling his 2015 Toyota, and Jones thinks he is selling his 2014 Buick. This is an example of which of the following? A) Misunderstanding B) Common mistake or shared mistake C) Unilateral mistake or one-sided mistake D) Fraudulent misrepresentation E) Non est factum

A Diff: 1 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

17 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 38) Which one of the following mistakes voids a contract? A) Two parties contract for a shipload of coal, but unknown to both parties, at the time of the contract the ship had sunk and the coal had been lost. B) Sally and Wacky had a serious misunderstanding about a term in the contract; the court found that the more reasonable interpretation was Sally's. C) Two parties contracted for the sale and purchase of a painting for the price of $800. When the contract was written up, the price was incorrectly stated as $900. D) Sam bought three gallons of paint, but found he had made a mistake; two would have been sufficient. E) When Mr. and Mrs. Houston put their property up for sale, Sam without speaking to the Houstons or their agent about the land, offered close to the asking price because he thought it was suitable for growing wheat. After his offer was accepted, he learned it was not suitable for wheat.

A Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

4 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 9) The contract for an Oakville property had been signed by both parties. Which of the following is necessary for the contract to be set aside on the grounds of misrepresentation? A) The misrepresentation must have been a false statement of a fact; false statements of opinion are never misrepresentations. B) The misrepresentation must have been a term of the contract. C) The misrepresentation must have induced the party to enter the contract. D) The misrepresentation must have been in writing. E) The misrepresentation must have been made recklessly or wilfully.

C Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

18) If Mills agreed to sell Boothe a used Nissan automobile, which in the contract was described as a 2012 Nissan Murano with a rebuilt transmission, Boothe could sue for ________ if the vehicle turned out to be a 2010 Murano and the transmission was used, not rebuilt. A) rescission B) compensation C) breach of contract D) damages E) the tort of deceit

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

31 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 68) When two parties are involved in a misunderstanding as to the meaning of a term of the contract, which of the following is usually applied by the court to settle the matter? A) The court will find that there is no contract because there is no meeting of the minds. B) Non est factum C) Caveat emptor D) The most reasonable interpretation of the terms E) The equitable remedy of rectification

D Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

162) Explain what is meant by a "trust."

It is a principle from the law of equity. Property is transferred from one person to another, who is obligated to use the property for the benefit of a third person. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

127) Where the misrepresentation is innocent, explain the remedies available to the victim.

Rescission is the only remedy available where the misrepresentation is innocent. Diff: 1 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

135) What's the effect of a court determining that undue influence has been present in a contractual relationship?

That the contract is voidable. Diff: 2 Type: ES Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

141) The principle that courts will not permit outside evidence to contradict clear wording of a contract is known as ________.

The parol evidence rule Diff: 1 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

138) What is meant by the term "non est factum"?

This means "it is not my act." It forms grounds for a court to declare a contract void because a party is unaware of the nature of the contract. Diff: 2 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

174) What does it mean that an assignee is "subject to the equities"?

This means that the assignee can be in no better position than was the assignor. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

132) Rescission of contract citing innocent misrepresentation on behalf of one of the parties is not available in four situations, list and describe these.

1 - Affirmation. Victims of misrepresentation who have affirmed the contract are bound by the affirmation and cannot later insist on rescission. Thus, where a person uses the proceeds of a contract knowing of the misrepresentation, he has affirmed the contract. 2 - Impossibility of restoring. The remedy of rescission is not available if the parties cannot be returned to their original positions because the subject matter of the contract has been destroyed or damaged. Since neither party is at fault with innocent misrepresentation, the court will not impose a burden on either one of them but will simply deny a remedy. 3 - Third-party involvement. Rescission will not be granted if it will adversely affect the position of a third party. When the subject matter of the contract has been resold by the purchaser to a third party who has no knowledge of the misrepresentation and otherwise comes to the transaction with "clean hands," the courts will not interfere with that person's possession and title to the goods. 4 - Failure on the part of the victim. Where the victim comes without clean hands, rescission will not be available. Where the victim has also misled or cheated, rescission will be denied. Where the victim has caused unreasonable delay, rescission will be denied. Diff: 3 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

1 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 3) Damages as a remedy will not be available in which of the following situations? A) Jones, although being careful, makes an innocent misrepresentation persuading Smith to enter a contract with him. B) Jones makes a fraudulent misrepresentation, persuading Smith to enter a contract with him. C) Jones makes a negligent misstatement, persuading Smith to enter a contract with him. D) A false statement made by Jones becomes a term of the contract. E) Jones makes an intentional misrepresentation of fact in order to get Smith to sign the agreement.

A Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

27) When the courts find that undue influence is present, the resulting contract is A) voidable. B) void. C) unenforceable. D) binding. E) illegal.

A Diff: 1 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

21 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 46) Al sells gravel to Bob on credit, and Bob sells it to Chuck, an innocent purchaser. Then Bob runs away with the money, without paying Al. Who will get the gravel if the court holds that the contract between Al and Bob was "void"? A) Al B) Bob C) Chuck D) Al and Bob E) Bob and Chuck

A Diff: 1 Type: MC Page Ref: 256 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

67) Len's new secretary came in and asked him to sign four letters that he said concerned general office matters. One of the "letters" was, in fact, a cheque for $500, payable to the secretary. The secretary cashed the cheque at his bank, and when his bank presented the cheque for payment, Len refused to pay it. He said he had been tricked and it was all a mistake. On these facts, which of the following is true? A) Len may be able to avoid his obligation on the cheque on the basis of non est factum. B) Len would be obligated to honour the cheque no matter how careful he was. C) Len may be able to avoid his obligation on the cheque on the basis of duress. D) Len may be able to avoid his obligation on the cheque on the basis of unconscionability. E) Even if he was careless, Len will not have to honour the cheque.

A Diff: 1 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

12) The major problem with ________ is the need to establish that the person being sued knowingly misled the victim. A) fraudulent misrepresentation B) innocent misrepresentation C) negligent misrepresentation D) undue influence E) deceit

A Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

14 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 31) A woman sought to set aside a mortgage on the grounds of misrepresentation, undue influence, and non est factum. She had been persuaded to enter into that mortgage contract with a mortgage company by her doctor. Which of the following is true with regard to these challenges to the mortgage contract? A) If she were influenced to sign the mortgage by her doctor and the mortgage benefited the doctor, the court would presume undue influence. B) If she were influenced to sign the mortgage by her doctor and the court found undue influence, the mortgage would be void and she wouldn't have to pay the mortgage company. C) If she failed to read the mortgage agreement, the mortgage would be void on the basis of non est factum. D) If the person who misled her as to the contents of the mortgage agreement honestly thought what he was stating was correct, she could sue for only damages, not rescission. E) If the court found that there was undue influence by her doctor, who obtained the money from the mortgage, she would not have to repay the mortgage company.

A Diff: 2 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

22 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 49) Mr. Ho talked with Mr. Tarr, who ran a business called Roscali Roofing. Mr. Ho agreed to pay Tarr $250 for the repair of his roof. In time, Gene Fix, Tarr's employee, came to Mr. Ho's and worked on the roof. Fix used the wrong material in the repairs, which made all his effort worthless, and during the next rain the roof leaked as before. Which of the following is true? A) Ho could successfully sue only Tarr for breach of contract. B) Ho could successfully sue only Fix or Tarr for breach of contract, whichever he chooses, but not both. C) Ho could successfully sue Fix and Tarr for breach of contract since they were both connected with the job. D) If Tarr doesn't pay Fix, Fix could sue Ho directly for his pay because he worked on Ho's roof. E) Ho could only sue Tarr because he is the one who did a poor job of the roof.

A Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

45) Mike is given a bottle of wine as a gift. Josh, a neighbour, sees it and recognizes it as a very rare bottle. Knowing that Mike doesn't drink, Josh offers him $300 for it, which he believes to be a fair price. Mike happily agrees. Later, when Josh is looking up the price of the bottle on eBay, he realizes that it is not a valuable bottle of wine at all. He had confused it with another vintage. Josh, who is taking a law class, wonders whether or not he could have the contract set aside. Which of the following statements is true? A) It is unlikely to be set aside unless Josh could show that it would be unfair or unjust to enforce it. B) It will automatically be set aside on the basis of the doctrine of mistake. C) It will only be set aside if Josh's mistake rendered the contract illegal. D) A contract can never be set aside where a mistake has been made. E) The contract will only be set aside if Josh's mistake was the result of willful blindness.

A Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

58) In 978011 Ontario Ltd. v. Cornell Engineering Co., a businessman signed a contract without reading it. He later discovered it contained a provision with which he did not agree. What did the Court hold? A) The Court refused to grant an equitable remedy to correct a mistake that the businessman himself had allowed. B) The Court held that the contract was void due to a lack of consensus. C) The Court held that the contract was unenforceable due to a lack of consensus. D) The Court ordered rectification to correct the mistake in the contract. E) The Court ordered severance due to a lack of intention to be bound to the particular provision.

A Diff: 2 Type: MC Page Ref: 260 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

33 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 72) With regard to the law governing privity of contract and assignment, which of the following is true? A) Where the assignor assigns the same debt to two or more persons, if the promisor (debtor) pays out in good faith to the first assignee to give him notice, he has no further obligation. B) If a promisor (debtor) accidentally pays out to the assignor after receiving notice of the assignment, he is free from any obligation to the assignee; the assignee must look to the assignor for payment. C) An equitable assignment is easier to enforce than a statutory assignment. D) An exception to the doctrine of privity of contract is a contract selling a car. E) Novation refers to the voiding of the original contract and substituting another.

A Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

75) Tong hired Hocaloski to design an ad for her business. Hocaloski gave the job to Peppar, her employee. After the ad was run, it was noticed that Peppar had made a serious error. He gave the wrong address and phone number for the business. On these facts, which of the following is true? A) For breach of contract, Tong could successfully sue only Hocaloski. B) Tong can sue either Hocaloski or Peppar for breach of contract, but not both of them. C) Tong can sue both Hocaloski and Peppar for breach of contract, since they are both connected with the job. D) If Hocaloski did not pay Peppar, Peppar could sue Tong for his pay because Peppar did do work for Tong. E) Only Peppar is liable since he made the mistake.

A Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

20) Victims of misrepresentation who have affirmed the contract are bound by the affirmation and cannot later insist on A) rescission. B) remedies. C) breach. D) original positions. E) quantum meruit.

A Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

54) In Works v. Works, what was the result where one party was mistaken about something significant in the contract? A) The Court will exercise its discretion to set aside the contract only if satisfied that it would be unfair or unjust to enforce it. B) The Court will automatically set aside the contract on the basis of the doctrine of mistake. C) The Court will only set aside the contract if the mistake renders the contract illegal. D) The Court will never set aside a contract where a mistake has been made. E) The Court will exercise its discretion to set aside the contract only if satisfied the mistake was the result of willful blindness.

A Diff: 2 Type: MC Page Ref: 260 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

16) With regard to the law concerning misrepresentation, which of the following is true? A) The case law allows a remedy for an opinion given by a non-expert. B) A misrepresentation can be a true assertion of fact that induces (persuades) the party to contract. C) If the buyer realizes the seller persuaded him to contract by a misrepresentation, he will not be able to get the remedy of rescission if he was tainted with wrongdoing himself, (i.e., not coming with "clean hands"). D) Damages as a remedy are not available where the misrepresentation becomes part of the contract. E) Rescission is available as a remedy for misrepresentation only if it is innocent misrepresentation.

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

60) The equitable remedy of rectification is granted by the courts in which of the following situations? A) The parties to a contract disagree as to the meaning of a term in their contract. B) The seller made a fraudulent misrepresentation that induced the buyer to buy. C) The seller of goods has made an innocent misrepresentation that persuaded the buyer to buy. D) A person buys something that he later learns he already owned. E) Because of a mistake, a written document does not include a corrected term to which the parties had orally agreed.

E Diff: 1 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

103) Undue influence takes place when one person uses violence to force another to enter into a contract.

FALSE Diff: 1 Type: TF Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

48 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 122) Negotiable instruments can sometimes convey better rights than existed between the original parties.

TRUE Diff: 3 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

165) A trust inferred by the courts to benefit a third party to a contract is known as ________.

a constructive trust Diff: 1 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

54 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 147) A windfall that one party to a contract stands to make at the expense of the other is known as ________.

unjust enrichment Diff: 1 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

8) When Gary went into Computer Heaven, Ltd. to get a better manual for the program he was trying to master, he was caught by a demonstration of a computer created by StarSystem Inc. He was fascinated by its performance. The salesman, Ross, told Gary that he should have this machine; that "it was the last computer, no other will ever be better"; that "UBC, Simon Fraser University, and BCIT just ordered over 1000 of them"; that he only had "a few left and the demand is so great it will take almost a year for the next shipment to arrive." When Gary said he needed a computer with at least 1 terabyte of hard drive space, Ross said this model had 2.5 terabytes. Gary was persuaded and contracted for it. Later Gary learned that every statement made by the salesman Ross was untrue, including the statement about the memory capacity. The model only had 400 gigabytes. On these facts, which of the following is true? A) Gary could be awarded the equitable remedy of rescission even if Ross, the salesman, honestly believed everything he said was true. B) Only if Ross, the salesman, knew that all the statements he made were false could Gary get a remedy. C) Merely the exaggerated claim "it was the last computer, no other will ever be better" is enough, according to the case law, to allow Gary to get out of the contract. D) Statements that induced Gary to contract, but that are not the terms of the contract, are not significant enough for the courts to award a remedy by case law or by statute. E) Such misrepresentations could only result in contractual remedies, legal or equitable, but not in tort remedies.

A Diff: 3 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

4) Often a party to a contract wants to avoid his obligations by arguing that the contract was entered into because of a mistake, misrepresentation, undue influence, or duress. Which of the following is false with regard to these areas of the law? A) A buyer could not be awarded the equitable remedy of rescission if the seller honestly believed that his misrepresentation, which persuaded the buyer to buy, was true. B) If a seller persuades a person to buy something by a fraudulent misrepresentation, the buyer could ask for rescission and/or damages for the tort of deceit. C) A person can successfully argue non est factum and avoid his obligations under a contract only if he was misled about the very nature of the document and was not careless. D) Independent legal advice given to a person who wants to give a gift to a dominant person (e.g., his doctor) is good evidence to rebut a presumption of undue influence. E) Where, because of a mistake, a written document does not embody the unchanged term of the original oral agreement, a party to the contract could ask the court for the equitable remedy of rectification.

A Diff: 3 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

23 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 51) Kassem was a real estate agent with his own firm. Because his agency was new in a competitive field, he hired the company of Barrett and Barrett Ltd. to advise on an advertising strategy and to design ads for the newspaper and for brochures. Jack Barrett, senior employee, was handling the market research, and the employee Armstrong was doing the illustrations. When the work was complete, the ads went to press. Unfortunately, after the printing, it was discovered that in all the ads and in every brochure "Kassem" was spelled "Kassim." Armstrong had made the mistake in his copy. On these facts, which of the following is true? A) For breach of contract, Kassem could successfully sue only the company, Barrett and Barrett Ltd. B) Kassem can choose to sue either the company or its employee Armstrong for breach of contract, but not both. C) Kassem can sue both the company and its employee Armstrong for breach of contract, since they were both connected with the job. D) If the company did not pay Armstrong, Armstrong could sue Kassem for his pay because Armstrong did do work for Kassem. E) Kassem's only recourse is against Armstrong, the employee who made the mistake.

A Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

24 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 53) Back in the days when people in Vancouver sold houses as houses and not for demolition, Mrs. Reid prepared her house for the market by contracting with Silversteps Ltd. to have her front steps replaced for the sum of $2800. Warren, an employee of the company, worked for days framing the stairs and pouring the concrete. Unfortunately, he had done the framing wrong and, in addition, the concrete mix was faulty, so all of his efforts were in vain, and the stairs were not useable. On these facts, which of the following is true? A) Mrs. Reid could successfully sue only Silversteps Ltd. for breach of contract. B) Mrs. Reid could successfully sue Silversteps Ltd. for breach of contract or Warren for breach of contract but not both. C) Mrs. Reid could successfully sue both Silversteps Ltd. and Warren for breach of contract because they were both connected with the job. D) If Silversteps Ltd. failed to pay Warren under the employment contract, Warren could sue Mrs. Reid directly for his pay because he worked on her stairs. E) Mrs. Reid could successfully sue the manufacturer of the cement for breach of contract because the cement was not fit for its purpose.

A Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

172) Explain what is meant by a "negotiable instrument."

A negotiable instrument is a substitute for money that bestows unique vehicles for conveniently transferring funds or advancing credit. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

149) Explain what is meant by a novation.

A novation occurs where two parties have a contractual relationship and another comes in, taking the place of one of those parties, but the terms of the contract remain the same. Note that the agreement of both of the original parties is necessary for such a substitution. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

64 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 182) Discuss the concept of an assignment, including an explanation of its significance in the modern business world.

A person who is entitled to receive a benefit under a contract has the ability to transfer that benefit (chose in action) to some third party in what is referred to as an assignment of contractual rights. The ability to make such assignments is critical to the functioning of our modern day commercial world. Students should note that only the benefits, not the obligations, in a contract can be sold (assigned) to a third party. Those benefits are to be enforced through the original contracting party (the one who assigned the agreement). In some cases, an assignment will qualify as a statutory assignment. In cases such as this, the assignee is entitled to enforce the assigned rights directly, in his or her own name. Good students will also recognize that some rights (such as the right to collect support payments) cannot be assigned. In business, it is critical that assignments be taken with care and that the debtor be immediately notified (in the case that the assignor has fraudulently assigned the same claim to multiple parties). Students may also mention the concept of an involuntary assignment arising in cases of death or bankruptcy. From a practical standpoint, students should note that in business a notice of assignment should not be ignored. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

160) Explain what is meant by "privity of contract."

A principle that contract terms apply only to the actual parties to the contract. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

53 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 142) Explain what is meant by a collateral contract.

A separate contractual obligation that can stand alone, independent of the written contract. Diff: 2 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

56 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 155) What is the significance of an assignment being "statutory" rather than merely an "equitable" assignment?

A statutory assignment allows the assignee to sue directly, whereas if the assignment is equitable, the assignor must be joined in the action. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

170) Explain what is meant by a "statutory assignment."

A statutory assignment is an assignment that meets certain qualifications and under which the assignee can enforce a claim directly without involving the assignor. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

175) In what way is a trust an exception to the privity rule?

A third party beneficiary can enforce it even though he or she is not a party to the original agreement. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

164) Explain what is meant by a "constructive trust."

A trust inferred by the courts to benefit a third party to a contract. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

146) Explain what is meant by unjust enrichment.

A windfall that one party to a contract stands to make at the expense of the other. Diff: 3 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

134) Indicate three situations where the courts will presume a relationship to involve undue influence.

An adult with an infant child, the solicitor contracting with a client, a doctor contracting with a patient, a religious advisor contracting with a parishioner, a trustee contracting with a beneficiary, and a guardian contracting with a ward. Diff: 2 Type: ES Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

158) Joe agreed to paint Sam's house for $4000. Joe then assigned the $4000 claim to Harry, who served notice on Sam about the assignment. When it came time for payment, Harry was informed by Sam that he would not pay because the paint was peeling off his house. Harry said that that was nothing to do with him and demanded payment. Explain the legal position of the parties.

An assignee is in no better position than was the assignor. In these circumstances, Joe, the original party in the contract, would not have been able to collect because the contract was breached. Harry is in no better position and therefore, Harry cannot collect. He must turn to Joe, the assignor, for any redress. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

171) Explain what is meant by an "involuntary assignment."

An involuntary assignment is an assignment of rights that takes place involuntarily, as in the cases of death and bankruptcy. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

14) A computer salesman innocently misrepresented a fact about a StarSystem computer to a customer. Although this fact was not about a term of the contract, it did induce the customer to buy the computer. The customer has now learned the true facts and wants to return the computer. If the store refuses to take it back, the customer would ask the court for which equitable remedy? A) Damages B) Rescission C) Rectification D) Restitution E) Injunction

B Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

28) Randal embezzled $6000 of his employer's money and then disappeared. The employer's accountant called at Randal's residence and found out that his wife had a $3500 term deposit. When the accountant threatened to have her husband arrested and imprisoned if she did not agree, she assigned the term deposit to the employer to help to defray the loss from the embezzlement. If the wife were later to sue for return of the term deposit, what would be her ground for avoiding the assignment? A) Undue influence B) Duress C) Mistake of law D) Fraudulent misrepresentation E) Non est factum

B Diff: 1 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

47) A and B entered into a contract for the purchase and sale of three grams of cocaine. B delivered the goods, but A didn't pay. If B sued for payment, the court would not enforce the contract because of which of the following? A) Mistake B) Illegality of object C) Rescission D) Non est factum E) Rectification

B Diff: 1 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

30 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 65) Which one of the following will be excluded by the parol evidence rule? A) Express terms B) Extrinsic evidence C) Evidence of implied terms D) A condition precedent E) Evidence of a collateral agreement

B Diff: 1 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

5 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 11) Mrs. Sharp, the owner of a restaurant, induced the Morissons to buy the business by a misrepresentation; the invoices made her costs appear less than they actually were, and thus her profits more than they actually were. On these facts, which of the following is false? A) The cause of action could be for the tort of deceit, if there was evidence that Mrs. Sharp intended to deceive them. B) The court could not award the equitable remedy of rescission if evidence showed that Mrs. Sharp really believed the invoices were accurate. C) The court could award the equitable remedy of rescission if the evidence showed she had fraudulently misrepresented the costs. D) The court could terminate the contract for breach of contract if the accurate statement of costs and profit were essential terms of the contract. E) The court could not award the equitable remedy of rectification because the argument is not about rectifying an erroneous written version of a previous oral contract.

B Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

9 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 19) Damages are available as a remedy where the misrepresentation has become a term of the contract that is breached, where the misrepresentation is ________, and where there is negligence. A) innocent B) fraudulent C) negligent D) material E) actionable

B Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

18 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 40) In which of the following instances would the court most likely hold the contract to be void on the basis of a mistake? A) Barry and Mary contracted for the sale and purchase of a boat for the price of $1200. When the contract was written up, the price was incorrectly stated as $1700. B) Two parties contracted for a shipload of fish, but unknown to both parties, at the time of the contract the ship had sunk and the fish had been lost. C) Carson and Leno had a serious misunderstanding about a term in the contract and the court found that the more reasonable interpretation was that of Leno. D) Sarah bought three rolls of wallpaper, but found she had made a mistake, since two would have been sufficient. E) Although the seller said nothing to the buyer about the characteristics of the answering machine, the buyer bought it, thinking that it would tell him the date and time of the call. Later, he learned that it did not perform this function.

B Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

20 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 44) Misgana ran into Tarja at their local gym. Tarja, it turns out, operated an art gallery that did custom framing and mounting. Misgana had some beautiful prints she wanted to have put into special frames and agreed to pay Tarja $400 to have this done. Tarja passed the task along to her new assistant, Shandy. Shandy used the wrong adhesive when mounting the prints, which meant they did not stick properly to the backing. Which of the following is true? A) Misgana could successfully sue only Shandy or Tarja for breach of contract, whichever she chooses, but not both. B) Misgana could successfully sue only Tarja for breach of contract. C) Misgana could only sue Shandy because she is the one who did a poor job of the framing. D) Misgana could successfully sue Shandy and Tarja for breach of contract because both were connected with the job. E) If Tarja doesn't pay Shandy, Shandy could sue Misgana directly for her pay because she worked on Misgana's prints.

B Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

41) In which of the following would the court find that the contract is void (i.e., not a binding agreement)? A) After some negotiation, Paul accepted Monafo's offer to sell him the painting for $5000. When the contract was put in writing, the price was incorrectly stated as $500. Monafo could prove the terms of the oral contract. B) Two parties contracted for a tanker of oil, but unknown to either of them at the time of the contract, the tanker had caught on fire and all the oil had burned. C) Kramer, thinking that the city was going to build a new school in the area, offered to buy a house. She had not talked with the seller or his agent about the possibility of a school. After the offer was accepted, she learned that there would be no such new school. D) Joe bought pizzas, but after eating one he realized that purchasing them was a big mistake. E) Ry and Ali, two parties to a contract, each had a different understanding about the term "royalties" in the contract. The court found Ali's interpretation the more reasonable.

B Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

56) In AMJ Campbell v. Kord Products Inc., a comma was inserted into the contract with the effect that both "freight" and "rebates" would be deducted from the sale price, rather than simply "freight rebates." This resulted in a difference of price amounting to $759,000. What was the result? A) The Court denied a request for rectification because a Court will not rectify a contract that is in writing. B) The Court denied a request for rectification because it was not clear both parties had the same intention. C) The Court denied a request for rectification because the appropriate remedy was rescission. D) The Court allowed the request for rectification because the price difference was significant. E) The Court allowed the request for rectification because one party had obviously made a mistake.

B Diff: 2 Type: MC Page Ref: 263 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

28 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 61) Len was behind in his work at the office. He decided to go in for a few hours on Sunday to catch up. He asked an assistant to come in for four hours. He turned on his office TV. Just then his assistant came in and asked him to sign four letters that she said concerned general office matters. He carelessly signed them without taking his eyes off the TV screen. One of the "letters" was, in fact, a cheque for $500 payable to the assistant. The assistant cashed the cheque at her bank, and when her bank presented the cheque for payment, Len instructed his bank not to honour it. He said that he had been tricked and that his signing it was all a big mistake. On these facts, which of the following is true? A) Because Len did not know what he was signing, he cannot be held liable. B) Len's carelessness in failing to read what he was signing will likely defeat any claim of non est factum. C) Len could avoid his obligation on the cheque on the basis of duress. D) Len could avoid his obligation on the cheque on the basis of unconscionability. E) Undue influence would be his best defence on these facts.

B Diff: 2 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

39 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 82) With regard to the law governing privity of contract and assignment, which of the following is false? A) A statutory assignment is easier to enforce than an equitable assignment. B) A party to a contract for services can assign both his contractual obligations and his contractual rights. C) Novation refers to the ending of the original contract and entering into a new contract with changes in terms, such as substituting one party for another. D) Assignments are modifications of the privity of contract rule since they do allow a stranger to the contract to receive benefits from the contract. E) An employee sent by his employer to do a routine job for one of the employer's customers is not in a contractual relationship with the customer.

B Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

73) With regard to the law governing privity of contract and assignment, which of the following is false? A) Where the assignor assigns the same debt to two or more persons, if the promisor (debtor) pays out in good faith to the first assignee to give him notice, he has no further obligation. B) If a promisor (debtor) accidentally pays out to the assignor after receiving notice of the assignment, he is free from any obligation to the assignee, and the assignee must look to the assignor for payment. C) A statutory assignment is easier to enforce than an equitable assignment. D) An exception to the doctrine of privity of contract is a contract granting an interest in land. E) Novation refers to the ending of the original contract and entering into a new contract with changes in terms, such as substituting one party for another.

B Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

13 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 29) With respect to having the court set aside a contract on the basis of undue influence, which of the following is false? A) If a client transferred property to his lawyer and later claimed the transfer was due to undue influence, the law would presume the transfer was due to undue influence. B) If the court presumes the existence of undue influence, the person asking for the return of the property will automatically get it back. C) A contract made in favour of a dominant person who exerted undue influence over the weaker party is voidable at the option of the weaker party. D) If you are a dominant person in relation to an aged relative who wants to sell you his house below market value, you should insist that the aged relative receive independent legal advice. E) Where undue influence is established, the resulting contract is voidable, not void.

B Diff: 3 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

10 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 22) ________ attempts to return both parties to their original positions. The subject matter of the contract must be returned to the original owner, and any monies paid under the contract must also be returned. A) Damages B) Remedies C) Recession D) Compensation E) Avoidance

C Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

7 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 15) Mary has a little scam most everywhere she goes. She sells by saying anything. Her buyers just have woes. Which of the following is true with regard to misrepresentation? A) There are several remedies available in case law for an exaggerated claim made by Mary. B) If Mary induces the buyer to buy by making a misrepresentation that she honestly thought was true, the buyer has no remedy in law or in equity. C) A misrepresentation can be made about a term of a contract and result in an award of rescission and/or damages. D) In some types of misrepresentation there are no remedies available. E) For fraudulent misrepresentation, the buyer can be granted the equitable remedy of only rescission.

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

8 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 17) Keri went to Crandon's computer outlet with her brother Paul, who was buying a laser printer. While she was waiting for him, she saw a poster saying the store was collecting funds for a special computer for a student recently disabled in an accident. The seller induced Paul to buy the model "X" printer by stating as a fact that the printer could interface with his iMac. Paul paid $400 for the printer. Also, Keri gave $15 to the student fund after the seller confirmed he was collecting for the student's computer. Later Paul and Keri learned that neither statement was true —the printer didn't work with Paul's computer and the store was doing nothing for the student— and that the seller didn't believe that either statement was true when he made them. On these facts, which of the following is true? A) Keri could sue for damages due to a misunderstanding. B) Paul could sue for damages due to an innocent misrepresentation. C) Paul could sue for rescission because of the misrepresentation. D) The court would rescind Paul's contract only with proof that the seller knew his statement was false. E) Only Keri has a remedy because she had been fraudulently misrepresented.

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

Chapter 8 Factors Affecting the Contractual Relationship 1) With regard to the law concerning misrepresentation, which of the following is true? A) The case law provides a remedy for a wildly exaggerated claim, such as "This is the best car ever built." B) A statement of opinion can be a one-sided mistake. C) A misrepresentation can be a false assertion of fact that induces (persuades) the party to contract, and need not be an assertion about a term of the contract. D) For fraudulent misrepresentation, the buyer could ask only for the equitable remedy of rescission. E) A buyer could not be awarded the equitable remedy of rescission if the seller honestly believed that the misrepresentation was true.

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

6 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 13) Which of the following constitutes a misrepresentation that would not allow the courts to award the equitable remedy of rescission? A) A man who contracted for an insurance policy did not state on the application form that he had been treated for cancer. He died from the cancer two months later. B) The seller concealed the broken drawer of the desk from the buyer. He would not be able to see it until he got it home. C) The seller was persuaded to buy the car by a misrepresentation that it had the fewest repairs of any car of its class. After the buyer learned of the truth, he kept the car for three weeks to get some benefit from it before taking it back. D) The seller persuaded the buyer to buy the car by misrepresenting it as having just been serviced and passing emissions tests. Neither had been done, but the seller honestly believed both had been done. E) None of the above.

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

21) The victim of ________ can seek monetary compensation as well as rescission for any loss incurred. A) innocent misrepresentation B) negligent misrepresentation C) fraudulent misrepresentation D) misrepresentation E) deceit

C Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

32) The law attempts to help persons who may feel forced to enter contracts. Which of the following is false with regard to the law of undue influence, duress, etc.? A) An unconscionable transaction is one in which one party has been seriously taken advantage of, and the courts, in their equitable jurisdiction, can set such a contract aside. B) If a contract favours the stronger party in a relationship (e.g., if a lawyer bought property from a client at far below the market value), the court would presume undue influence (i.e., that the stronger party abused his dominant position). C) If the court presumes the existence of undue influence, the person asking for the return of the property will automatically get it back. D) A contract entered into because of a threat of violence is voidable at the option of the victim. E) Independent legal advice given to a person who wants to give a gift to a dominant person (e.g., his doctor) is good evidence to rebut a presumption of undue influence.

C Diff: 2 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

48) Gomer paid the seller of a car with a worthless cheque. He then sold the car to an innocent person who paid him good consideration. Gomer took the money and left the country. The original seller found out who had the car and wanted it back. Who is entitled to the car if the court holds that the contract between the original seller and Gomer is voidable? A) Original seller B) Gomer C) Innocent purchaser D) The innocent purchaser, but he must pay damages to the original seller E) The original seller, but he must pay compensation to the innocent party

C Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

52) While selling the contents of his house in preparation for a move to a condominium, Mr. Lotski sold an antique desk to a Mr. Rogers, who paid by a cheque that was later returned N.S.F. (nonsufficient funds). Lotski later learned that Rogers had sold the desk to Mrs. Lee for cash, which he took and then disappeared. Who is entitled to the desk if the court holds that the first contract between Lotski and Rogers is voidable? A) Lotski B) Rogers C) Lee D) Lotski, but he must pay compensation to Lee E) Lee but, she must pay compensation to Lotski

C Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

25 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 55) In Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd., the defendant attempted to take advantage of a mistake made by the plaintiff. What did the Court hold? A) The defendant's conduct was sharp business, and the Court dismissed the plaintiff's claim. B) The defendant's conduct was improper, but there is no remedy available to address such a mistake. C) The defendant's conduct was equivalent to a fraud or a misrepresentation amounting to fraud, and the Court awarded damages in lieu of rectification. D) The defendant's conduct was essentially a breach of a fiduciary duty and the Court ruled that the entire contract was void as a result. E) The defendant's conduct was admirable and the Court ordered the plaintiff to pay costs.

C Diff: 2 Type: MC Page Ref: 262 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

50) Lars Jepsen, a fisherman from Tofino, regularly sells his catch to packing plants in Steveston. His shipment had already left dock last Monday, but he didn't contract for its sale until yesterday. He sold this shipment for $10,000 to B.C. Packers. Jepsen still owes Sam $3000, part of his commission for having sold one of his waterfront properties. This morning he assigned to Sam, in writing, $3000 of the $10,000 owed under the contract with B.C. Packers. Unknown to Jepsen or B.C. Packers, at the time they made the contract, his transporter had gone down in a storm and all the cargo was lost. Jepsen had no insurance for loss of his boat. Which of the following is correct with respect to his legal position? A) This is an example of a frustrated contract. B) This is an example of a breach of contract by Jepson with B.C. Packers. C) This is an example of a mistake causing the contract between Jepson and B.C. Packers to be void. D) Because of the frustration, Sam has no claim against either Jepson or B.C. Packers. E) Despite the frustration, Sam can collect the $3000 from B.C. Packers.

C Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

69) Often a party to a contract wants to avoid his obligations by arguing that the contract was entered into because of a mistake, misrepresentation, undue influence, or duress. Which of the following is true with regard to these areas of the law? A) A buyer could not be awarded the equitable remedy of rescission if the seller honestly believed that his misrepresentation, which persuaded the buyer to buy, was true. B) If a seller persuades a person to buy something via an innocent misrepresentation, the buyer could ask for rescission and damages for the tort of deceit. C) A person can successfully argue non est factum and avoid his obligations under a contract only if he was misled about the very nature of the document and was not careless. D) Independent legal advice given to a person is good evidence of undue influence. E) Where a written document embodies the original oral agreement, a party to the contract could ask the court for the equitable remedy of rectification.

C Diff: 3 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

34 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 74) Able Company contracted to sell to Baker Company 400 barrels of chemical C for $12,000. Able Company assigned the entire $12,000 in writing to Mr. Long, who sent a letter informing Baker Company of the assignment and directing Baker Company to forward money to him instead of Able Company. Unknown to both companies, at the time of the contract the ship carrying the chemical had sunk and all cargo was lost. Which of the following is true? A) Mr. Long, the assignee, will receive $12,000 from Baker Company. B) The assignment to Mr. Long would fail to be a statutory assignment. C) Mr. Long will receive nothing from Baker Company because nothing is owed to Able company. D) Mr. Long will receive part payment. E) Since Able Company has breached the contract, it must pay compensation for the damages of both Baker Company and Mr. Long.

C Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

37 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 79) Allen hired Beth to do a marketing survey. The contract provided that she would start the work on January 15 and finish it by March 15, the date for completion being a condition on the contract. She would be paid $2000. After one month of work, when the work was half completed, Beth assigned the $2000 contract price to Charlie, from whom she had bought computer hardware. Charlie gave written notice of the assignment to Allen on the same day. The second month's work went badly. Information entered into the computer was lost and Beth could not finish on time. She was five days late, and each day cost Allen $100. His total foreseeable loss was $500 because of her breach. On these facts, which of the following is true? A) Charlie could receive only $1000 from Allen because half of the $2000 project was finished when he gave notice of the assignment to Allen. B) Charlie could receive $2000 from Allen because that is the amount owed to Charlie and the amount assigned by Beth. C) Charlie could receive $1500, because when the contract was completed, that was all that was legally owed to Beth. D) Charlie could receive only $1000 from Allen because only half the work was done when the assignment was made. E) Charlie gets $0 from Allen because one can assign contractual obligations but not contractual rights.

C Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

77) The Weyburn Farmers' Co-op contracted to sell a carload of grain to Mr. Takemori for $2000. The co-op assigned, in writing, its contractual right to receive the $2000 to the Royal Bank, to which it was indebted. The Royal Bank gave written notice of the assignment to Takemori. Unknown to the buyer and the seller, at the time of the contract the grain had been destroyed because of a train derailment caused by the negligence of the train conductor. On these facts, which of the following is true? A) The Royal Bank, the assignee, will receive the $2000 because it could prove privity of contract with Takemori. B) The Royal Bank will receive part payment from Takemori. C) The Royal Bank will receive nothing from Takemori because Takemori owes nothing to the Co-op. D) The Royal Bank will receive $2000 from Takemori because there was an assignment in writing and that is the sole test for determining if the assignee will be paid the amount of the assignment. E) Because of the conductor's negligence, the railroad will have to honour Mr. Takemori's contract with the Royal Bank.

C Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

83) Although Zlotnic had been in business a long time, he had been forced to borrow heavily in the last few years. When his debt reached the limit of his line of credit, $100,000, the manager of the Regal Bank called him in for a talk. Subsequently, Zlotnic sold his house for $250,000 to the Johnsons. He contracted to buy another house from the Scotts. From the proceeds he anticipated receiving from the Johnsons, he assigned $200,000 to the Scotts, the purchase price of Scott's house, and assigned $50,000 to the Regal Bank to reduce his debt. The assignment to the Scotts was in writing; the assignment to the bank was not. The Scotts gave written notice of the assignment to the Johnsons on March 1, the day the money was owed to Zlotnic. Johnson verified the assignment and paid out the $200,000 to the Scotts. On March 2, the Regal Bank gave written notice of its assignment to the Johnsons. Unfortunately, at that time only $45,000 was owing to Zlotnic because the Johnsons had paid $5000 to the Canada Revenue Agency for Zlotnic. On these facts, which of the following is true? A) The assignment to the bank is a statutory assignment. B) The assignment to the bank is not enforceable because it was not in writing. C) Regal Bank must take "subject to the equities" between Zlotnic and the Johnsons; i.e., it can't receive the whole $50,000. D) Zlotnic needed the permission of the Johnsons, the debtors, before he could make any assignments. E) The bank has no claim since the Johnsons didn't owe Zlotnic the specified $50,000 at the time of the assignment.

C Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

181) Discuss the signs that the doctrine of privity may be breaking down. In your discussion, include a reference to the leading cases in this area.

Case law, especially some recent Supreme Court of Canada authority has begun to erode the doctrine of privity. In London Drugs Ltd. vs. Kuehne & Nagel International Ltd., the Supreme Court of Canada extended the protection of an exemption clause to employees of one of the parties. In doing so, the Court created a "principled exception" to the common law doctrine of privity. Privity of contract may also be weakening in the area of product liability. Good students will note that in some jurisdictions, there have been law reform recommendations to relax the application of the doctrine of privity to allow third party beneficiaries to enforce their rights under contracts. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

15 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 33) A real-estate agent, Jones, was owed a $17,000 commission, having sold property for Mr. Quick. Mr. Quick couldn't be found, but Jones did find his wife and learned that she had over $20,000 in treasury bills. Mr. Jones told her that if she didn't assign to him $17,000 of the $20,000, he would make sure her husband was imprisoned for his debts and "for other crimes" he knew about. If she did make an assignment in writing to Jones of the $17,000 but later tried to void the agreement, she would argue which of the following? A) Statutory assignment B) Mistake C) Non est factum D) Duress E) Privity

D Diff: 1 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

37) When two parties are involved in a mutual mistake (misunderstanding) as to the meaning of a term of the contract, which of the following is usually applied by the court to settle the matter? A) The court will find that there is no contract because there is no meeting of the minds. B) Non est factum C) Caveat emptor D) The reasonable person test E) The equitable remedy of rectification

D Diff: 1 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

64) The longer Adolph stayed on his job, the more he hated it. He thought his boss was too demanding. He especially disliked being reprimanded for being late. One afternoon, he was asked by a secretary to take a letter to his boss for his signature. His boss had had an eye operation and was recuperating at home. Adolph got two signatures, one on the letter and one on a note promising to pay Adolph $1000 in consideration for services rendered. His boss was not careless, but couldn't read the papers. What plea or argument, if any, could his boss use to avoid paying on the promissory note? A) Duress B) Unconscionability C) Shared mistake D) Non est factum E) Rectification

D Diff: 1 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

66) Mr. Frank, a foreman supervising some 43 employees, was asked by his secretary to sign a form requesting additional supplies needed on the factory floor. He was not careless when he examined the form, but his secretary had cleverly arranged the signature line so that instead of signing a request for supplies he signed a cheque payable to his secretary. What principle, if any, would be used to defend against her action on the cheque? A) Mistake B) Illegality of object C) Rescission D) Non est factum E) Rectification

D Diff: 1 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

35 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 76) Privity of contract applies in which of the following situations? A) Where an interest in land is involved B) Where a trust is involved C) Where an insurance contract is involved D) Where goods are being sold E) Where a trust has been created

D Diff: 1 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

2 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 5) The office manager of a real estate agency was at an office supply store to replace a filing cabinet when he saw a demonstration of a new Xerox copier. Undoubtedly, the agency would benefit from the copier, especially since it had the capability of enlarging the original—a good feature when dealing with the small print of contracts. The next day, he called the manager of the store to discuss the machine further. The seller said that it was "ten years ahead of the competition," that it "was rated as maintenance-free by an independent consumer research group," and that he had "sold five to other real estate agencies in this area" and "had only one left." The agency, relying on these statements, asked to have it delivered. When it arrived, the office manager had learned that every statement made by the seller had been false. Furthermore, the seller did not send out the machine discussed, but the old model. Which of the following is true? A) The agency would have to keep the machine, but could sue the seller for damages for the tort of deceit. B) This is a "buyer beware" situation and the buyer has no remedy. C) The agency would have a remedy for breach of contract, but no remedy for other statements that merely persuaded it to enter the contract. D) The agency could have returned the machine even if it had been sent the right model, since the remedy of rescission was available to it for misrepresentations made. E) Had the office supply store sent the right machine, the agency would have had no remedy.

D Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

3 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 7) A salesman innocently misrepresented a fact to a customer about a new printer. He honestly believed his statement was true and was not careless. Although this fact was not about a term of the contract, it did induce the customer to buy that printer. The next day, the customer learned the true facts and wanted to return the printer. If the store refused to take it back and the customer sued, which of the following would be the most likely result? A) An award of damages B) The buyer's case dismissed C) An order of specific performance D) An order of rescission E) An injunction

D Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

6) Jenny went to the store and asked to see a Bluetooth headset. The salesman brought out a set that he said had all the features that she wanted. After looking at the price tag and little else, she said she would think about it. The salesman said that this was the most popular model sold, that they sold 1000 of them during the World Series alone, that it had the highest rating in Consumer Reports, and that he only had that one left. Jenny bought it. Later she found out that all the statements made to her by the salesman were false, including the statement that the headset had all the features that she wanted, because it did not have noise suppression. Which of the following is true? A) Jenny could obtain the remedy of rescission only if the statements made to induce her to contract were fraudulent. B) The statements of the salesman are fraudulent only if the salesman knew they were false. C) Jenny would only have a remedy for breach of contract. D) The equitable remedy of rescission is available only if Jenny were able to restore the headset to the seller. E) Jenny could return this headset to the seller only if she could prove undue influence.

D Diff: 2 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

12 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 26) According to Braut v. Stec, what is the Courts' position when one enters into a contract where a claim is made that a bargain is unconscionable? A) There is an automatic presumption of undue influence due to the relationship of the parties. B) A close relationship between business associates prevents a finding of unconscionability. C) When one party lacks the intellect to enter into a contract, the contract continues to be binding on both parties. D) A presumption of fraud is raised when there is an inequality in the position of the parties due to the ignorance of the weaker party. E) Because a party to the contract is an uneducated immigrant, the contract is voidable.

D Diff: 2 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

27 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 59) Which of the following situations gives rise to the application of the equitable remedy of rectification? A) Both parties to a contract agree that they want to change some of its terms and thus apply jointly to the court to have the relevant terms altered. B) The two parties to a contract have made a mutual mistake and one of these parties is asking the court to choose the more reasonable meaning of the terms in question. C) The defendant has a justifiable defence of non est factum. D) A written instrument, because of an obvious mistake, does not embody the unchanged terms of an original oral agreement. E) The contract is one requiring "utmost good faith."

D Diff: 2 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

62) In which scenario will the court likely find the contract void on the grounds of mistake? A) Annette bought a suit thinking she would be invited back for a second interview. She wasn't, and now wants to return the suit on the basis of mistake. B) Ms. Hunt bought some property erroneously thinking that the province was planning to put a highway nearby, even though the seller had never made any such suggestion. She wants out of the contract. C) The parties signed a document that stated the consideration as $1100 instead of the $900 that the buyer and seller had contracted for, but the buyer cannot prove the terms of the original contract. D) Mr. Armstrong accepted an offer by Sidhu, who was selling a "computer program," but learned that they had different understandings of what program was meant. The court cannot say that one interpretation is better than the other. E) Mary contracted to buy "the Acura car" from a collector of cars. He was selling his 2011 model but she thought she was buying the 2012 model. The court, looking at all the evidence, found that his interpretation was the more reasonable.

D Diff: 2 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

71) Which of the following is true with regard to the law of contract? A) Assignments are modifications of the privity of contract rule, since they do allow one person to take over the obligations of another. B) An employee sent by his employer to do a routine job for one of the employer's customers is in a contractual relationship with the customer. C) The assignor for value of a negotiable instrument may acquire better rights than the assignee has. D) A statutory assignment is easier to enforce than an equitable assignment. E) A party to a contract for services can assign both his contractual obligations and his contractual rights.

D Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

85) With regard to the law governing privity of contract and assignment, which of the following is false? A) The privity of contract rule states that only the parties to the contract have rights and obligations under the contract. B) Assignments are modifications of the privity of contract rule since they do allow a stranger to the contract to receive benefits from the contract. C) A statutory assignment is easier to enforce than an equitable assignment. D) A party to a contract for services can assign both his contractual obligations and his contractual rights. E) Novation refers to the ending of the original contract and entering into a new contract with changes in terms, such as substituting one party for another.

D Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

34) On September 1, Beeton contracted to sell $4000 worth of specified Kenyan lumber to Cairns. Beeton expected the arrival of the lumber soon, so the delivery date was set for September 8. On September 5, Beeton assigned, in writing, his contractual right to receive the $4000 to his bank, which was pressing him to reduce his $17,000 debt. The bank sent a written notice to Cairns instructing him to forward the $4000 to the bank and not to pay Beeton directly. Unknown to either Beeton or Cairns, the lumber had been lost at sea in August, before they had even entered the contract. On these facts, which of the following is true? A) This assignment was not a statutory assignment; i.e., it failed to satisfy the statutory requirements for enforcement by the assignee against the debtor. B) Because the assignment was made by Beeton to his bank in good faith, Cairns must pay the bank $4000. C) The assignee would receive whatever the assignor had assigned to him, namely, the $4000. D) Because the goods bargained for had perished before the parties had contracted for them, the court would hold the contract void. E) The time for determining the "equities between the parties" is always the time that notice of the assignment is given.

D Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

39) Which of the following will have the likely consequence of the court finding the contract void on the grounds of mistake? A) Mr. Twigg carelessly signed a mortgage for $24,000, which he was told was a mortgage for only $14,000. This was assigned to Mr. Jones. B) Mr. Ideer bought some property, erroneously thinking that the province was planning to put a highway nearby, even though the seller had never made any such suggestion. C) The parties signed a document that stated the consideration as $1200 instead of the $1100 that the buyer and seller had contracted for, but the buyer cannot prove the terms of the original contract. D) Mr. Ille, although using due care, signed a cheque for $100 in favour of his secretary, who had told him it was a receipt for money received. E) Mr. Jones, without reliance on a salesperson, purchased an HTC smartphone, thinking it was actually a Samsung smartphone.

D Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

36 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 78) Mr. Jans owned a small building with four offices upstairs and a restaurant on the main floor. Jans contracted with a company, Signs Limited, to construct a sign indicating the names of his tenants and their room numbers. The sign was created and installed by John Monet, an employee of Signs Limited. Signs Limited assigned $500 of the $700 contract price to Ms. Franz, its landlord, when she called and pressed for the rent. Ms. Franz gave notice of the assignment in writing to Jans. Read the following statements, independently of one another, and indicate which is the true statement. A) If Signs Limited fails to pay Monet's salary, Monet is legally entitled to sue Jans for it because Monet did work for Jans. B) Franz cannot enforce this assignment because the assignment was not in writing, and only assignments in writing will be enforced by the courts. C) If the sign were not done properly, Jans should sue Monet for breach of contract because Monet, as the employee, did the work. D) If the contract were completed satisfactorily, Franz could enforce the assignment, although it is a partial assignment. E) If the assignment is not honoured by Jans, Franz' only recourse is to sue Monet, the employee who actually did the work.

D Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

38 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 80) Adam bought a boat from Charlie for $900 payable on November 6. On November 6, when Charlie came for the money, Adam didn't have it. Adam was, however, employed by Ms. Bey to do some market research. He was to be paid $1000 for his report, due on November 12. Charlie wanted an assignment of $900 of the amount Adam expected to receive November 12. Adam wrote out an assignment with all the essential information and signed it. Charlie gave written notice of the assignment with all pertinent information to Ms. Bey the next day, November 7. On November 12, Adam had not finished his report. The contract provided that he would lose $100 for every week he was late. Adam was two weeks late in submitting his report. Which of the following is true? A) The assignment fails to be an assignment at all because Adam failed to get the consent of Ms. Bey. B) This assignment is a statutory assignment. C) Ms. Bey must honour the notice of assignment by paying out the $900 on the day the notice was received. D) Charlie, the assignee, would receive $800 from Ms. Bey and have to look to Adam for the other $100 owed. E) Charlie would get nothing because Ms. Bey owed less than the amount assigned.

D Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

81) Mr. Zink hired Bruce Dorne to create a payroll program for his business. Bruce was to be paid $4000 for the program. When Bruce was half finished, a creditor to whom he owed $2000 pressed so hard for payment that Bruce assigned him $2000 of the contract price, an amount he felt he had earned already. The creditor, Mr. Pressing, gave written notice that very day to Mr. Zink. On these facts, which of the following is true? (Read each statement separately.) A) Mr. Zink must pay $2000 to Mr. Pressing on the day that notice was given, because at that time Bruce had done half of the work on the $4000 contract. B) This assignment is a statutory assignment, not an equitable assignment. C) This type of assignment is not recognized by the courts because it is an assignment of contractual obligations. D) Mr. Pressing is entitled to $2000 from Mr. Zink when the contract is completed, if at least that much is owed to Bruce by Zink at that time. E) If Bruce bungled the assignment and the court determined that nothing was owed to him, Pressing could still get $2000 from Zink.

D Diff: 3 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

51 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 133) Distinguish between duress and undue influence.

Duress involves controlling somebody's actions through threat of violence or imprisonment. Undue influence involves controlling that person's actions through abuse of position and influence. Diff: 2 Type: ES Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

10) It came to your attention that your great-grandmother had signed a contract pursuant to which she would be paying $5000 for an electronic organ that retails in reputable stores for $3000. Furthermore, the interest being charged is 18%, even though today's rate fell to a 20-year low. This debt is totally out of line with her pension income. It is apparent that she was misled by the door-to-door salesman who came to her place. On these facts, which of the following laws is the most likely to help her? A) Undue influence only B) Unconscionability only C) Misrepresentation only D) Non est factum E) Both unconscionability and misrepresentation

E Diff: 1 Type: MC Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

23) Which of the following is an example of duress? A) Joe refuses to sell Harry his car unless Harry offers him more money. B) Joe, knowing of Harry's financial situation, refuses to sell him his car. C) Joe counteroffers Harry's original offer. D) Joe wants to purchase Smith's car from him, and Smith sells it to someone else. E) Joe threatens to smash Harry's car if Harry won't sell it to him.

E Diff: 1 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

25) In Rochdale Credit Union v. Barney, a lawyer persuaded his client to guarantee a loan. The relationship of solicitor/client leads to a presumption of A) duress. B) mental incapacity. C) lack of intention. D) unconscionability. E) undue influence.

E Diff: 1 Type: MC Page Ref: 256 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

11 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 24) An 80-year-old woman signed, in the presence of a solicitor, a contract for land by which she sold property to her daughter. She later asked the court to set the contract aside on the grounds of non est factum (mistake) and undue influence. Which of the following is true with regard to these grounds for the contract? A) She can successfully use the plea of non est factum if there is evidence that she was careless when she signed the document. B) She can successfully use the plea of non est factum if she was not misled about the very nature of the document. C) If the court presumes that undue influence was used by the adult who gained from the contract with an aged parent, the contract is automatically set aside. D) If the lawyer were the daughter's husband, his advice would be seen as independent legal advice. E) If the aged mother received independent legal advice, it would be good evidence for the daughter that the mother's transferring the property was done freely, without undue influence being exerted.

E Diff: 2 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

19 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 42) When you went home for Thanksgiving dinner, your great aunt, now 80 years old, seemed very unhappy. You learned that she had just signed a contract to buy an expensive condominium in a retirement community. She had attended a real estate "seminar" with her friend. In trying to think of a way for her to get out from under this contract, you review mistake, duress, undue influence, and unconscionability. Which of the following is false? A) To avoid the contract on the basis of non est factum, she would have to prove, among other things, that she did not understand the nature of the document signed. B) To avoid the contract on the basis of undue influence, she would have to show that she was improperly pressured by a trusted person in a dominant position. C) To avoid the contract on the basis of duress, she would have to show that she was forced into signing the contract against her will by serious threats. D) To avoid the contract on the basis of unconscionability, she would have to have evidence that the sellers of the property knowingly took advantage of their superior bargaining position and that the consideration was grossly unfair. E) To avoid the contract on the basis of mistake, there is a presumption of mistake and she will automatically get out of the contract.

E Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

36) Mr. Copperfield, a collector of movie memorabilia, bid $250,000 on the Batmobile. After taking delivery, he discovered the car was not the car actually used in the film "Batman," it was merely one of five cars used to promote the film. He is suing the seller, Mr. Eisenberg. In which of the following cases would Mr. Copperfield not be entitled to a remedy? (Assume that in each case the facts could be proven.) A) Fraudulent misrepresentation by Mr. Eisenberg B) Innocent misrepresentation by Mr. Eisenberg C) Breach of contract by Mr. Eisenberg D) Negligent misrepresentation by Mr. Eisenberg E) Unilateral mistake by Mr. Copperfield

E Diff: 2 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

26 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 57) In Moss v. Chin, Chin's insurer, ICBC, made an offer to settle a claim that was accepted by the public trustee representing Mrs. Moss. ICBC was not aware that Mrs. Moss had died in the interim. ICBC made a unilateral mistake and yet the Court ordered that the contract be rescinded. What was the rationale? A) ICBC lacked capacity to make an offer, as only Chin had such a right. B) The public trustee lacked capacity to accept an offer, as only Mrs. Moss could do so, and she had died. C) It is illegal to settle a claim when the claimant is no longer alive. D) There was no consideration to support the claim, and therefore the contract was invalid. E) ICBC had not misled itself, rather the public trustee had deliberately set out to keep ICBC from discovering the truth.

E Diff: 2 Type: MC Page Ref: 264 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

29 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 63) A week after signing a contract, you became aware that you and the other party, Sheldon, seemed to have a different understanding of one of the provisions of the contract. Before you said anything to him, you reread it to see if your interpretation was valid. As you reread it, you noticed that not only was that provision vague, but also other terms and provisions were ambiguous or left out. Which of the following is false with regard to the methods used by the courts to interpret contracts? A) The court will do its best to give effect to the intention of the parties. B) To interpret express terms, the courts will look first to the plain meaning of the term (e.g., the dictionary meaning). C) The parol evidence rule holds that when a contract is in writing, the court will not allow evidence to contradict, vary, add to, or subtract from the written contract. D) Evidence of a condition precedent agreed upon by the parties but not included in the written contract is admissible despite the parol evidence rule. E) Evidence of misrepresentation will not be admissible because of the parol evidence rule.

E Diff: 2 Type: MC Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

32 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 70) With regard to the law governing privity of contract and assignment, which of the following is true? A) A statutory assignment is more difficult to enforce than an equitable assignment. B) A party to a contract for services can assign both his contractual obligations and his contractual rights. C) Novation refers to the modifications of the privity of contract rule since it allows a stranger to the contract to receive benefits from the contract. D) Assignments are modifications of the privity of contract rule since they allow ending the original contract and entering into a new contract with changes in terms, such as substituting one party for another. E) An employee sent by his employer to do a routine job for one of the employer's customers is not in a contractual relationship with the customer.

E Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

40 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 84) Which of the following is false with regard to the law of contracts? A) Assignments are modifications of the Privity of Contract Rule, since they do allow a stranger to the contract to receive benefits from the contract. B) An employee sent by his employer to do a routine job for one of the employer's customers is not in a contractual relationship with the customer. C) The assignee for value of a negotiable instrument may acquire better rights than the assignor had. D) A statutory assignment is easier to enforce than an equitable assignment. E) A party to a contract for services can assign both his contractual obligations and his contractual rights.

E Diff: 2 Type: MC Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

30) You and your parents were both surprised when grandmother said the doctor told her to come for weekly checkups, because she didn't seem sick. Nevertheless, you dutifully took her to and from her appointments for a period of about six months. She never talked about these sessions, but loved to go. Now she has come to the family and said that she is sorry that she gave him the oil paintings and sold him the farm. On these facts, which of the following is false? A) If a court held that the property was obtained by undue influence, the contract would be voidable at the option of grandmother, the weaker person. B) In a court action, if she claimed the return of her property on the basis of undue influence, the court would presume undue influence and the doctor would have to prove that the property was freely given. C) A presumption of undue influence doesn't mean the weaker party will automatically get her property back. D) If grandmother had gone to her own lawyer for independent advice before conveying her property to the doctor, she would have more difficulty arguing undue influence. E) It would be easier for her to argue duress than undue influence.

E Diff: 3 Type: MC Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

43) Mr. and Mrs. H were induced to sign a mortgage in favour of M Co. Ltd. by Johnston, a man living with their daughter. Johnston led them to believe that the document was an unimportant amendment to an existing mortgage, when in reality, it was a second substantial mortgage of their home. Neither read the document or questioned it. When the payments were in arrears, the mortgagee took an action for foreclosure (to take their home). Which of the following is correct with respect to the legal position of the parties? A) If the court finds that Johnston committed a fraudulent misrepresentation, Mr. and Mrs. H will not have to honour the mortgage. B) If the court finds that this is an example of undue influence by Johnston, Mr. and Mrs. H will not have to honour the mortgage. C) If the court finds that this is an example of duress by Johnston, Mr. and Mrs. H will not have to honour the mortgage. D) If Mr. and Mrs. H can show they didn't read the document, they will not have to honour the mortgage contract. E) Assuming there was consideration, they will likely have to honour the mortgage contract even though they didn't read it.

E Diff: 3 Type: MC Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

43 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 97) The victim of fraudulent misrepresentation retains the right to have the parties to the contract returned to their original positions but not to be reimbursed for any out-of-pocket expenses.

FALSE Diff: 1 Type: TF Page Ref: 255 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

108) A unilateral mistake refers to a breach of a unilateral contract.

FALSE Diff: 1 Type: TF Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

120) The doctrine of privity of contract is unique in that is has no exceptions.

FALSE Diff: 1 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

42 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 92) Fraud does not exist if the victim of the misrepresentation could have found out the truth, but relied instead on the statement of the defendant.

FALSE Diff: 2 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

86) The victim of intentional misrepresentation can sue for damages but cannot ask for rescission.

FALSE Diff: 2 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

90) In order to succeed in suing for a misrepresentation, that misrepresentation must have been in writing.

FALSE Diff: 2 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

94) Where the misleading statement being complained of was an expression of opinion rather than fact, it is not actionable, even if the person making the statement was an expert.

FALSE Diff: 2 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

98) A victim of fraud cannot seek damages where rescission is not available.

FALSE Diff: 2 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

104) When it has been clearly established that one of the parties to the contract has been the victim of undue influence, that contract is void.

FALSE Diff: 2 Type: TF Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

46 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 112) Non est factum is available as a defence even when there is negligence on the part of the person claiming it.

FALSE Diff: 2 Type: TF Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

115) The original party cannot enforce a contract that bestows benefits on an outsider.

FALSE Diff: 2 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

89) For a misrepresentation to be actionable, it must become a term of the contract.

FALSE Diff: 3 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

44 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 102) Duress takes place when one person takes advantage of another's vulnerability because of a special relationship with that person.

FALSE Diff: 3 Type: TF Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

119) An assignee is "subject to the equities," means that a negotiable instrument can never convey more than existed between the original parties.

FALSE Diff: 3 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

128) Distinguish between innocent and fraudulent misrepresentation, indicating why the distinction is important.

Innocent misrepresentation is involved where the person who made the misleading statement honestly believed it to be true. Fraudulent misrepresentation is involved where the person making the statement knew it was false or didn't believe it was true. The distinction is important, since with innocent misrepresentation, the only remedy is rescission, whereas with fraudulent misrepresentation, the victim may obtain rescission and/or damages. Diff: 3 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

57 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 159) "Joe received a cheque from Sam for work he had done painting Sam's house, and Joe passed that cheque onto Harry. Harry took it, not knowing that the work done was defective. Because of the principle that an assignee of contractual rights is in no better position than an assignor, Harry would not be able to demand payment on that cheque from Sam." Discuss the accuracy of this statement.

It is incorrect. Negotiable instruments are an exception to this rule. One of their unique features is that if a negotiable instrument, such as a cheque, gets into the hands of an innocent third party who qualifies as a holder in due course, that person will be able to enforce it even where there is some problem like this to the original contract. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

52 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 137) Outline the restrictions on the ability of a person to claim non est factum.

It must be shown that the mistake about the document went to the very nature of the document, not merely its terms. Negligence can defeat the defence. Diff: 2 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

150) Joe, a student at the local college, had a one-year lease on a suite in a house owned by Sam. Sam sold the house to Jones without telling Jones about the lease. When he discovered Joe in the suite, he demanded that Joe leave. Explain the rights of the parties in terms of privity of contract.

Joe is not party to the contract between Sam and Jones, but his rights embodied in the lease are said to run with the land, and Jones is bound by that lease and can't evict him. This is an exception to the privity rule. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

124) "Misrepresentation involves a misleading statement of fact, not opinion." Discuss the accuracy of that statement.

Misrepresentation can involve the statement of opinion when it comes from an expert. Diff: 2 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

139) What is the term used to describe a claim that results in a court declaring a contract void because a party is unaware of the nature of the contract?

Non est factum Diff: 1 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

49 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 126) Explain what remedies are available to the victim where misrepresentation becomes a term of the contract.

Normal contractual remedies, including damages, injunctions, and specific performance are available. Diff: 1 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

140) Explain what is meant by the parol evidence rule.

Parol is the principle that courts will not permit outside evidence to contradict clear wording of a contract. Diff: 2 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

63 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 180) Discuss how privity of contract affects the position of people who are not parties to a contract. In your discussion, include an examination of the Supreme Court decision in London Drugs Ltd. v. Kuehne & Nagel International Ltd.

Privity of contract limits the rights and obligations under the contract to those who are immediate parties to the contract. Only those who are parties to the contract can have rights and obligations under it. The classic illustration is the Donoghue v. Stevenson case (snail in the ginger beer case) discussed in Chapter 4, where Mrs. Donoghue could not sue the café that served the contaminated ginger beer to her in contract because she did not buy it. Her friend bought it for her. This question requires that students demonstrate a clear understanding of this basic principle as demonstrated in this case. Students should then show that they have an understanding of the number of exceptions, both apparent and real, set out in the chapter. Examples are agency, trust, land, modification through agreement including novation, and assignment. There should be some more lengthy discussion of assignment and why that does not violate the rules of privity. Finally, students should show an understanding of how privity of contract is breaking down. In the London Drugs Ltd. vs. Kuehne & Nagel International Ltd. case specifically mentioned in the question, the Supreme Court of Canada extended the protection of an exemption clause to employees of one of the parties, stretching the concept of privity even further. This is only one example of how the courts and legislatures have shown a willingness to abandon the principle of privity. Diff: 3 Type: ES Page Ref: 270 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

144) Explain what is meant by rectification.

Rectification is a correction by the court of the wording of a mistake in the contract. Diff: 2 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

50 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 130) Indicate under which circumstances the remedy of rescission might not be available.

Rescission may not be available where the victim of the misrepresentation has affirmed the contract, where it's impossible to restore the parties back to their original positions, or where some third party is involved who might be harmed by the rescission. Diff: 2 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

125) Sam agreed to buy property from Joe to build a store of a certain design. Joe, the vendor, was aware of the design and knew that an easement across the back of the property would prevent such a building being erected, but said nothing. Sam purchased the property, later discovered the easement, and learned that Joe knew about it. He sued for misrepresentation. Discuss the likely outcome.

Sam will lose. Joe was under no obligation to tell him about the mistake. Silence or non-disclosure will not amount to a misrepresentation unless there is some sort of specialized obligation or relationship existing between the parties, which was not the case here. Diff: 3 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

176) Discuss the various remedies that are available where one of the parties to the contract is a victim of misrepresentation.

Students should show how misrepresentation applies primarily where one party is induced to enter a contract, not just when the misrepresentation becomes part of the contract. They should point out that when the misrepresentation is without fault (not intentional or negligent), the remedy available is limited to the contract remedy of rescission, and they should explain what that means. Where the misrepresentation has been intentional, this is fraud, and the remedy available is the tort remedy of damages for deceit. Where the misrepresentation becomes a term of the contract, the remedies are the normal contract remedies including damages. Good students might point out that the damages awarded in contract law may be different than the damages awarded in tort law. That is, with tort you are put into the position you would have been in had the misrepresentation not taken place (backward), whereas in contract law you are put into the position you would be in had the contract been properly performed (looking forward). Good students will also note that where fraud or deceit are involved, punitive damages may also be available. Diff: 1 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

41 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 87) Fraudulent misrepresentation is intentionally misleading another person into a contract.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

93) The major problem with fraudulent misrepresentation is the need to establish that the person being sued knowingly misled the victim.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

95) Where a heavy-duty equipment supplier sells a truck claiming it can haul ten tonnes of gravel but its actual capacity is only five tonnes, this is misrepresentation even where the seller believes what he said was true.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

100) Only when the misrepresentation is truly innocent and without fault is the victim restricted to the remedy of rescission.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

101) The victim of a fraudulent misrepresentation can also seek punitive damages, that is, damages intended to punish the wrongdoer rather than compensate the victim.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

96) The remedy of rescission is not available if the parties cannot be returned to their original positions because the subject matter of the contract has been destroyed or damaged.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

99) If the person making the misrepresentation is in no way at fault, the misrepresentation is innocent, and the remedies are limited.

TRUE Diff: 1 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 2. Identify the remedies available for each type of misrepresentation.

91) The threat of violence makes a contract voidable.

TRUE Diff: 1 Type: TF Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

109) The court will not allow the careless party to escape responsibility when a shared mistake is the result of the negligence of one of the parties.

TRUE Diff: 1 Type: TF Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

45 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 107) The purpose of contract law is to give effect to the reasonable expectations of the parties to an agreement.

TRUE Diff: 1 Type: TF Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

105) For a contract to be unconscionable, it is necessary that the victim was particularly vulnerable and that the bargain was unfair.

TRUE Diff: 2 Type: TF Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Recall Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

106) Misunderstanding occurs when each party has a different understanding of the terms of the agreement, in which case the courts apply a reasonable interpretation of the contract.

TRUE Diff: 2 Type: TF Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Recall Objective: Chapter 8: 4. Identify three types of mistake.

110) When there is clear evidence that both parties agreed to something different than what was in the written document, the courts will rectify the document.

TRUE Diff: 2 Type: TF Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

111) To avoid a contract on the basis of non est factum, the mistake must have gone to the entire nature of the agreement, not just some aspect of it.

TRUE Diff: 2 Type: TF Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

113) Rules of interpretation are guidelines used by the court to correct simple misunderstandings in relation to the contract.

TRUE Diff: 2 Type: TF Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

114) Privity of contract is a principle that holds that a contract can only affect the immediate parties to it.

TRUE Diff: 2 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

116) Novation is the term used when a new party is substituted for an original party to the contract.

TRUE Diff: 2 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

121) An assignee can be in no better position than was the assignor.

TRUE Diff: 2 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

88) A misrepresentation must be a false statement of fact unless it is a statement by an expert.

TRUE Diff: 3 Type: TF Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

118) When a negotiable instrument is used, the drawer of the instrument cannot use the rule of privity to limit the claim of the holder.

TRUE Diff: 3 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

47 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 117) An assignee is in no better position than the original contractor.

TRUE Diff: 3 Type: TF Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

62 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 178) Discuss the principle of caveat emptor and how it relates to misrepresentation in contract law.

The answer here will likely be shorter, but the principle is important. At the heart of contract law is the principle of the bargain and the marketplace environment. Each party is in theory left to their own wits to bargain for the best deal they can, the idea being that a fair price will be determined best by both parties being in an equal bargaining position and trying for the best deal possible. Caveat emptor is consistent with this principle. All parties must be vigilant and take care to look after their own interests. This does not extend to the position of being the victim of fraud or deceit, or even being innocently misled. Each party must be vigilant to protect their own interests, but they cannot mislead the other party, since that would upset the balance. The principles of caveat emptor are not inconsistent with the protection provided against misrepresentation, but are really a manifestation of the more general principle of ensuring that there is a level playing field and that both parties are in an equal bargaining position in order to protect that balance. Students should appreciate this broader principle and how the law of misrepresentation on the one hand and caveat emptor on the other create the necessary balance. Diff: 1 Type: ES Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

157) What is the significance of an assignment qualifying as a statutory assignment?

The assignee can sue the original party to the contract directly without involving the assignor as a party to the action. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

136) The facts of a case heard by the Supreme Court of Canada are as follows: Mr. and Mrs. H were induced to sign a mortgage in favour of M.C.R. Ltd. by Johnston, a man living with their daughter. Johnston led them to believe that the document was an unimportant amendment to an existing mortgage when, in reality, it was a second substantial mortgage on their home. Neither read the document or questioned it. When the payments were in arrears, the mortgagee took an action for foreclosure (to take their home). Mr. and Mrs. H. pleaded non est factum. Would this defence succeed? Why or why not?

The defence would not succeed as Mr. and Mrs H were careless and as a result cannot claim non est factum. Diff: 3 Type: ES Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

60 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 173) What is the status of the doctrine of privity today?

The doctrine still applies, but there are signs that it is weakening. For example, if something is not actionable because of a lack of privity of contract, tort law may provide a remedy, such as with the tort of inducing breach of contract. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

131) What is the significance of determining that the misrepresentation was negligent rather than innocent?

The remedy of damages will be available as well as rescission. Diff: 2 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

123) "A misrepresentation involves one person making a false statement of fact that misleads another and induces that person to enter into the contract." Discuss the accuracy of this statement.

The statement is accurate. Diff: 1 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Recall Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

166) Explain what is meant by a "chose in action."

The thing or benefit that is transferred in an assignment, being intangible personal property, such as a claim or the right to sue. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

153) Joe owned an apartment building and entered into a contract with Sam whereby Sam would operate the apartment building but the proceeds from the rent and profits would be distributed among Joe's children. If Joe were to die and Sam were to refuse to pay out any profits to the children, what could they do?

They could enforce the trust agreement. This is an exception to the privity of contract rule and they, as beneficiaries, have the right to enforce the contract. Diff: 3 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

179) Discuss what happens when the parties to a contract make mistakes with respect to what they have agreed.

This question requires a review of the whole area of mistake and also an examination of the requirement of consensus in forming a contract. Students can even include a discussion of misrepresentation when misleading statements induce the mistake. Students should distinguish the different forms of mistake, including shared mistake, misunderstandings, and one-sided mistakes, indicating the court's approach when each happens. The court will apply a reasonable person test and apply the most reasonable interpretation when there is a disagreement over what the terms of a contract mean. Only where both explanations are reasonable will the court declare the contract void for lack of consensus. Where a shared mistake takes place—that is, where both parties make the same mistake—it is only where the mistake is important, such as a mistake about the existence of the subject matter, that it will be void. As far as a one-sided mistake, the principle of caveat emptor usually applies, and the person who made the mistake is out of luck. However, the principle of non est factum is available in limited circumstances, and students should explain what this means and when non est factum is not available. Students should also explain what happens when that one-sided mistake is induced by misrepresentation on the part of the other party. Diff: 3 Type: ES Page Ref: 259 Topic: Ch. 8 - Mistake Skill: Applied Objective: Chapter 8: 4. Identify three types of mistake.

129) "Where fraudulent misrepresentation is involved, the victim can obtain rescission and/or damages but where innocent misrepresentation is involved, the only remedy is damages." Discuss the accuracy of that statement.

This statement is incorrect. With innocent misrepresentation, the remedy is rescission, not damages. Diff: 2 Type: ES Page Ref: 247 Topic: Ch. 8 - Misrepresentation Skill: Applied Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.

152) Joe owned an apartment building and entered into a contract with Sam whereby Sam would operate that apartment building, but the proceeds from the rent and profits would be distributed among Joe's children. This is an example of what kind of an agreement?

Trust Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

61 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 177) Discuss the development and importance of the principle of unconscionable contracts. In your answer compare unconscionability to insanity, duress, and undue influence.

Unconscionable contracts are a relatively recent development in contract law, but are indicative of a modern trend towards protecting disadvantaged parties to a contract. Historically, rules relating to insanity and misrepresentation were all that were available to protect a person from being taken advantage of by an unethical merchant. Recently, however, there has been a great body of statute law introduced to protect consumers. These laws were necessary because one of the basic assumptions in contract law—that both parties are in an equal bargaining position—didn't really work when naïve consumers faced unscrupulous merchants. Consumers needed more protection than found in the rules associated with misrepresentation and insanity. The development of the concept of unconscionability is a reflection of the courts also reacting to that need. Students must show a clear understanding that this is not simply a protection given to all consumers who are taken advantage of by a merchant. Here there must be some special vulnerability that creates an unequal bargaining position, and even that is not enough. It must be made clear that the other party took advantage of this vulnerability to the extent that the bargain that was been struck was grossly unfair. Students should give examples of what constitutes such vulnerability. Some examples might be simple-mindedness (short of insanity), poverty, not knowing the language, or some other physical or mental disability that interferes with the victim's ability to bargain on an equal footing. Note that students should show that simply taking advantage of a favourable economic situation is not enough to be unconscionable. So where one person is in poverty and the other charges a high rate of interest on a loan because of the risk, that by itself would not be unconscionable. Students should also distinguish unconscionability in contract law developed by the courts from the unconscionable transactions statutes that have been passed in many jurisdictions, which usually have a much narrower scope, often being limited to loan transactions. Diff: 2 Type: ES Page Ref: 255 Topic: Ch. 8 - Duress and Undue Influence Skill: Applied Objective: Chapter 8: 3. Explain the implications of duress and undue influence.

59 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 168) Explain what is meant by "vicarious performance."

Vicarious performance is performance by another qualified person of the obligations under a contract. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

55 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 151) Explain why agency is not really an exception to the privity rule.

When an agent acts on behalf of a principal in creating a contractual relationship with a third party, the contract is between the principal and the third party. The agent is merely a gobetween who is able to establish privity between the principal and the third party. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Applied Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

148) Explain the impact of the principle of privity of contracts.

When two people enter into a contract, they bestow rights and benefits only on each other. Third parties who are not party to the contract cannot enforce the contract. Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

167) The thing or benefit (such as a claim or the right to sue) that is transferred in an assignment is known as ________.

a chose in action Diff: 1 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

143) A separate contractual obligation that can stand alone, independent of the written contract, is known as ________.

a collateral contract Diff: 1 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

58 Copyright © 2017 Pearson Canada, Inc. Downloaded by Rezzak Ucar ([email protected]) lOMoARcPSD|4461764 163) A provision in equity whereby one person transfers property to a second person obligated to use it to the benefit of a third is known as ________.

a trust Diff: 1 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

154) Where one person transfers his rights to benefits under a contractual relationship to a third party, this is an example of ________.

assignment Diff: 2 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

161) The principle that contract terms apply only to the actual parties to the contract is known as ________.

privity of contract Diff: 1 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.

145) Correction by the court of the wording of a mistake in the contract is known as ________.

rectification Diff: 1 Type: ES Page Ref: 266 Topic: Ch. 8 - Rules of Interpretation Skill: Recall Objective: Chapter 8: 5. Describe the effect of mistake upon the enforceability of a contract.

169) Performance by another qualified person of the obligations under a contract is known as ________.

vicarious performance Diff: 1 Type: ES Page Ref: 267 Topic: Ch. 8 - Privity of Contract and Assignment Skill: Recall Objective: Chapter 8: 6. Outline the rules governing privity and assignment.