Deck 7: Formation of a Contract: Capacity to Contract and Legality of Object

Question 1

In order for a person under mental incapacity to avoid a contract made while that person was incapacitated, the incapacitated person must show:

A) that the contract was unfair
B) that the other party should have recognized the incapacity
C) that there was no intention to enter into a contract
D) that neither party knew what was happening
E) all of the above.

Answer 1

B

Question 2

Michael is an aboriginal native living on a Canadian Native Indian Reservation. Which of the following is true?

A) Michael has the same capacity to contract as other Canadians.
B) Michael's legal position to sell produce would not vary by province.
C) If Michael moves off the reservation, his capacity to contract would not change.
D) Michael may manufacture and sell goods to outsiders.
E) Michael can use Native Indian land as security for a loan.

Answer 2

D

Question 3

The age of majority is established by

A) provincial legislation.
B) municipal by- laws.
C) federal legislation.
D) the English common law.
E) anglo- canadian common law.

Answer 3

A

Question 4

Minors will be liable for contracts

A) if they signed the contract.
B) if the minor is deemed to be of well above average intelligence.
C) if the contracts concern necessaries.
D) if the parent of the minor was present at the time the minor was signing the contract.
E) if the minor completes a declaration stating that he or she has read and understood the terms of the contract.

Question 5

Capacity to contract means

A) the ability to make an offer, or accept and offer.
B) the ability to make a promise.
C) the competence to enter into a legally binding contract.
D) the ability to comprehend the terms of a contract.
E) the ability to pay damages in the event of a breach of contract.

Question 6

A contract with a minor is voidable

A) if the agreement has not been co- signed by the parent.
B) if the minor entered into the contract under duress.
C) if the minor cannot read or write.
D) if the minor is entitled to avoid the legal obligations that the contract created.
E) if it has not been signed by the minor.

Question 7

The law makes some contracts unenforceable against minors because

A) minors do not know how to run their own businesses.
B) minors may not always be able to deliver or perform.
C) minors have a weak bargaining position.
D) minors lack experience.
E) they may inconvenience other persons such as their parents.

Question 8

Jack is thirteen years old and a young musical legend. Jack enters into negotiations with a studio pertaining to a starring role in a series of movies. Prior to the negotiations, and as a condition to entering into the negotiations, Jack and the studios enter into an agreement under which the studio agrees to buy Jack a limousine for his personal use. The studio buys the limousine. A few months later Jack repudiates the contract and his chauffeur has an accident with the limousine. Which of the following is true?

A) Jack may keep the limousine but has to pay for it.
B) Jack will have to return the limousine in the state it is in.
C) Jack will have to repair the limousine and then return it.
D) The studio can sue Jack for breach of contract.
E) Jack may sell the limousine and then pay the proceeds to the studio.

Question 9

A minor's immunity from liability

A) is determined by statute.
B) extends to purchases and sale of real estate.
C) is dependent on the age of the minor.
D) extends to contracts and torts.
E) is limited to contracts.

Question 10

Upon attaining the age of majority, a minor may be bound by two kinds of voidable contracts, namely .

A) contracts of service and contracts of employment
B) contracts of purchase, and contracts of sale
C) contracts that create an interest of a continuous and permanent nature, and contracts that are ratified by the minor
D) contracts pertaining to real estate, and contracts pertaining to intellectual property
E) contracts that concern necessaries, and contracts that concern non- necessaries

Question 11

A minor is

A) a person who has not attained the age of majority.
B) a person who is small in stature.
C) a person who enters into an agreement to work in a coal mine
D) a person who performs minor tasks pursuant to a contract.
E) a person who is small in stature but is able to enter into certain contract.

Question 12

Although there has been an offer and acceptance and consideration, and the parties intended to enter into a contract, a court will set aside a contract as void, because of

A) the impecuniosity of one of the parties.
B) the lack of capacity of one of the parties.
C) the signature on the contract is unclear.
D) the wealth of one of the parties.
E) the social standing of one of the parties.

Question 13

A minor may repudiate all contracts entered into by her with the exception of

A) contracts pertaining to real estate.
B) contracts entered into with relatives.
C) contracts entered into under duress.
D) contracts for necessaries.
E) contracts that a beneficial to the minor.

Question 14

A year ago, James sold a motor bike to Jim, his best friend. At the time that the bike was sold, Jim was a minor. Jim is still making payments to James. Jim will be attaining the age of majority in a few months time. How should James protect himself?

A) Have Jim transfer the bike to a third party.
B) Get Jim to ratify the agreement.
C) Provide Jim with a statement of account.
D) Enter into another agreement with Jim.
E) Get a witness to witness the next payment that Jim makes.

Question 15

When a minor reaches the age of majority, a contract that was entered into earlier and was unenforceable, remains unenforceable unless

A) the subject matter is a non- necessary item.
B) it is repudiated after the age of majority.
C) the subject matter is stolen before attaining the age of majority.
D) the parties execute an affidavit.
E) it was ratified after attaining the age of majority.

Question 16

Native Canadians living on reservations are considered to be _ of the Crown.

A) wards
B) friends
C) children
D) relatives
E) beneficiaries

Question 17

Which of the following is NOT true?

A) A corporation cannot enter into a contract.
B) A corporation is a legal fiction.
C) A corporation is a creature of law.
D) A corporation has no physical existence.
E) A corporation has the same attributes as a natural person.

Question 18

Mary is thirteen years old, she enters into an agreement with a modelling agent pursuant to which the agent agrees to represent her. Why of the following is NOT true?

A) The contract is enforceable against the agent.
B) The contract is not enforceable by Mary against the agent.
C) The agent cannot enforce the contract against Mary.
D) The agent can only enforce a contract regarding necessaries against the minor.
E) A minor may violate contracts with impunity because he or she is not bound.

Question 19

Which of the following words comes close to the meaning of capacity as it is used in law?

A) size
B) grasp
C) competence
D) capability
E) room or volume

Question 20

Jack and Jill agree to threaten Michael into giving them his valuable coin collection. This agreement between Jack and Jill, according to the common law, is

A) unenforceable.
B) illegal.
C) void
D) ineffective.
E) voidable.

Question 21

Although a contract may contemplate the commission of a crime, it may still be deemed to be illegal because it is contrary to

A) the criminal code.
B) moral standards.
C) societal standard.
D) public sentiments.
E) public policy.

Question 22

A void contract is one that is deemed in law to have never been created.

Question 23

The statute that sets out the legal position of Native Canadians is called the

A) Native Canadian Bill of Rights.
B) Indian Act.
C) Native Canadian Independence Act.
D) Native Canadian Charter of Freedoms.
E) Native Canadian Self Government Law.

Question 24

In examining contracts that include a restrictive covenant, the court will not presume that the term is in restraint of trade, unless the evidence establishes that it is.

Question 25

Which of the following is true?

A) A contract that contemplates the commission of a tort is not legal unless the tort is committed and someone is injured.
B) Where a portion of a contract is void, the whole contract is affected and a court will set aside the whole contract as being void.
C) The common law supercedes statute law when determining the legality of contracts.
D) A statute can only make a contract illegal, it cannot make a contract void.
E) Where a portion of a contract is void, the remainder of the contract is not affected provided a court can sever the void parts without doing injustice to the parties.

Question 26

Where a contract contains a restrictive covenant, that is a covenant in restraint of trade. the totality of the contract is invalid.

Question 27

Which of the following is true regarding the legal capacity of the corporation?

A) Agents can negotiate but not sign contracts on behalf of the corporation.
B) Authorized officers of the Corporation can sign most contracts.
C) The corporation can show it is ultra vires to have contracts enforceable.
D) All contracts need to be placed under the corporate seal.
E) Neither statute nor incorporating documents can limit the capacity.

Question 28

When a court strikes down an unreasonable agreement between an employer and employee that restricts the future economic freedom of the employee, the court serves two public interests, namely protecting employees and

A) maintaining peaceful workplaces.
B) protecting businesses.
C) applying the law law.
D) protecting the management of businesses.
E) protect the mobility of labour.

Question 29

When a corporation's actions exceed its powers, its conduct may be challenged as being ultra vires.

Question 30

What is meant by the term contractual capacity?

Question 31

An agreement in restraint of trade will NOT be struck down if it is unreasonable in terms of:

A) its effect on the public interest
B) the breadth of activities restricted
C) geographic limitations
D) consideration paid for it
E) its duration

Question 32

Restrictive covenants are most likely to involve employment contracts.

Question 33

A contract made by a minor is enforceable against her, and unenforceable by her.

Question 34

The age of majority is established by the English common law.

Question 35

ABC Inc. and XYZ Ltd. enter into an agreement. The agreement, among other things, includes a provision that both parties will monitor their prices to ensure that both parties price their products equally. The court will set aside the whole contract as being illegal.

Question 36

In order to collect compensation for a loss under a fire insurance policy, the insured must show an insurable interest.

Question 37

A restrictive covenant is a term in restraint of trade that is found in an agreement.

Question 38

A court will refuse to enforce a contract that involves illegality only if it can be shown that both parties knowingly agreed to illegality.

Question 39

Business agreements are most often challenged as contrary to public policy because

A) one party may have been coerced into signing the agreement.
B) they may be in restraint of trade.
C) the agreement may be contrary to statute.
D) one party may be more powerful that the other.
E) the agreement may be intended to defraud others.

Question 40

Most business contracts are challenged on grounds of public policy because they may be in restraint of trade.

Question 41

Explain the position that a court will take when it is faced with a term in a contract that may be in restraint of trade.

Question 42

Explain, with the use of examples, the concept of legal capacity.

Question 43

Explain the role of legality in the formation of a contract.

Question 44

Why is a court more likely to accept as reasonable, certain restraints on an employer who is in possession of certain trade secrets of his or her employer?

Question 45

Explain the difference between a void and an illegal contract.

Question 46

What are the legal consequences of the ratification of a contract by a minor who attains the age of majority?

Question 47

Why is a court more likely to accept as reasonable, certain restraints on an employer who is in possession of certain trade secrets of his or her employer?

Question 48

Explain why it can be importance in terns of enforcing a contract, to ensure that you have all the licences required by government regulation and your trade.

Question 49

When can an adult recover money loaned to a minor?

Question 50

What must a minor do if he or she wishes to avoid liability under a contract?

Question 51

Explain, with the use of examples, the concept of legal capacity.

Question 52

A minor's freedom from liability is limited to contract. Explain.

Question 53

For the purpose of a contract, who is a minor?