Question 1

A takes his car into B's car repair shop.B does substantial repairs to A's car and presents A with an invoice for $1500.00.A says,"I'll come back later to pay you" and leaves.A couple of months go by and A has not returned to pay for the repairs.B has which of the following options?

Accepted Answer

B has multiple legal remedies in this situation. B can sue A for the cost of repairs (A), has a mechanic's lien on the car for the amount of the repairs (B), can sell the car to recover the cost of repairs after a certain period of time if permitted by law (C), and can retain possession of the car pending payment as part of the lien rights (D).

Question 2

In leases,who is most likely to carry the insurance and bear the cost of maintenance and repairs?

Accepted Answer

E

Question 3

Use the facts of this situation to answer the related question that follows it. A enters into an agreement with B,an automobile dealer.A does not have the cash to buy the car,so a leasing arrangement is made under which each lease payment is a payment towards the purchase of the car.Ownership of the car remains with B until A makes the last payment,at which time it is transferred to A.
In the fact situation above,the lease is best described as

Accepted Answer

D

Question 4

A and B agree that A will lease a truck owned by B.The truck is valued at $30 000 and the term,which cannot be cancelled,is three years,by which time A will have paid slightly more than $22 500.00 in lease payments.In this situation,the lease is best described as

Accepted Answer

The answer of A and B agree that A will...

Question 5

A and B enter into an agreement for a car whereby A will make lease payments for a certain term,after which A will have the option of buying the car by a final payment of $5000.00.In this case,the lease is best described as

Accepted Answer

The answer of A and B enter into an agreement...

Question 6

Which of the following would NOT be a defence for a carrier that is sued for damage caused to goods during shipping when there is no contractual limitation of liability?

Accepted Answer

The answer of Which of the following would NOT be...

Question 7

Given its importance,how does the accounting profession determine whether a lease is an operating lease or a purchase capital lease?

Accepted Answer

The determination of whether a lease is an operating lease or a capital lease is based on whether title is likely to pass at the end of the lease period. If title is likely to pass, it is considered a capital lease, while if title is not likely to pass, it is considered an operating lease.

Question 8

A reason to sue for breach of a contract of bailment rather than for negligence is that in a contract of bailment,

Accepted Answer

The answer of A reason to sue for breach of...

Question 9

A and B are neighbours.B wants to trim his hedges,but his trimmer is broken.Being close neighbours,A and B often borrow things from each other,so B borrows A's trimmer from A's garage.This is an example of

Accepted Answer

This is a gratuitous bailment because there is no agreement or payment between A and B for the use of the trimmer. A is lending the trimmer to B as a favor or out of goodwill, and B is not paying for its use.

Question 10

Rex,a licensed contractor,rented a heavy duty brush cutter from YouRentAll Inc.Within the first few minutes of use,the blade came off and extensively damaged the shroud and housing of the machine.It was determined that the bolts that held the blade on were left loose by some previous user.YouRentAll sued Rex for the repair costs,claiming Rex should have checked out the machine before using.Assuming the lease contract did not speak to this type of situation,how would the court rule?

Accepted Answer

The defendant (Rex) would win because there is an implied warranty of fitness when renting equipment, which means the equipment is expected to be in a condition suitable for the purpose for which it is rented. This implies that the equipment should be safe to use without the need for the renter to inspect it for basic operational safety, such as ensuring the blade is securely attached.

Question 11

Quincy owns a metal fabricating company.He is desperately in need of working capital in order to carry out several large orders.Therefore he sells his heavy stamping equipment to Beneficial Leasing Inc.in a five-year purchase lease plan.This arrangement amounts to

Accepted Answer

A sale and leaseback is when a company sells an asset to a leasing company and then immediately leases that asset back from the leasing company for a specific period of time. This provides the company with much-needed cash flow and allows them to continue using the asset. In this scenario, Quincy is selling his heavy stamping equipment to Beneficial Leasing Inc. and leasing it back from them in a five-year purchase lease plan. This is a classic example of a sale and leaseback arrangement.

Question 12

While A is staying in a hotel,A's room is broken into and her jewellery is stolen.The hotel provided state of the art security and the latest and most secure locks on all guest room doors.If A sues the hotel,at common law,

Accepted Answer

This question is about the common law rule of innkeeper's liability, which makes innkeepers strictly liable for the loss or theft of their guests' belongings, unless the loss resulted from an irresistible force or the guest's own negligence. This rule reflects the fact that innkeepers have a special relationship of trust and responsibility towards their guests, who entrust them with their valuables while staying at the hotel. Therefore, the hotel in this scenario would be liable for the stolen jewelry, regardless of the security measures it had in place, unless it can prove that the theft was caused by an irresistible force or A's own negligence (e.g. by leaving the jewelry in plain sight or not using the provided safe). None of the other options are correct: A would not have a quantum meruit claim, which is a claim for the reasonable value of services provided without a contract; the hotel's duty is not only to take reasonable care, but to be strictly liable, for its guests' belongings; and negligence is not required to establish liability under the innkeeper's rule.

Question 13

Hilda rented a hospital bed from Medical Leasing Co.for her bedridden father.In the contract she was referred to as the ________ and Medical Leasing was referred to as the ________.

Accepted Answer

In a lease agreement, the lessee is the person renting the property or equipment, in this case Hilda renting the hospital bed. The lessor is the owner of the property or equipment, which in this case is Medical Leasing Co. Therefore, the correct choice is A) lessee; lessor.

Question 14

Identify which of the following statements correctly describes a hire-purchase agreement.

Accepted Answer

A hire-purchase agreement is a type of agreement where the owner of goods allows the hirer to possess and use the goods for a period of time while making payments towards the purchase price. The contract creates a bailment, where the hirer has possession but not ownership of the goods. At the end of the agreed-upon term, the hirer has an option to purchase the item by paying off the remaining amount due. Therefore, option E is the correct choice.

Question 15

In a bailment of common carriage,where the bailor proves that the goods were given to the bailee in good condition but were returned damaged,the bailee will be held liable unless it can show that the damage was caused by

Accepted Answer

In a bailment of common carriage, the bailee is held to a high standard of care and is presumed to be liable for any damage to the goods unless it can prove that the damage was caused by the default of the bailor, an act of God, or the dangerous condition of the goods. Option A is the only choice that includes all three of these possible defenses for the bailee. Options B, C, and D do not include all three possible defenses. Option E is incorrect as it does not provide a correct answer.

Question 16

Use the fact situation in Q3 to answer the related question that follows. Using the fact situation above,assume that just after B,the dealer,enters into the lease agreement with A,he assigns the lease to a financing company,which gives notice to A to make all payments to the company until the price has been paid in full,at which time the company will transfer the car to A.In this case,the lease is best described as

Accepted Answer

In this scenario, the lease is best described as a finance lease because the dealer assigned the lease to a financing company who now holds ownership and is allowing A to use the car in exchange for the lease payments until the full price is paid off.

Question 17

The tax advantage in leasing arrangements is most apparent

Accepted Answer

The answer of The tax advantage in leasing arrangements is...

Question 18

Marcus rented some scaffolding to aid in replacing the siding of his house.This type of lease would be referred to as

Accepted Answer

An operating lease is correct because it is a short-term lease agreement that allows the lessee to rent equipment or property for a period that is shorter than the asset's useful life, which fits the scenario of renting scaffolding for a specific, temporary project like replacing siding.

Question 19

A sends a package valued at $400.00 to B by means of the courier company X Co.In the contract between A and X Co.,there is a limitation of liability clause that limits X Co.'s liability for damage or loss caused to the goods by any reason whatsoever,including the negligence of X Co.and/or its employees,to $20.00.When the goods reach B,they are damaged.If A sues X Co.for the full $400.00,

Accepted Answer

The limitation of liability clause in the contract between A and X Co. is effective to reduce A's damages to $20.00, regardless of the negligence of X Co. and its employees. Therefore, A cannot succeed in suing X Co. for the full $400.00.

Question 20

A leases a harvesting machine from B to be used during the harvesting season in Ontario,which is from the beginning of August to the end of September.In this case,the lease is best described as

Accepted Answer

An operating lease is for a short-term use of an asset, and is not intended for ownership transfer at the end of the lease term. In this case, A is leasing a harvesting machine from B for a specific period of time, which is the harvesting season from August to September. This lease is therefore an operating lease.

Quiz 15: Bailment and Leasing