Question 1

Salvatore contractually agreed to by a shipment of widgets from Acme Corp.A dispute has arisen in connection with that agreement and Acme claims the protection of a force majeure clause.Which of the following statements is most likely to be TRUE?

Accepted Answer

A force majeure clause typically excuses one or both parties from performance of the contract due to events beyond their control, such as natural disasters. If the widgets were destroyed by a typhoon while in transit, this situation aligns with the conditions where a force majeure clause would be invoked, making statement C the most likely to be true.

Question 2

An unconscionable transaction

Accepted Answer

The doctrine of unconscionability was developed in equity to prevent unfair or oppressive contracts, focusing on the fairness of the terms and the circumstances of the agreement.

Question 3

Jerry and four of his friends form the Inventor's Club, a private club that allows inventors to get together and share new ideas.This organization is

Accepted Answer

An association is typically an unincorporated group, meaning it does not have separate legal rights from its members. Therefore, contracts would need to be made by individual members like Jerry or his friends.

Question 4

Which of the following have limited capacity to contract for the necessities of life?

Accepted Answer

The answer of Which of the following have limited capacity...

Question 5

Malkit sold a house to Amanda.The evidence indicates that Amanda owed fiduciary obligations to Malkit both before and after the agreement was signed.Which of the following statements is TRUE?

Accepted Answer

The court will often presume that a contract entered into where one party owed fiduciary obligations to the other was the result of undue influence, especially if the fiduciary was in a position of power or trust. This presumption places the burden on the fiduciary (in this case, Amanda) to prove that the contract was entered into freely and fairly by the other party (Malkit).

Question 6

Because she was moving to Calgary, Lucy wanted to sell the furniture store that she had created in Edmonton.Chas was interested in buying the business, but he insisted that the contract must include a non-compete clause.Lucy agreed, the contract was created, and Chas became the new owner of the store in Edmonton.A year later, however, he learned that Lucy had opened a new furniture store in Calgary and was doing great business.Chas then sued Lucy for breaking the non-compete clause.Which of the following statements is most likely to be TRUE?

Accepted Answer

Generally, non-compete clauses are enforceable if they are reasonable in terms of the geographical area and the time period that they cover. In this case, the clause would have to be reasonably limited to the Edmonton area and a reasonable length of time. Whether or not Lucy received independent legal advice or special consideration is not relevant to the enforceability of the clause. Option A is incorrect because there is no indication that the process leading up to the contract was defective. Option B is incorrect because non-compete clauses are not necessarily always void.

Question 7

Adrian and Darah entered into a contract.After the agreement was partially performed, Adrian successfully claimed that the contract is voidable.Which of the following statements is most likely to be TRUE?

Accepted Answer

If Adrian is a minor (under the age of 18), the contract is voidable at his/her option. This means that they can choose to either enforce or void the contract. Since Adrian claimed that the contract is voidable, it is likely that he/she is a minor who entered into a contract with Darah to purchase computer games.

Question 8

A fiduciary relationship

Accepted Answer

A fiduciary relationship exists when one party is in a position of dominance over another, such as a trustee and a beneficiary, a lawyer and a client, or a doctor and a patient. It involves a duty of loyalty and good faith, and the fiduciary is obligated to act in the best interests of the other party. This relationship is not exclusive to the law of corporations or employment, and it is not necessary to establish undue influence. Inequality in bargaining power may be a factor in some cases, but it is not the defining characteristic of a fiduciary relationship.

Question 9

A force majeure clause

Accepted Answer

A force majeure clause is a provision in a contract that excuses a party's performance if certain unforeseeable events, such as natural disasters or wars, occur. By including this clause in a contract, the parties can anticipate events that may affect the performance of the contract and allocate the risk of those events between them. The force majeure clause overrides the effect of an event that normally would constitute a frustration.

Question 10

On Tony's 21st birthday, he spent the afternoon in a pub with his friends and then visited a car dealership.Although Tony exhibited clear signs of intoxication, the dealership persuaded him to sign a contract to buy an expensive new car.Which of the following is most likely to be TRUE?

Accepted Answer

In this situation, Tony was under the influence of alcohol, which impaired his ability to make informed decisions. Therefore, the contract signed by him can be considered voidable. The law provides protection to individuals who are incapable of entering into a contract due to intoxication, duress, coercion, fraud or misrepresentation. Tony can repudiate the contract by contacting the dealership within a reasonable time after regaining capacity. Hence, option B is the correct answer.

Question 11

Jane is interested in purchasing a condominium property from Full House Real-Estate Group.She recently graduated college, so she does not have much of a credit record.Knowing this, she goes to Version Bank with her wealthy cousin, Ted, who previously agreed to assist her in buying a house.Which statement is most likely to be TRUE?

Accepted Answer

Guarantees in the context of loans are conditional promises to pay, which become enforceable only upon the occurrence of a specific condition, such as the primary borrower's default. Indemnification typically refers to compensation for harm or loss and is not the correct term in the context of co-signing or guaranteeing a loan.

Question 12

Wilma had worked for Acme Inc for more than ten years.Unfortunately, she fell out of favour with the company after she began to complain, on behalf or herself and her co-workers, about working conditions.Eventually, the relationship became intolerable and Wilma reluctantly agreed to leave.Acme provided a severance package, but only after Wilma contractually promised that she would not sue the company in connection with her dismissal.Wilma now believes that her employment was improperly terminated.She cannot sue the company, however, unless she can escape from the severance contract.Which of the following statements is most likely to be TRUE?

Accepted Answer

Economic duress occurs when one party threatens to do something that would cause financial harm to the other party unless that party agrees to a contract term. In this situation, Wilma may be able to argue that she signed the severance contract under economic duress because she was in a vulnerable position after losing her job and needed the money. It is more likely that Wilma will succeed in her claim for economic duress if she can demonstrate that she signed the severance contract without receiving independent legal advice. Choice A is incorrect because undue influence refers to situations in which one party has superior power or influence over another and uses that power to obtain unfair advantage. Choice B is unrelated to the situation described in the question. Choice D is also incorrect because the question does not provide enough information to support a finding of unconscionability. Finally, Choice E places an unnecessarily high burden on Wilma; she need only prove that Acme threatened financial harm to secure her agreement to the severance contract.

Question 13

Which of the following is most likely an improvident bargain?

Accepted Answer

Assigning all assets to a convicted fraudster is an obviously improvident bargain as it exposes the elderly woman's assets to a high risk of loss with no guarantee of future care. The other options may or may not be improvident depending on the specific circumstances and values involved.

Question 14

Pam entered into a contract with Dave.A court will declare that the contract was frustrated if

Accepted Answer

A contract is considered frustrated when an unforeseen event, beyond the control of both parties, renders the contractual obligations impossible to perform. In choice B, the destruction of Dave's truck by a fire before he could take possession of it after repairs is an example of such an unforeseen event that makes the fulfillment of the contract (the return of the repaired truck to Dave) impossible.

Question 15

Stewart is a fifteen-year-old boy who comes from a very wealthy family. Throughout his life, Stewart has been given expensive jewelry.In May, he and his mother got into an argument and he decided to sell some of his jewelry at Frank's Pawnshop.Excited about the collection they were about to receive, the pawnshop clerk immediately entered into a contract with Stewart to complete the transaction.Which of the following statements is most likely to be TRUE?

Accepted Answer

Since Stewart is a minor, he has the option to void the contract. However, he must do so in a timely manner once he reaches the age of majority. As long as he repays the money that he received, the contract can be avoided. The fact that the pawnshop paid fair market value or provided legal advice is not relevant to the enforceability of the contract. The contract is also not illegal, as selling jewelry is a legal transaction.

Question 16

Maeve entered into a contract with Tyler.The parties had equal bargaining power and Tyler did not pressure Maeve into the agreement.Although she does not suffer from a mental illness or intellectual disability, and although she is an adult, Maeve is easily victimized in some commercial dealings.She is naive, immature, and unsophisticated.As a recent immigrant to Canada, she speaks English reasonably well, but she cannot read or write in English.She now wants to set aside her contract with Tyler on the basis that it is an unconscionable transaction.Which of the following statements is most likely to be TRUE?

Accepted Answer

A judge may enforce a contract even if it seems to be an improvident bargain for one party, as long as there was no undue influence, misrepresentation, or exploitation involved in the formation of the contract. Maeve's disadvantages do not automatically render the contract unconscionable if the transaction was entered into freely and with understanding by both parties.

Question 17

Where is exists, the Statute of Frauds imposes a writing requirement on

Accepted Answer

The Statute of Frauds requires certain types of contracts to be in writing to be enforceable, notably including guarantees (suretyships) and contracts that cannot be performed within one year from the making thereof.

Question 18

Tajeash and Faye entered into a contract.Before either party began to perform, however, Tajesh successfully claimed that the contract is void.Which of the following statements provides the best explanation for that outcome?

Accepted Answer

This is the best choice as minors do not have the capacity to enter into contracts, and therefore any contract entered into with a minor is considered void. Selling a shotgun to a minor who does not have the necessary license to purchase it would make the contract void.

Question 19

Napoleon wanted to borrow money from the Bank of Winnipeg.The bank, however, was not entirely convinced that he would be able to repay the debt.It therefore wanted some assurance from Napoleon's friend, Josephine, that she would repay the loan if Napoleon did not.Which of the following statements is most likely to be TRUE?

Accepted Answer

In order to satisfy the requirement of a written promise from Josephine, the bank may be able to combine several documents as evidence, even if those documents do not refer to each other. This is known as the "folding-in" approach and has been accepted by courts in some jurisdictions. The other choices either lack support or are outright incorrect.

Question 20

Which of the following is TRUE?

Accepted Answer

Option A is true as unconscionability refers to a situation where a weaker party agrees to a contractual term that is overly harsh or oppressive, often resulting from an inequality of bargaining power between the parties. The notion of an improvident bargain is central to the determination of whether a transaction is unconscionable. options B, C, D, and E are incorrect.

Quiz 10: Contractual Defects