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Chapter 8 Non Enforcement of Contracts

MULTICHOICE

1. Which of the following are competing goals that contract law attempts to balance when
enforcing contracts?

(A) the goal of providing remedies, and the goal that contractual terms are reasonable

(B) the goal of preventing people from avoiding contractual obligations, and the goal of
ensuring the contract reflects the real agreement between the parties

(C) the endeavour to preserve the real agreement reached by the parties, and the goal of
preventing mistakes

(D) the goal of ensuring equal power between the parties, and the goal of ensuring contract
negotiations are successful

Answer : (B)

2. Which of the following are achieved through the law's enforcement of contracts?

(A) the protection of economic interests and avoidance of coercion

(B) due diligence and fair contractual terms

(C) fairness and equality of the parties within contractual relationships

(D) the integrity, reliability, and predictability of contractual relationships

Answer : (D)

3. While negotiating a commercial agreement, Juan made a misrepresentation that goes to

the heart of the ensuing formal contract between the parties. How do you think the other
party to the contract will act, once it becomes aware of the misrepresentation?

(A) The other party must seek a mediated remedy for the problem.
(B) The other party may opt to enforce the contract or have it set aside.

(C) The other party must seek legal advice to remedy the misrepresentation.

(D) The other party may opt to reproach the contract and set it aside.

Answer : (B)

4. Which of the following situations might give rise to a "voidable contract"?

(A) a contract entered into under duress

(B) an illegal contract

(C) a contract between spouses

(D) a contract between partners in a partnership

Answer : (A)

5. In what way is a void contract different from a voidable contract?

(A) A void contract contains a defect so substantial that it is of no force or effect.

(B) A void contract cannot be enforced because it is contrary to legislation or public policy.

(C) A voidable contract fails to meet the requirements imposed by the Statute of Frauds.

(D) A voidable contract fails to meet the requirements imposed by the Sale of Goods Act.

Answer : (A)

6. How does Canadian contract law protect minors and mentally incapacitated individuals?

(A) by ensuring that they cannot enter into legally binding contracts

(B) by requiring the courts to approve their contracts

(C) by providing that only certain types of contracts are enforceable against minors and
those who lack mental capacity

(D) both ensuring both groups are represented by guardians when entering into contracts

Answer : (C)

7. What are the elements of importance emphasized by contract law as it pertains to the
legal capacity to form contracts?

(A) offer and acceptance

(B) essentials of a contract

(C) immunity from liability

(D) consent and voluntariness

Answer : (D)
8. Which of the following would be enforceable against a minor?

(A) a contract for a necessary of life

(B) any employment contract

(C) a contract where the minor received legal advice prior to entering into the contract

(D) a contract to purchase a concert ticket

Answer : (A)

9. Cory, aged 17, plays hockey under contract with the Northern Manitoba Huskies junior
hockey team. What is the legal term given to this particular type of contractual
arrangement?

(A) beneficial contract of training

(B) beneficial development contract

(C) beneficial contract of service

(D) beneficial minor training contract

Answer : (C)

10. A sales representative knowingly entered into a contract for an alarm system during a
door-to-door sales campaign with an obviously mentally ill individual. Why could the
contract be immediately rendered voidable at that individual customer's request?

(A) The contract is contrary to the culpable silence provisions contained in the Vulnerable
Persons Act.

(B) The contract is unenforceable in accordance with the Unconscionable Transactions

Relief Act.

(C) Establishing true consent is not possible due to the individual's incapacity to grasp the
essence and effect of the contract.

(D) The individual is lacking legal capacity and is unable to perform the contract in whole or
in part.

Answer : (C)

11. Even though Dalbert knew Rahim had consumed copious amounts of alcohol during the
afternoon, both signed a contract written on a napkin whereby Rahim agreed to buy
Dalbert's old car for top dollar. Upon regaining his legal capacity, if Rahim opts to repudiate
the contract on the basis of an improvident agreement, how must he proceed to void the
contract?

(A) He must claim relief due to the effects of duress.

(B) He must claim relief due to economic duress.

(C) He must claim relief due to undue influence.

(D) He must claim relief due to unconscionability.

Answer : (D)

12. Which of the following might prove that a contract was freely entered into by the parties?

(A) evidence the contract was signed in the presence of a witness

(B) evidence the weaker party received independent legal advice

(C) evidence there has only been presumed pressure but not actual pressure

(D) evidence that the terms of the contracts are fair

Answer : (B)

13. In the case of Bank of Montreal v. Duguid (2000), 47 O.R. (3d) 737 (C.A.), the court was
asked to consider whether a wife who had signed a guarantee on a loan for her husband's
business was entitled to be released from the guarantee on the basis of undue influence
exerted by her husband. Why did the majority of the court find that the guarantee was
enforceable against the wife?

(A) because the wife had received independent legal advice

(B) because the wife was a real estate agent and presumably knowledgeable enough to not
be unduly influenced by her husband to sign the guarantee

(C) because agreements between spouses are always enforceable

(D) because there was no evidence that the guarantee was unconscionable

Answer : (B)

14. In the case of Atlas Supply Co of Canada v. Yarmouth Equipment (1991), 103 NSR (2d) 1
(CA), the court considered whether a franchise agreement was unconscionable and
therefore unenforceable because financial projections given by the franchisor were overly
optimistic. Why did the court find that the contract was unconscionable?

(A) because the agreement was illegal

(B) because the franchisee and franchisor were in a relationship of good faith
(C) because the franchisee acted promptly in seeking to avoid the contract

(D) because the franchisor gave misleading financial information and withheld contrary
information

Answer : (D)

15. What is the definition of "duress" with respect to contractual relationships?

(A) inequality between the parties

(B) the threat of physical or economic harm that results in a contract

(C) unfair manipulation that compromises someone's free will

(D) unfair criminal activity that seriously undermines a contract

Answer : (B)

16. Holding a gun to someone's head to induce them to enter a contract exemplifies which
of the following legally exceptional circumstances?

(A) unconscionability resulting from presumed pressure

(B) undue influence resulting from actual pressure

(C) misrepresentation resulting from presumed pressure

(D) undue inducement resulting from actual pressure

Answer : (B)

17. Luis believes his contract with ABC Homebuilder's Inc. is unconscionable. What must
Luis prove in order to win his case?

(A) Luis must prove undue influence was present.

(B) Luis must prove the presence of actual pressure.

(C) Luis must prove the parties are in a relationship of utmost good faith.

(D) Luis must prove inequality and an improvident bargain or exploitation

Answer : (D)

18. Where circumstances surrounding a proposed commercial transaction involve an

unsophisticated party, what would a court most likely accept as undisputable evidence that
that party has proceeded with the transaction on a free and informed basis?
(A) a certificate of individual legal advice

(B) a certificate of independent legal advice

(C) a certificate of indisputable legal advice

(D) a certificate of indubitable legal advice

Answer : (B)

19. The case of Atlas Supply Co. of Canada v. Yarmouth Equipment (1991), 103 N.S.R. (2d) 1
(N.S.C.A.) disallowed the reliance on the defendant's exclusion clauses to prevent evidence
of the plaintiff's reliance on misleading information provided by the defendant. The
dissenting appellant court judge cautioned against setting aside business deals such as this
one. What was the dissenting appellant court judge advocating by taking this position?

(A) that a small businessperson needs protection from unconscionable big businesses

(B) that the acceptance of bad faith misrepresentations is a legal commercial negotiating
practice

(C) that the acceptance of unconscionable misrepresentations is grounds to set aside a

contract

(D) that a small businessperson is disadvantaged when dealing with a multinational business

Answer : (B)

20. Which of the following statements accurately reflects one of the principles regarding the
doctrine of unconscionability?

(A) It is based on the assumption that the parties to a contract should have equal bargaining
power.

(B) Imbalance in bargaining power alone is insufficient on its own to upset a contract.

(C) The court will only intervene if there is evidence of mental incapacity of one of the
parties.

(D) The doctrine of unconscionability imposes a positive duty to disclose information.

Answer : (B)

21. How does misrepresentation differ from a breach of contract?

(A) Misrepresentation refers to statements made prior to entering into a contract.

(B) Misrepresentation must be intentional in order to be actionable.

(C) Misrepresentation only applies if the parties are in a relationship of utmost good faith.

(D) Proof of misrepresentation alone is insufficient for the courts to rescind a contract.

Answer : (A)

22. How is a wilful omission with regard to relevant information during pre-contractual
negotiations regarded in law?

(A) as a false statement of fact that causes someone to enter a contract

(B) as permissible because each party must look out for their own interests

(C) as an error made by one or both parties that seriously undermines a contract

(D) as a breach of the duty to disclose information without being prompted

Answer : (D)

23. Johan is negotiating the possible sale of one of his company's regional business
operations to Bill. In response to Bill's inquiry regarding the duration remaining on the
existing supply contracts, Johan provided the end dates of the contracts themselves. Johan
did not advise Bill that two of the customers were on the brink of insolvency. If Bill relies on
the information Johan provided, what recourse will contract law allow him?

(A) The contractual defect is so substantial that it is of no force or effect.

(B) A misrepresentation must meet the requirements imposed by legislation.

(C) An aggrieved party can choose to enforce the deal or bring it to an end.

(D) Partial provision of information allows the contract to be rescinded.

Answer : (D)

24. What criteria must be satisfied in order for a misrepresentation to be actionable?

(A) the misrepresentation must be made to a minor

(B) the misrepresentation must be material to the contract

(C) the misrepresentation must be made in conjunction with a threat of harm

(D) the misrepresentation must be intentional

Answer : (B)

25. A seller unknowingly made a misrepresentation during negotiations to sell his car. Now
that the seller is aware of the misrepresentation and the prospective buyer is returning to
make an offer, what recourse is available to rectify the situation and accept the offer
without risking an ensuing lawsuit?

(A) The seller has no recourse; once information is offered, it must be completely accurate.

(B) The seller can remain silent to secure the best price and plead mistake as a defence.

(C) The seller should simply forego the deal with this buyer and look for a new buyer.

(D) The seller must attend to the prompt disclosure of the correct facts to the prospective
buyer.

Answer : (D)

26. What is the goal of the common law remedy of rescission?

(A) It seeks to provide redress to the innocent party.

(B) It seeks to provide monetary redress for harm incurred.

(C) It seeks to return parties to their pre-contractual positions.

(D) It seeks to enforce good faith in commercial transactions.

Answer : (C)

27. What category of actionable misrepresentation restricts the innocent party to the
common law remedy of rescission of the contract?

(A) innocent misrepresentation

(B) negligent misrepresentation

(C) fraudulent misrepresentation

(D) material misrepresentation

Answer : (A)

28. What is the legal definition of "mistake"?

(A) the threat of physical or economic harm that results in a contract

(B) an unfair manipulation that compromises someone's free will

(C) an error made by one or both parties that seriously undermines a contract

(D) a false statement of fact that causes someone to enter a contract

Answer : (C)

29. How does the common law classify a situation in which both parties to an agreement
have shared the same fundamental mistake in order to provide a remedy?

(A) as a mistake at law

(B) as a shared mistake

(C) as a common mistake

(D) as a mutual mistake

Answer : (C)

30. Which of the following forms the basis of a common argument for setting aside a
contract based on mistake that will rarely succeed in Canadian courts?

(A) misunderstanding of the legal consequences of giving an oral guarantee

(B) misunderstanding of the terms of an oral contract dealing with land

(C) misunderstanding of the nature or type of contract signed by the party

(D) misunderstanding that a contract is not to be performed within one year

Answer : (C)

31. Which of the following is a distinguishing feature of all contracts that are void due to
illegality?

(A) They contain restrictive covenants.

(B) They are contrary to statute law and/or violate public policy.

(C) They are unconscionable.

(D) They are contrary to the Criminal Code.

Answer : (B)

32. A judge has determined that offending portions of a contract can be severed and the
remaining portions saved. What type of common law contractual infraction is this judge
resolving?

(A) a mistaken contract

(B) a fraudulent contract

(C) an illegal contract

(D) a negligent contract

Answer : (C)

33. Why are contracts that unduly interfere with the ability to earn a livelihood or reduce
competition generally unenforceable in common law?

(A) They contravene the rules of goodwill contained in the Competition Act.

(B) They cannot be enforced because they are contrary to statues and public policy.

(C) They contravene the rules of fairness contained in the Consumer Protection Act.

(D) They are contrary to the community's common sense and common conscience.

Answer : (D)

34. Which of the following elements would a court consider when determining the
enforceability of a non-competition clause on the grounds of reasonableness?

(A) contravention of the Real Estate and Business Brokers Act

(B) the reasonableness of location and time restrictions

(C) contravention of anti-price maintenance legislation

(D) the need to maintain free and open competition

Answer : (B)

35. Why do the courts subject restrictive covenants in the employment context to greater
scrutiny than those arising in the sale of a business?

(A) because the clauses are typically ambiguous

(B) because there is typically a power balance in employment situations

(C) because such agreements offend human rights legislation

(D) because such clauses violate the Competition Act

Answer : (B)

36. In a recent 2009 ruling, the Supreme Court of Canada found it necessary to direct that
judges in lower courts were prohibited from redrafting overly broad non-competition
clauses to make them legal and enforceable, stating that such clauses are simply and utterly
unenforceable. Why did the Supreme Court find it necessary to invoke this prohibition?

(A) to restate policy that vague or ambiguous clauses are unenforceable

(B) because such clauses improperly bind employees unable to afford litigation costs

(C) because such clauses are difficult to prove when the meaning is in fact unclear

(D) to restate a central policy objective to facilitate drafting of broad clauses

Answer : (B)

37. What was the intended purpose of the creation and enactment of the Statute of Frauds?

(A) to require that commercial contractual relationships be stated in one document

(B) to avoid the difficulty in proving the value of the goods or services exchanged

(C) to allow performance to take the place of a written duly executed agreement

(D) to impede perjury and fraud by documented evidence of specified types of contracts

Answer : (D)

38. What is the legal definition of a "guarantee"?

(A) a fair contract formed by one advantaged party over another

(B) a pledge evidencing the capacity to enter into legally binding contracts

(C) a pledge to pay another's liability in the event of default of such duty

(D) a contract made enforceable by performance over a period of time

Answer : (C)

39. Under what circumstances might a court enforce a verbal contract for the sale of land?

(A) where the plaintiff comes to the court with "clean hands"

(B) where enforcement of the agreement will not interfere with the rights of third parties

(C) where the person attempting to enforce the agreement has performed acts that can be
explained by the existence of an agreement

(D) where it would be unfair to permit the defendant to avoid his or her contractual
obligations

Answer : (C)
40. Which of the following reflects the general view in Canada with respect to electronic
signatures?

(A) They cannot take the place of signatures on written contracts.

(B) They are capable of binding the parties to contractual obligations.

(C) They are not acceptable in the absence of extrinsic evidence of an agreement.

(D) They are always accepted as conclusive evidence of the parties' intention.

Answer : (B)

41. Which of the following would be a valid provision under the various provincial acts
dealing with the sale of goods?

(A) Contracts above $20 to $25 must be made in writing in order to be enforceable.

(B) If partial payment or acceptance is made by the buyer, an oral contract is enforceable.

(C) Contracts above $15 to $20 must be made in writing in order to be enforceable.

(D) If creation of a record of an agreement is evident, the court must make a prudent ruling.

Answer : (B)

TRUEFALSE

42. A voidable contract is one that an aggrieved party can choose to keep in force or bring
to an end.

(A) True (B)

False

Answer : (A)

43. In order for a contract to satisfy the requirement of being written, all of the
requirements must be met in one document called "the contract."

(A) True (B)

False

Answer : (B)

44. A simple oversight or error by one negotiating party does not constitute a legal mistake
and provides no basis for voiding a contract.

(A) True (B)

False

Answer : (A)

45. Contracts between adults and minors are always unenforceable against the minor.

(A) True (B)

False

Answer : (B)

46. Minors have the option of fulfilling their contractual obligations and suing the other
party to enforce the contract.

(A) True (B)

False

Answer : (A)

47. The value in obtaining a certificate of independent legal advice is that it can help prove
a contract was freely entered into.

(A) True (B)

False

Answer : (A)

48. People seeking to avoid a contract owing to mental capacity, duress, undue influence, or
unconscionability must do so promptly.

(A) True (B)

False

Answer : (A)

49. If possible, the courts will redraft an offending provision in a contract to make it legal.

(A) True

(B) False
Answer : (B)

50. The only basis for a contract being held to be illegal is if it is prohibited by the Criminal
Code.

(A) True

(B) False

Answer : (B)

51. A contract will be set aside for mistake only if one party realized the other party was
mistaken at the time of entering the contract.

(A) True (B)

False

Answer : (B)

52. The remedy of rescission is only available in the case of fraudulent or negligent
misrepresentation.

(A) True (B)

False

Answer : (B)

53. In British Columbia, the interests of under-age-of-majority children are protected by the
Infants Act.

(A) True (B)

False

Answer : (A)

54. Some Canadian common law courts have ruled that, where proper circumstances allow,
a party's lack of a practical or realistic alternative can establish valid evidence of economic
duress.

(A) True (B)

False

Answer : (A)
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