EXERCISE (A) OF CHAPTER 3

1.In a contractual relationship, how does one communicate an offer?

A.By conduct.

B. In writing.

C. Orally.

D. All of the above.

E. None of the above.

2.Professor Smith addressed his class one day with the following: “I will award any student 10

bonus marks if he or she paints the walls of my office.” Most of the students giggle, and no student says anything to Smith. Later in the term, Jenny, desperate for a higher grade, obtains the keys to Professor Smith’s office from his secretary and proceeds to paint 3 walls of the office before she must leave for a class. How many marks must Professor Smith award her for her work?

A.7.5, because she substantially completed what was required of her under the terms of Smith’s offer,

but she should not be compensated to a greater extent than what she actually performed.

B.0, because she never told Smith she would accept his offer.

C.10, because she substantially completed what was required of her under the terms of Smith’s offer.

D.0, because she neither verbally accepted Smith’s offer, nor did she complete all of her obligations in

order to accept the unilateral contract.

E.0, because no reasonable student would have taken Smith’s “offer” seriously.

3.Professor Smith addressed his class one day with the following: “I will award any s tudent 10

bonus marks if he or she paints the walls of my office.” Most of the students giggle, and no student says anything to Smith. Later in the term, Jenny, desperate for a higher grade, obtains the keys to Professor Smith’s office from his secretary a nd proceeds to paint the 4 walls of his office. Smith arrives at his office just as she is finishing, and demands to know why Jenny is in his office and why she is painting his office such a “hideous” colour. She tells him that she was merely accepting his offer. How many marks is Jenny entitled to?

A.0, because she never verbally accepted Smith’s offer.

B.10, because Jenny has enriched Smith by the amount of her painting services.

C.10, because she substantially completed what was required of her under the terms of Smith’s offer.

D.0, because in order to be enforceable, a contract such as this would have had to be in writing.

E.Maybe 10 marks or maybe 0 marks, depending on an assessment as to whether a reasonable person

in Jenny’s position would have reasonably relied on Smith’s statement as a binding offer to enter a contract.

4.Penny sent a letter to Victor offering to buy his house for $150 000. Two days later, on Tuesday

the 29th, Victor sent a letter back stating he would sell the house for $160 000. Victor's letter was received by Penny on Friday the 1st. On Tuesday the 5th, Penny mailed a letter to Victor accepting the offer, with the letter being received by Victor on Thursday the 7th. However, on Saturday the 2nd, Victor had agreed to sell the house to Trent for $170 000; on the same day he mailed a letter to Penny revoking his offer. The letter of revocation is received by Penny on Wednesday the 6th. To whom is Victor legally bound to sell his house?

A.With Trent because Victor's letter of revocation was received before Penny's letter of acceptance was

received.

B.With Penny because Victor had no right to negotiate with Trent after he had sent his offer to Penny.

C.With Trent because Victor's letter of revocation was mailed before Penny's letter of acceptance was

mailed.

D.With Penny because her letter of acceptance was mailed before the letter of revocation was received.

E.With Trent because that contract was concluded first.

5.On June 3, Sam offered to sell Patty his cottage for $80 000. The offer did not include an expiry

date, but in it Sam indicated that he was short of cash and needed to sell the cottage within two weeks or he would be forced into bankruptcy. On June 18, Patty sent Sam a letter by courier

saying she accepted his offer, had arranged financing, and was ready to close the deal in two days. George sent a message back that he had sold the cottage on June 10 to Tate. Can Patty sue Sam for breach of contract?

A.No, because Sam's statement was just an invitation to treat so it could not be accepted.

B.No, because Sam revoked the offer to Patty when he agreed to sell the cottage to Tate.

C.Yes, because Sam never revoked the offer to Patty.

D.No, because Sam's offer to Patty had lapsed.

6.Bill has advertised in the local newspaper that he will sell his 5 year old car. The advertisement

describes the car in some detail, but lists no offering price. Jim calls the telephone number Bill has included in the ad, and not getting an answer, leaves the following message on voice mail: “Bill, I, Jim, will buy your car for $5000. I live at 123 Main Street. Please drive the car to my house next Tuesday the 15th at 7:00 p.m. and I will give you a cheque. If you have any difficulties with this, please call me.” Bill never shows up at Jim’s house on the night of the 15th.

When Jim calls him on the morning of the 16th, Bill tells him that he sold the car to Joyce for $5500 two days earlier. Can Jim sue Bill for breach of contract?

A.No, because Jim’s acceptance of Bill’s offer was not in writing.

B.No, because Jim never accepted Bill’s offer.

C.No, b ecause Jim never accepted Bill’s offer.

D.No, because Bill’s ad was an invitation to people like Jim to make offers to buy the car and Bill never

accepted Jim’s offer.

E.Yes, because Jim accepted Bill’s offer before he could revoke it and sell to Joyce.

7.On October 12, Frank wrote to Jane asking at what price she would be willing to sell her house.

Jane wrote back on the 14th, stating the asking price was $75 000. On the 16th, Frank wrote back and asked, "Would you take $50 000?" On the 20th, Jane replied, "I won't go lower than $70 000." On the 25th, the letter from Frank stated, "You've got a deal at $68 000." On the 26th, Jane called Frank and agreed to $68 000. How would each communication be described?

A.12th - invitation to treat; 14th - offer; 16th - counter-offer; 20th - counter-offer; 25th - counter-offer;

26th - acceptance.

B.12th - invitation to treat; 14th - offer; 16th - revocation; 20th - offer; 25th - counter-offer; 26th -

acceptance.

C.12th - offer; 14th - invitation to treat; 16th - offer; 20th - counter-offer; 25th - counter-offer; 26th -

acceptance.

D.12th - invitation to treat; 14th - offer; 16th - counter-offer; 20th - revocation; 25th - offer; 26th -

counter-offer.

E.12th - offer; 14th - invitation to treat; 16th - offer; 20th - counter-offer; 25th - revocation; 26th -

acceptance.

8.In early October, Irene buys a ticket on Confederation Airlines to fly home from Toronto to

Calgary on December 12, the day after her only scheduled final exam. Irene learns on November

29 that her exam, originally scheduled for December 11, has now been rescheduled to December

17 because of a conflict. Irene contacts Confederation Airlines to change her flight and is told

that one of the terms of purchase—printed in small print on the ticket she received from the airline—provides that she cannot cancel her ticket more than 30 days after purchase. She therefore must pay for a second ticket for a flight to Calgary leaving Toronto on December 18.

Does she have a right to demand her money back for the first ticket?

A.Yes, because she never read the term limiting the time for refunds.

B.No, the terms of the contract clearly state she cannot get her money back more than 30 days after its

purchase.

C.Yes, because airlines are not permitted to use standard form terms pre-printed on their tickets.

D.Yes, because this was an unusual or unexpected term that was not highlighted to her when she

received the ticket.

E.Yes, because the term limiting the time for refunds was unfair.

9.ABC Developments Inc. is planning to build a set of townhouses on a downtown lot that is

partially vacant, and partially occupied by 6 property owners. In order to complete the project as planned, ABC needs all of the owners of the occupied lots to sell their land to it. ABC has had the experience that once property owners know that a developer requires a number of lots, they hold out for a higher price, knowing that their land is that much more valuable to the developer.

What is the best way for ABC to ensure that it is able to purchase all of the lots and at a reasonable price?

A.Enter into contracts with each owner who agrees and hope that no one holds out.

B.Ask each owner to make ABC an offer and then accept none of them until every owner has made an

offer.

C.Make an offer to each owner and do not acknowledge any acceptance until acceptances are received

from every owner.

D.Enter into contracts with each owner who agrees and ask each owner not to tell their neighbours

about the deal.

E.Enter into an option with each owner that is not exercised until every owner has agreed to the

option.

10.On October 25, Geraldine said to Peter that she would pay him $250 if he would rake all of the

leaves in her yard. On October 26, Peter starts raking the leaves, finishing on October 29. He then asks Geraldine for the $250. Geraldine refuses to pay Peter and thanks him for the gift of the raking. Can Peter force Geraldine to pay him?

A.No, because Peter never communicated his acceptance of the offer to Geraldine.

B.Yes, because Peter's conduct in raking all of the leaves amounted to communication of acceptance.

C.No, because Geraldine's offer had lapsed so could not be accepted.

D.No, because Geraldine's statement was merely an invitation to treat.

E.Yes, because an owner of a house has to pay anybody who does work on the house.

11.The City of Kingston needs extensive r oad work done and publishes a “Request for Tenders” in

a local newspaper. In response, three local construction firms submit tenders, and all of the

tenders address all of the issues raised in the City’s Request for Tenders. The City decides to award the contract to a firm from Toronto it has heard does good work. The contract price agreed to is more than the bids of all three local firms that submitted tenders. It is revealed that the City never considered the tenders of the local firms. What should the local firms do in response to the City’s actions?

A.Nothing. Their tenders were invitations to the City to make offers to the local firms on the terms

suggested in their tenders.

B.Nothing. Their tenders were merely offers that the City never accepted.

C.They could all sue for breach of contract as there is an implied contract that all bids submitted

pursuant to a tender request will be considered.

D.Nothing, it is the City’s prerogative to choose whatever contractors it wishes.

E.The firm with the lowest priced bid should sue for breach of contract because it should have been

selected.

12.How may an offer lapse?

A.When the offeree fails to accept within a time specified in the offer.

B.When the offeree fails to accept within a reasonable time, if the offer has not specified any time limit.

C.When either of the parties die or becomes insane prior to acceptance.

D.All of the above.

E.None of the above.

13.How can an offeree bind an offeror to keep its offer open for a specified time?

A.The offeree may obtain a written offer under seal.

B.The offeror and offeree exchange promises to perform.

C.The offeree may make a contract called an option to keep the offer open.

D.The offeree must perform both requirements stated in answers A and C.

E.The offeree must perform the requirements set out in either answer A or answer C.

14.How can an offer "come to an end"?

A.The offer may lapse when the offeree fails to accept within the time stated in the offer, or if no time

limit is stated, within a reasonable time.

B.The offerer revokes the offer before the offeree has accepted.

C.The offerer rejects the offer or makes a counter-offer.

D.The offeree accepts before any of the three above has occurred (offer ends and a contract is formed).

E.All of the above.

15.Under what circumstances has an offeree counter-offered?

A.Through silence.

B.Through performance of the terms.

C.When the offeree receives an offer and, though interested, chooses to change some of the terms

D.All of the above.

16.Maxine, a wealthy widow, was approached by her alma mater university for a donation that the

school intended to use to construct a residence for women. Maxine offered to donate an amount that would cover fifty percent of the capital required for the building. If Maxine were to later refuse to fulfill the pledge, could the university force her to pay?

A.Yes, because Maxine has a moral obligation to fulfill the pledge.

B.No, because the university does not need a women’s residence.

C.Yes, if the university can show that they commenced construction of the residence in reliance on

Maxine's pledge.

D.No, because Maxine's pledge is merely a gratuitous promise.

E.Yes, because all the essential elements of a contract are present—offer, acceptance, and

consideration.

17.Scott offered to shovel snow from Trisha’s driveway after she sprained her ankle late in January.

For the remainder of January and throughout February, true to his word, Scott shoveled her driveway approximately five times. On March 1, when Trisha’s ankle had sufficiently healed and she was able to look after her driveway again, Trisha told Scott how thankful she was for his efforts and that she would give him $20 for each time he shoveled her driveway (or a total of $100). Scott accepted Trisha's offer, but later Trisha refused to pay the $100. Can Scott force Trisha to pay?

A.No, because $20 is too much for shoveling snow.

B.Yes, because all the essential elements of a contract are present—offer, acceptance, and

consideration.

C.Yes, because Scott changed his course of action and shoveled her snow thinking that he might be

paid.

D.No, because Trisha's promise is merely a gratuitous promise since the consideration is in the past.

E.Yes, because Trisha has a moral obligation to fulfill the promise.

18.Betty asked her friend Marnie, an accountant, if she could help her with her tax return. Marnie

owed Betty $300, and offered to help Betty if Betty would agree to forgive Marnie’s debt to her.

Betty agreed and Marnie helped Betty prepare her tax return, which resulted in a $2 000 refund.

A month later, Betty called Marnie and asked her to repay the $300; Marnie refused, citing the

“deal about the tax return.” Betty replied: “That was no deal. I’ll see you in Small Claims Court!” If Betty presses ahead with her case, what will the court say?

A.There was no consideration here—it was an example of past consideration.

B.There was no consideration here—consideration must be paid, not a promise not to do something.

C.This was a gratuitous reduction of a debt and not enforceable; Marnie still owes the debt.

D.There was a binding contract, and as consideration for the tax services, Betty agreed to forgive

Marnie’s debt.

E.The forgiveness of the debt could have been consideration, but the amount of the debt far exceeded

the value of the services and therefore the consideration was inadequate.

19.Alomar rescued Bell’s son from a burning building. Afterwards, Bel l promised to pay Alomar

$5000 out of gratitude. If Bell refuses to pay, can Alomar force him to?

A.No, because the consideration is out of proportion to the labour or act required.

B.No, because the labour or act was done before the promise to pay was made an d thus was “past

consideration.”

C.Yes, because the consideration is not out of proportion to the labour or act required.

D.No, because the act was done—or the consideration was paid—to Bell’s son and not to Bell.

E.Yes, because all the essential terms of a contract are present—offer, acceptance, and consideration.

20.Dennis had Sean repair his sports car and on January 31, Sean sent him a bill for $2500. Dennis

paid $1500 and owes Sean $1000, due on March 1. On February 28, Dennis is a little short of cash so he asks Sean to accept $900 in satisfaction of the debt. Sean accepts the $900 and two days later commences a lawsuit against Dennis for the remaining $100. Can Sean succeed in the lawsuit?

A.Yes, because Dennis has not fulfilled his obligations since the full amount was not paid.

B.Yes, because $900 is not adequate consideration for a $1000 debt.

C.No, because accepting the money one day early is consideration for the reduction.

D.Yes, because terms of a contract cannot be varied once the agreement is signed.

E.No, because Dennis relied on Sean's agreement to accept $900.

21.The Kingston Hospital solicits pledges from any person visiting friends or relatives in the

hospital, to help finance the construction of a new wing. Fred is so happy with the care his mother has received at KH that he completes and signs a pledge card indicating that he intends to give $20 000 to the hospital. Fred never donates the money. Can the hospital sue him in order to receive that money?

A.Yes. Fred is in breach of a properly formed contract.

B.Yes. While charitable pledges ordinarily are not enforceable, when they are in writing and signed, they

are enforceable.

C.No. Charitable organizations are not permitted to sue donors.

D.No. When Fred made the pledge he was incapable of making a rational decision because of his

euphoria over his mother’s recovery.

E.No, this is a gratuitous promise and not enforceable against Fred.

22.Assume the same set of facts as were set out in Question #7. In this case, however, when Fred

hands his pledge card to the Kingston Hosp ital’s charitable officer, the officer says: “Oh thank you Fred. With this kind donation we can hire architects to design the new wing.” The hospital later that day signs a contract with a local architectural firm and the architects immediately begin working on plans. Fred never makes the donation and the architectural firm has billed the hospital for $18 000 worth of services. In this case, can the hospital successfully sue Fred for the money?

A.Very likely, so long as it can show that a reasonable person in Fred’s place would have understood

that the hospital was relying on his promise to undertake further obligations

B.No, this is a gratuitous promise and not enforceable against Fred.

C.Yes. While charitable pledges ordinarily are not enforceable, when they are in writing and signed,

they are enforceable.

D.No. Charitable organizations are not permitted to sue donors.

E.No. When Fred made the pledge he was incapable of making a rational decision because of his

euphoria over his mother’s recovery.

23.Ben asked an investment advisor, Sherry, for advice concerning the appropriate composition of

his portfolio. After the advice was provided, Ben asked Sherry her fee and Sherry suggested a reasonable sum. Ben refused to pay the figure. Can Sherry successfully sue Ben for the sum mentioned?

A.Yes, because a reasonable payment is required when there has been a request for services.

B.No, because Ben and Sherry had no intention to create legal relations.

C.No, because Sherry's provision of investment advice was a gratuitous service.

D.No, because past consideration is no consideration.

E.Yes, because the essential elements of a contract are present—offer, acceptance, and consideration.

24.What is the classic situation in which equitable estoppel arises?

A.The other party in reliance on that promise alters his conduct in a way that would make it a real

hardship if the promisor could renege on his promise.

B.Some form of legal relationship already exists between the parties.

C.One of the parties promises (perhaps by implication only) to release the other. From some or all of

the other's legal duties to him.

D.None of the above.

E.All of the above.

25.John, who has just ordered a new playground set for his children, tells his friend Irene that he

will give her his old smaller swingset as soon as the new playground set arrives. To make room for the swingset, Irene will have to have five trees cleared from her backyard, and engages a firm to do this work at a cost of $1 200. Subsequently, John's brother reminds him that he had promised the old swingset to him, and rather than promote a family quarrel, John tells Irene she cannot have the swingset. Can Irene successfully sue John?

A.Yes, because Iris reasonably relied on John's promise to her detriment and incurred significant

reliance costs.

B.Yes, because the contract between John and Iris had all the essential elements—offer, acceptance,

and consideration.

C.No, because past consideration is no consideration.

D.No, because the promise to John's brother was made first.

26.At their children’s soccer game one summer evening, Sue and Ted are discussing Sue’s plan to

convert part of her house into a retail store. Ted, a property lawyer, tells Sue that a recently enacted city by-law will not permit her customers to access her store through a front door,

contrary to her plan. She thanks him profusely for his advice and the next day advises the contractors to alter their plans. Two days later, Sue receives a bill for professional services from Ted for $200. Does Sue have to pay this bill?

A.No. Professional advice rendered in social situations can never be considered as billable.

B.Yes, based on the principle of quantum meruit.

C.Yes, she benefited from Ted’s advice and has a moral duty to pay it.

D.She has no duty under contract law to pay this bill, but she does have a duty in tort to pay a

professional for his services.

E.No, as there was no implication from their conversation that she was requesting this opinion, it was

given gratuitously.

27. A promise made in the absence of a bargain is:

A. Consideration.

B. Promissory estoppel.

C. Gratuitous promise.

D. Past consideration.

E. None of the

above.

28. A unilateral contract means:

A.The price for which the promise [or act] of the other is bought.

B.The price paid for the offeror's promise is the act done by the offeree.

C.The price paid for each party's promise is the promise of the other.

D.All of the above.

E.None of the above.

29.What are the elements required to form a binding contract?

A.The defendant had the capacity to form a binding contract.

B.Acceptance

C.The contract is legal

D.Offer

E.Consideration for the promise

F.All of above

30.Jen leaves her bicycle at Joe’s for 2 weeks for repairs, and in the interim, she celebrates her 18th

birthday. She then picks up her repaired bike, but does not pay. Can Joe successfully sue her in this case?

A.Yes, because she is no longer a minor and therefore the contract is enforceable

B.No, because this was not a contract for a “necessary."

C.No, because on attaining the age of majority, she did not ratify the contract she had entered into as a

minor.

D.Yes, because this is a contract of a continuous nature and she did not repudiate her liability upon

turning 18.

E.No, because she was a minor when she entered the contract and it can never subsequently be binding

against her.

31.At 17 years of age, Wilma entered into a contract of employment with a large retail clothing

outlet to join its one-year training program. The program included travel to the company’s head office in Toronto and several of its stores across Canada, for promising young employees.

Shortly after Wilma went to work for the company, it proposed to send her to work in its largest store in Saskatoon for a few months as part of the training program, at her regular salary. If Wilma refuses to go, can the company successfully sue her?

A.Yes, because it is part of a beneficial contract of service.

B.No, because it is part of an exploitive contract of service.

C.Yes, because it is part of a contract for “necessaries."

D.Yes, because it is a contract of an ongoing or continuous nature.

E.No, because it is part of a contract for non-necessaries of life.

32.Sally, a 17-year-old, is desperate for a car so that she can obtain a job delivering pizzas. She

borrows $2 000 from an adult family friend to buy a used car. If Sally fails to repay the debt, can the family friend successfully sue Sally for the debt?

A.No, because the loaning of money is not a necessary.

B.Yes, because the money was used to purchase a non-necessary item.

C.No, because the money was used to purchase a car that was necessary for her employment.

D.No, because not all the essential elements of a contract are present —offer, acceptance and

consideration.

E.Yes, because the loaning of money is a necessary.

33.In order to become a licensed electrician, 16-year-old Josh must work with a licensed electrician

for a period of 1 year. He has some difficulty finding an experienced electrician who will hire him for this training period, but finally enters into an agreement with Barney, an older electrical contractor. Barney’s business is rather slow, and he is unable to pay Josh very well. Two months later, Josh learns that two of his friends are apprenticing for electricians and making twice as much money per hour as Josh is. Josh wants to break his agreement with Barney, but Barney has come to rely on Josh. Can Josh repudiate this contract?

A.Unlikely, because this appears to be a contract of service beneficial to Josh in that it allows Josh to

meet the requirements of his profession.

B.No, because this contract is not beneficial to Josh, it is beneficial to Barney.

C.Yes, as a minor he can repudiate any contract while still under the age of majority.

D.Yes, it is illegal to employ minors to contracts for professional services.

E.No, he cannot repudiate it until he is 18 and the contract will be over before that time.

34.Ron, a 15-year-old hockey enthusiast, was surfing the Internet one evening looking for rare

hockey cards. He finds a site selling what he is looking for and using the online purchase form, agrees to purchase a Wayne Gretzky rookie card and three Russian-produced cards of prominent hockey stars. He agrees to pay $600 for the 4 cards, which is to be paid “on delivery."

The next day, Ron spends $600 on other hockey cards of interest he discovers in a local card store. When the internet-ordered cards arrive, Ron determines that he has already spent all of his money on the cards he found in the store and refuses to pay the delivery person. Can the online seller sue Ron for breach of contract?

A.No, the contract was neither a beneficial contract of services nor a contract for necessaries and

therefore is not enforceable against the minor.

B.No, the proper elements of contract formation were not present.

C.Yes, because Ron cannot repudiate after the purchased cards have been delivered.

D.Yes, there is no way that the online card seller could have known that Ron was a minor and therefore

the contract is enforceable.

E.Yes, but only if Ron stated on the form that he was at least 18 years of age.

35.Ron, a 70-year-old hockey enthusiast who suffers from mild Alzheimer’s disease, was surfing the

Internet one evening looking for rare hockey cards. He finds a site selling what he is looking for and using the online purchase form, agrees to purchase a Wayne Gretzky rookie card and three Russian-produced cards of prominent hockey stars. He agrees to pay $600 for the 4 cards, which is to be paid “o n delivery." When the internet-ordered cards arrive several days later, Ron has no recollection of making such a purchase and refuses to pay the delivery person. Can the online seller sue Ron for breach of contract?

A.No. Ron suffered from diminished capacity when he entered into the contract and it is not

enforceable against him.

B.No. The online dealer had a duty to determine the capacity of the purchaser it was dealing with.

C.Yes. The contract was properly formed and Ron cannot assert the defence of diminished capacity

because the seller did not know of his mental state when he made the online order.

D.No. Ron has the right to repudiate this contract when he is lucid.

E.Yes. Online contracts are enforceable against all adults.

36.In relation to minors, what have the Courts identified as necessaries?

A.Lodging and transportation

B.Food and clothing

C.Medical and legal services

D.All of above

E.None of above

37.Somara got into Fred’s taxi at the Toronto Airport. Somara notices that Fred does not display the

Toronto Airports Authority sticker which is required for any cab to pick up a fare at the Toronto airport. She says nothing about this until Fred has driven her across the city to her home in Scarborough and asks her to pay a fare of $45.00. She replies that she will not pay. Does she have

a right to take this position?

A.Yes, because Fred is not properly registered and cannot by law enforce the contract against her.

B.Yes, because Fred did not tell Somara that he was not registered.

C.No, she must pay, but she can report Fred to the police who will charge him with the crime of

carrying on business without registration. No. If Somara does not pay, she will have committed a crime equivalent to theft.

D.No, she must pay, but she can report Fred to the police who will charge him with the crime of

carrying on business without registration.

E.No. If Somara does not pay, she will have committed a crime equivalent to theft.

38.John, a university student, participated in a pub-crawl for new students and then spent the rest

of the evening drinking in the university pub. By 2 a.m. not only he is incapable of driving but is barely able to walk. John hails a cab to drive him home even though he lives less than 1 km from campus. He has trouble remembering his address since he only moved in that day. After driving around for 30 minutes, the cab finally arrives at the correct house, but John discovers he has no money. The cab driver is fed up with this customer so agrees to come back the next day for payment. The next day, after he has sobered up, John refuses to pay the $50 fare the cab driver now demands of him. Can the cab driver successfully sue John for the fare?

A.Yes, because the fare was a reasonable price for the drive.

B.Yes, because, unlike minors, adults are responsible for any contracts that they enter.

C.No, because the contract was for a non-necessary and the driver was aware John was drunk.

D.No, because John was too drunk at the time to have entered into a binding contract for a

non-necessary.

E.Yes, because the contract was for a necessary and the driver was aware John was drunk.

39.For people considered to be of unsound mind or incapacitated through drink or drugs, what is

the "additional burden of evidence" required to avoid the contract?

A.The person claiming that he/she was insane and/or incapacitated through drink or drugs is an

unreliable witness and therefore any additional evidence given to this effect lacks veracity and must be adduced from all of the surrounding circumstances.

B.The person must show that he/she was incapable of a rational decision at the time of the agreement.

C.Additional evidence is not required.

D.The person must show that the other party was aware of his/her condition.

E.The person must show that the other party was aware of his/her condition.

40.Rosa is a well-known and popular Canadian singer and the University of Vancouver School of

Business has contracted with her to perform at the gala to open its new building. As a fundraising effort, tickets to the gala have been sold and advance publicity for the event has included her name as a feature performer. One day before the gala, Rosa calls the Dean and says that her travel schedule has been extremely hectic and she will not be able to perform at the gala.

So as not to leave the School in the lurch, she is sending her back-up singer, Leanne, who has a terrific voice, in her place. To the extent the School does not make as much money from the fundraiser as it had hoped, can it sue Rosa?

A.No, Rosa fulfilled the contract by providing a competent singer.

B.No, but the school could sue Leanne because she did not perform as well as the contract required.

C.Yes, because Rosa should have sent a more accomplished singer.

D.No, because Rosa had the right to assign the benefit of the contract to Leanne.

E.Yes, the school could sue Rosa because the contract required personal performance.

41.Darrin, a plumber, owes $2 500 to Peter. Darrin offers to build a second bathroom for Karen if

Karen will promise to pay Darrin’s debt to Peter. Karen accepts this offer. Although Darrin completes the renovation, Karen does not pay the debt to Peter. On failing to receive payment, who should Peter sue?

A.Darrin because Peter never received notice of the assignment.

B.Neither Darrin nor Karen, because neither is responsible for paying the debt

C.Darrin, because he is the person with whom Peter has the contract.

D.Karen, because she took an assignment of the debt.

E.Karen, because she agreed to pay the debt.

42.Harriet is excited about the new blue couch and chair set that she has just ordered from a

furniture manufacturer. A week after the order is placed, the manufacturer calls Harriet and tells her that the furniture has to be ordered directly from the factory and that it will take three months to arrive. Harriet and the dealer agree to substitute a green couch and chair that is in stock for the blue set she had ordered. What has just happened to the contract?

A.Novation.

B.Privity of contract.

C.Nothing.

D.Assignment.

E.Vicarious performance

43.Novation occurs when the parties to a contract agree to terminate it and substitute a new

contract. How is this done?

A.Neither party is able to terminate a contract once it is formed.

B.The parties may change the subject-matter of the contract.

C.One of the parties to the contract "leaves" and another replaces him/her.

D.None of the above

E.Answers 2 and 3.

44.When is vicarious performance allowed?

A.Never.

B.In the transport of people or goods.

C.In the manufacture of goods.

D.In contracts for the construction of buildings.

E.Answers 2, 3, and 4.

45.As part of an arrangement Carly has reached with Sarah in connection with Carly’s purchase of

Sarah’s business, Carly is to pay the outstanding amount of the purchase price to David, who is to pay Sarah $500 a month for three years out of that fund for this purpose. If David stops making payments to Sarah, can Sarah successfully sue David?

A.No, because Sarah has no privity to the contact.

B.No, because the money is owned by David who can do whatever he wants with it.

C.Yes, because Carly has assigned her part of the contract to Sarah

D.Yes, because Sarah has privity to the contract as the named beneficiary.

E.Yes, because Sarah is the beneficial owner of the money in the fund.

46.Ellen owns a house in downtown Edmonton that she rents out to graduate students attending

the University of Alberta, but she has decided to sell the property to Lance. Two days before the transfer of the house is completed, Tommy, the tenant of the house, has a big party and the house suffers significant damages. There is a clause in the lease that states that the tenant must repair any damages caused by the tenant’s negligence or willful misco nduct. Lance inspects the property on the day of closing and sees the damages. Can Lance force Tommy to make the necessary repairs?

A.No, because Tommy has not breached the lease.

B.Yes, because Ellen did assign her interest in the lease to Lance.

C.Yes, because Lance has privity to the lease by virtue of being the new owner of the land.

D.No, because Ellen did not assign the lease to Lance.

E.No, because Lance has no privity to the lease.

47.In what circumstance(s) is/can a trust be created?

A.Privately (trustee/beneficiary).

B.Only when equitably assigned.

C.Bankruptcy (debtor/trustee/creditor).

D.Corporate transfer of bonds (trustee/bondholders).

E.Answers 1, 3, and 4.

48.Andrew forced Garry to give Tower Bank a guarantee in support of Andrew’s loan. Garry did

not receive independent legal advice when he signed the guarantee documentation. Tower Bank has sold their loan portfolio to Sky Bank and has therefore assigned the benefit of Garry’s guarantee to Sky Bank. Andrew has defaulted on the loan and Sky Bank is attempting to enforce the guarantee against Garry. Will it be successful?

A.No, because guarantees cannot be assigned.

B.Yes, because it is a valid equitable assignment.

C.No, because the assigned contract was formed under undue influence and will not be enforceable.

D.No, because it has not included Tower Bank as a party to the lawsuit.

E.Yes, so long as notice of the assignment was given to Garry in writing, it is a valid statutory

assignment.

49.Amco Limited, a building contractor, has built a house for Smith. Under the terms of their

contract, Smith still owes Amco Limited $15 000, to be paid one month after completion of the house. Amco Limited has purchased $25 000 worth of materials from Bricks Inc. In settlement of its debt to Bricks Inc., Amco Limited pays $10 000 in cash and assigns in writing its rights to the $15 000 still owing by Smith. Bricks Inc. then notifies Smith that he should pay the money to it rather than to Amco Limited when the debt falls due. What is wrong with this scenario?

A.The notice given to Smith was not proper.

B.Nothing.

C.Smith has no privity of contract with Bricks Inc. so cannot be forced to pay Bricks Inc.

D.Money owing on building contracts cannot be assigned.

E.Amco Limited still owes Bricks Inc. $15 000.

50.Debbie owed Craig $500. Craig assigned his right to collect this debt to Alan. Alan delayed in

sending notice to Debbie that he was now the party entitled to payment. Debbie, before receiving any notice of the assignment, paid Craig $250 on account. Who can Alan successfully sue for the $250?

A.Craig, because Debbie has not received notice of the assignment.

B.Neither Craig nor Debbie, because it is Alan’s own fault that notice was not sent.

C.Debbie, because that is who owed the money.

D.Craig and Debbie because it is only fair that one of them should have to pay.

E.Debbie, because in certain circumstances a debtor can be forced to pay twice.

51.Arlene owes Betty $100. Betty owes Chris $250. Betty pays $150 to Chris and assigns Arlene’s

debt to Chris in satisfaction of the remainder of what she owes. Chris gives notice to Arlene that she should pay him the $100 and not Betty. Arlene ignores the notice from Chris and pays Betty.

Whom should Chris sue to recover the $100 and why?

A.Chris cannot sue either Arlene or Betty in this case.

B.Chris should sue Arlene because she ignored the proper notice.

C.Chris can sue either Arlene or Betty.

D.Chris must sue both Arlene and Betty.

E.Chris should sue Betty because she has the money.

52.What are examples (if any) of exceptions to the Privity of Contract rule?

A.An undisclosed principal (an agent).

B.A contract for life insurance.

C.A contract for automobile insurance

D.Contracts concerning the sale of land.

E.All of the above.

53.Andy is owed $500 by a supplier. Andy owes $500 to Cam. Andy tells Cam that he will assign to

Cam the supplier’s debt if Andy is unabl e to repay Cam by the end of the month. Andy does not repay the $500 in time and consequently Cam gives notice to the supplier to pay Cam instead of Andy. The supplier refuses and Cam launches a lawsuit against the supplier. What will be the supplier’s def ence?

A.The supplier has no defence and he must pay Cam the $500.

B.That Cam has no privity to the contract under which the supplier owed the $500.

C.That he wasn’t given timely notice of the assignment and therefore it is not effective against him.

D.That one per son’s indebtedness cannot be assigned in satisfaction of another’s indebtedness.

E.That the assignment was not in writing and therefore Andy must be named as a party to the lawsuit.

54.What are examples of "choses in action"?

A.Stocks and bonds.

B.Copyright and patents.

C.Funds deposited into a bank account.

D.Rights to collect proceeds of an insurance policy.

E.Rights against persons who have caused injury.

F.All of the above.