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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. Which of the following situations might give rise to a void contract?

  a.  a contract that is contrary to public policy
  b. a contract that fails to meet the requirements of the Statute of
Frauds
  c.  a contract between spouses
  d. a contract between partners in a partnership
ANSWER:  a

4. 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

5. 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
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  d both ensuring both groups are represented by guardians when entering into
.  contracts
ANSWER:  c

6. What is the policy rationale underlying the rule that minors are obligated by contracts for essentials?
  a.  minors who are self-supporting should be treated like adults
  b. no one would provide essentials to minors if such contracts were
unenforceable
  c.  essentials of life are usually priced fairly
  d. minors do not voluntarily incur obligations for essentials
ANSWER:  b

7. 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

8. 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 b. beneficial development contract
training
  c. beneficial contract of service d. beneficial minor training contract
ANSWER:  c

9. 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

10. Kramer returned from a wedding in an intoxicated state and, while still under the influence, agreed to sell his
motorcycle to his roommate for a price substantially lower than its market value. Which statement best
describes Kramer’s legal position?
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  a. He must claim relief due to the effects of duress.
  b. He must claim relief on the basis of undue influence.
  c. The contract may be voidable if his roommate was aware he lacked mental
capacity.
  d. The contract will be binding on Kramer because his reduced mental capacity
was self-induced.
ANSWER:  c

11. 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

12. 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

13. Michael was severely injured in an automobile accident. While in the hospital, he was visited by an
insurance adjuster who made him a take it or leave it offer of $3000 in full settlement of his personal injury
claim. Michael accepted the offer because the adjuster told him there would be no further offers. If Michael’s
claim is actually worth $100,000, on what legal basis might the court cancel the agreement?
  a.  because the agreement was illegal
  b. because the agreement was entered into under duress
  c.  because Michael lacked capacity to contract
  d. because the agreement is unconscionable
ANSWER:  d

14. 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
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ANSWER:  b

15. 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

16. Marie, an elderly widow, has discovered that the fee in the contract she signed to install new siding on her
home is more than twice that typically charged for such work. What must Marie prove in order to cancel the
contract on the basis of unconscionability?
  a.  Marie must prove undue influence was present.
  b. Marie must prove the presence of actual pressure.
  c.  Marie must prove the parties are in a relationship of utmost good faith.
  d. Marie must prove inequality and an improvident bargain or exploitation
ANSWER:  d

17. 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 b. a certificate of independent legal
advice advice
  c. a certificate of indisputable legal d. a certificate of indubitable legal
advice advice
ANSWER:  b

18. Which statement best 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

19. 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

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good faith.
  d. Proof of misrepresentation alone is insufficient for the courts to rescind a
contract.
ANSWER:  a

20. 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

21. David was approved for automobile insurance coverage despite his history of seizures. As it turns out, the
insurance agent forgot to ask him about his medical history and David did not bother mentioning his seizures.
What is the legal position of the insurer?
  a. The insurer is still bound to provide coverage because it did not ask David
about his medical history.
  b The insurer may deny coverage because applicants for insurance have a
.  positive duty to disclose matters that would be relevant to the risk of accepting
the application.
  c. The transactions is unconscionable and may be cancelled at the discretion of
the insurer.
  d The insurer may not cancel the contract but may increase David’s premiums to
.  reflect the additional risk he represents.
ANSWER:  b

22. Which of the following is NOT necessary for an actionable claim of misrepresentation?

  a.  a false statement of fact
  b. the statement induced the other party to enter into a contract
  c.  the speaker knew the statement was untrue
  d. the untrue fact was material to the contract
ANSWER:  c

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.

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  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. Which type of misrepresentation entitles the wronged party to cancel the contract?
  a. innocent misrepresentation b. unconscionable misrepresentation
  c. fraudulent d. material misrepresentation
misrepresentation
ANSWER:  c

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
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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 an example of a contract that would be considered contrary to public policy?
  a.  a loan that charges interest in excess of 60% per annum
  b. a contract in restraint of trade
  c.  a commission contract of an unlicensed realtor
  d. a contract to that contains an improvident bargain
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
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  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. Rita is employed as a financial investment advisor for a local investment services firm and signed a
restrictive covenant that prevents her from working as an investment advisor for a period of 5 years anywhere in
Canada should she leave her current employer. On what legal basis might this clause be unenforceable?
  a.  It violates the Charter guarantee of freedom of mobility.
  b. It constitutes an unreasonable restraint on trade.
  c.  Rita failed to read the contract before signing it.
  d. It violates the Criminal Code.
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

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  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

42. A contract with an individual who lacks mental capacity is always unenforceable.
  a. True
  b. Fals
e
ANSWER:  Fals
e

43. Minors have the option of fulfilling their contractual obligations and suing the other party to enforce the
contract.
  a. True
  b. Fals
e
ANSWER:  True

44. 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. Fals
e
ANSWER:  True
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45. People seeking to avoid a contract owing to mental capacity, duress, undue influence, or unconscionability
must do so promptly.
  a. True
  b. Fals
e
ANSWER:  True

46. The remedy of rescission is only available in the case of fraudulent or negligent misrepresentation.
  a. True
  b. Fals
e
ANSWER:  Fals
e

47. 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. Fals
e
ANSWER:  True

48. To establish undue influence, evidence of actual pressure requires the party seeking relief to show, among
other things, that the influence existed.
  a. True
  b. Fals
e
ANSWER:  True

49. When a relationship exists between a lawyer and a client, the court is entitled to assume presumed pressure
amounting to undue influence.
  a. True
  b. Fals
e
ANSWER:  True

50. Only misrepresentations that were significant to the decision to enter into the contract are actionable.
  a. True
  b. Fals
e
ANSWER:  True

51. 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
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  b. Fals
e
ANSWER:  True

52. 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. Fals
e
ANSWER:  Fals
e

53. In order to count as misrepresentation, it must be proven that the party making the statement knew it was
untrue.
  a. True
  b. Fals
e
ANSWER:  Fals
e

54. Sanjip has elected to build up the earth around the cracked foundation of his home prior to listing the home
for sale. Sanjip’s action will not amount to misrepresentation if he fails to disclose the cracks to potential
purchasers.
  a. True
  b. Fals
e
ANSWER:  Fals
e

55. Carelessly signing a document without reading it will be sufficient to avoid enforceability.

  a. True
  b. Fals
e
ANSWER:  Fals
e

56. When applying for life and disability insurance protection on her mortgage, Marabou neglected to disclose
that she had been diagnosed with type 2 diabetes. As players in the commercial contractual area have a duty to
look after their own interests, the insurance policy will be enforced should she become disabled or die as a
result of the undisclosed pre-existing condition.
  a. True
  b. Fals
e
ANSWER:  Fals
e
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57. Ranjit, Quan Lu, and Ng are all directors of BigSkyInvestments Inc. who have a beneficial interest in a
contract that BigSkyInvestments’ management is considering and each must disclose their status to
management in accordance with statute requirements.
  a. True
  b. Fals
e
ANSWER:  True

58. A void contract is considered to have never existed at all.

  a. True
  b. Fals
e
ANSWER:  True

59. 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. Fals
e
ANSWER:  Fals
e

60. Proof of unconscionability requires proof of inequality between the parties.

  a. True
  b. Fals
e
ANSWER:  True

61. The only basis for a contract being held to be illegal is if it is prohibited by the Criminal Code.
  a. True
  b. Fals
e
ANSWER:  Fals
e

62. A contract is only as good as the process leading up to its formation. What factors should businesses train
their employees to consider when negotiating contracts in order to ensure they are enforceable?
ANSWER:  ∙ Matters to be concerned about include:
∙ Are the parties to the contract under any legal incapacities?
∙ Has one party taken unfair advantage of the other?
∙ Has one party misled the other?
∙ Has a substantial mistake been made?
∙ Is the contract contrary to legislation or in violation of public
policy?

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∙ Is the contract required to be in writing?

63. If a contract is one that the Statute of Frauds requires must be written in order to be enforceable, what must
appear in writing?
ANSWER:  Three things must appear in writing:
1. Essential terms of the contract
2. Identity of the parties
3. Signature of the party against whom the contract is to be enforced

64. What interests do the courts balance in deciding whether a noncompetition covenant, preventing an
employee from leaving and going into competition with her former employer, is enforceable? What is the test
applied by the courts?
ANSWER Factors considered are that it is in the public interest to discourage restraint of
:   trade and maintain free and open competition, versus a disinclination to restrict
the rights of contract, particularly when exercised by knowledgeable persons of
equal bargaining power.
The test applied is whether the covenant is reasonable between the parties and
with reference to the public interest.

65. What must be proven in order to have a contract set aside for misrepresentation?
ANSWER It must be shown that:
:   1. There was a false statement
2. The misrepresentation was clear and unambiguous
3. The misrepresented fact was material to the contract
4. The misrepresentation actually induced the aggrieved party to enter the
contract
5. The misrepresentation was one of fact and not opinion, unless given as an
“expert opinion”

66. What is the distinction between a non-solicitation clause and a non-competition clause, and in what context
do these clauses typically arise?
ANSWER These clauses are typically used in contracts for the purchase of a business and
:   in employment contracts. A non-solicitation clause simply forbids the employee
(or business vendor) from contacting the business’s customers. A non-
competition clause forbids competition outright for a certain period of time and
is therefore much more intrusive.

67. Is an “electronic signature,” legally valid in Canada?

ANSWER This area of law is still developing, but legislators across the country have now
:   offered guidance as to what fulfills a signature requirement in an electronic
environment, and most Canadian jurisdictions have now accepted electronic
signatures according to statutory rules of varying strictness.

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68. Under what circumstances might a contract be enforceable against a minor?
ANSWER Minors are obligated by contracts for essentials, known in law as “necessaries,”
:   and are required to pay a reasonable price for them. What amounts to a
necessary in a given case is legally determined in relation to two questions:
1. Is the item being acquired necessary to this minor?
2. Does this minor already have an adequate supply of the item?
Contracts known as beneficial contracts of service are also binding if they are
considered largely for the benefit of the minor. For example, an employment
contract with a minor is enforceable if the employer can show that the contract
involves a significant element of training and career development, such as one
would expect in a program required to enter or progress through a trade or
profession.

69. Identify and briefly explain the relevance of a misrepresentation of relevant facts with regard to an insurance
contract.
ANSWER A person applying for insurance coverage is entering into a relationship that the
:   law considers to require utmost good faith. The person applying therefore has a
duty to disclose all relevant information to the insurer in order for the insurer to
assess the risk of accepting the application.

70. Identify the categories of contracts that must be evidenced in writing in order to be enforceable.
ANSWER
:   1. Contracts of Guarantee
2. Contracts not to be Performed Within a Year
3. Contracts Dealing with Land
4. Contracts for the Sale of Goods

71. With respect to a contractual relationship, identify the types of remedies for misrepresentation available to
the affected parties and how they are applied.
ANSWER The types of remedies for misrepresentation available to the affected parties are
:   as follows:
1. A court may rescind the contract
2. A court may set the contract aside
3. Misrepresentations that are torts attract an award of damages from the courts
If the misrepresentation is fraudulent or negligent, damages in tort may be
awarded by the court in addition to the remedy of rescission provided by
contract law.

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