Saint Mary’s University Business Law Quiz Questions The final will cover materials from Lessons 2 through 11. Lesson 1 is foundational and is not going to
Saint Mary’s University Business Law Quiz Questions The final will cover materials from Lessons 2 through 11. Lesson 1 is foundational and is not going to be specifically examined. The exam format will be a mixture of multiple choice and long answer questions….generally 30MC, and 2 long answer that you choose from two or three options.
The Final Exam will be 3 hours in length.
I can provide you with materials for lesson 2-11.
Thanks. Lesson2 Elements of the Contract
ELEMENTS OF A CONTRACT 1. Intention to form legal relations 2. Offer &
Acceptance 3. Consideration
INTENTION TO FORM LEGAL RELATIONS WOULD A REASONABLE PERSON
BELIEVE THAT THE PARTIES INTENDED TO CREATE A LEGALLY
ENFORCEABLE AGREEMENT? OBJECTIVE TEST NOT SUBJECTIVE NOT
WHAT THE PARTIES THOUGHT BUT WHAT A REASONABLE, OBJECTIVE
THIRD PARTY MIGHT THINK IN ALL THE CIRCUMSTANCES
THE NATURE OF AN OFFER An OFFEROR is a party who offers to enter into a
contract. An OFFER is am indication of a willingness to enter into a contract on certain
terms. An OFFEREE is a party who receives an offer to enter into a contract.
CARLILL V CARBOLIC SMOKE BALL CO [1893] 1 QB 256 (CA) IN THE 1890S,
ENGLAND WAS PLAGUED BY TWO RELATED PHENOMENA: AN
INFLUENZA EPIDEMIC AND QUACK MEDICINE. THE CARBOLIC SMOKE
BALL CO WAS ONE OF MANY COMPANIES THAT TRIED TO CAPITALIZE ON
THE COUNTRYS ILL HEALTH. IT PRODUCED A HAND-HELD GADGET THAT,
WHEN SQUEEZED, EMITTED A SMALL CLOUD OF CARBOLIC ACID DUST.
THE COMPANY CLAIMED THAT IFONE INHALED THE DUST REGULARLY, IT
WOULD PREVENT A LONG LIST OF AILMENTS RANGING FROM
DIPHTHERIA AND BRONCHITIS TO SNORING AND SORE EYES. AS PART OF
ITS MARKETING PLOY, THE COMPANY PUBLISHED AN ADVERTISEMENT
THAT OFFERED TO PAY £100 TO ANY PERSON WHO CONTRACTED
INFLUENZA WHILE USING THE CARBOLIC SMOKE BALL. MRSCARLILL
SAW THE AD, BOUGHT THE PRODUCT, AND USED IT AS DIRECTED. WHEN
SHE LATER CAME DOWN WITH THE FLU, SHE CLAIMED TO BE ENTITLED
TO £100. THE COMPANY REFUSED TO PAY. IT SAID THAT THERE WAS NO
CONTRACT BECAUSE SHE HAD NOT TOLD THEM THAT SHE HAD
ACCEPTED THEIR OFFER AND WAS USING THEIR PRODUCT.
THE LIFE OF AN OFFER Revocation Lapse of Time Death or Insanity Rejection
Counter-offer
REVOCATION OCCURS IF THE OFFEROR WITHDRAWS THE OFFER
OFFER WILL LAPSE WHEN EITHER A SET DEADLINE PASSES, OR A
REASONABLE LENGTH OF TIME
IF EITHER PARTY DIES OR IS DETERMINED TO LACK CAPACITY THE OFFER
CEASES TO EXIST
REJECTION OCCURS WHEN THE OFFEREE REFUSES THE OFFER
A COUNTER OFFER OCCURS WHEN THE OFFEREE RESPONDS TO AN OFFER
BY INDICATING A WILLINGNESS TO BE BOUND ON DIFFERENT TERMS
ACCEPTANCE
AN ACCEPTANCE OCCURS WHEN AN OFFEREE AGRESS TO ENTER INTO A
CONTRACT ON THE EXACT TERMS PROPOSED BY THE OFFEREE
ACCEPTANCE
By promise creates a bilateral contract ACCEPTANCE
By performance creates a unilateral contract
FORM OF ACCEPTANCE
Words Conduct Silence
FORM OF COMMUNICATION 1. THE POSTAL RULE 2. INSTANTANEOUS
COMMUNICATION 3. ELECTRONIC COMMUNICATION
CUTS LIKE A KNIFE
MACK DARIN OWNS AND OPERATES A STORE IN A ROUGH DOWNTOWN
NEIGHBOURHOOD. LAST WEEK, HE RECEIVED A SHIPMENT OF
SWITCHBLADE KNIVES. HE PLACED ONE OF THE KNIVES IN HIS STORE
WINDOW, ALONGSIDE A SMALL NOTICE BOARD THAT SAID,
SWITCHBLADE KNIVES$25 EACH. THAT DISPLAY SOON CAUGHT THE
ATTENTION OF CONSTABLE BOOT, A MEMBER OF THE LOCAL POLICE
DEPARTMENT. DARIN WAS ARRESTED AND CHARGED WITH A CRIME
UNDER SECTION 7 OF THE PROHIBITED WEAPONS ACT,WHICH SAYS THAT
IT IS ILLEGAL TO MANUFACTURE, SELL, RENT, OR OFFER FOR SALE OR
RENT . . . ANY KNIFE . . . WHICH HAS A BLADE THAT OPENS
AUTOMATICALLY BY HAND PRESSURE APPLIED TO A BUTTON, SPRING,
OR OTHER DEVICE IN OR ATTACHED TO THE HANDLE OF THE KNIFE.
THERE IS NO DOUBT THAT THE SWITCHBLADE THAT APPEARED IN
DARINS STORE WINDOW FALLS WITHIN THAT DESCRIPTION.
Lesson3Elements of a Contract: Consideration and Pre-contractual
Representations. Terms of a Contract.
Lyoto has owned and operated a catering business in Ontario for less than a year.
Because the venture is new and small, it does not have a proper office or even a proper
email account. Lyoto usually works from a desk in his basement, but when he is
annoyed by the sound of the washing machinewhich happens quite oftenhe goes
to the public library. He conducts business using the email account that he was assigned
as a college student, as well as a Gmail account that he set up to chat with friends or
post anonymous messages online. His website lists options for food and drink, along
with corresponding prices.
A young woman named Fabiola was to be married. She had dealt with most of the
planning details, but she still needed to find a caterer for the reception afterwards.
Having heard about that situation from a mutual friend, Lyoto sent a message, from his
college account, that offered his services to Fabiola. She was keen to hire Lyoto for the
job, but she was ultimately left deeply disappointed.
Fabiola argues that she accepted Lyotos offer by sending an email to his college
account. In the message, she listed her choices for food items and beverages, and she
promised to pay the resulting price. Unfortunately, Lyoto did not see that message until
three days after the wedding, when Fabiola telephoned him, furious that he had not even
shown up at the reception.
Lyoto feels badly, but insists that he is not responsible for ruining Fabiolas big day.
The problem, he explained to the court, began with the fact that he had a girlfriend
named Fabiola while he was in college. When that relationship ended and she began
harassing him, Lyoto created a filter that automatically re-directed any messages
containing the word Fabiola to his trash folder. Having forgotten about that filter by
the time that he went into business, he had no idea that the new Fabiola had wanted to
accept his offer.
Elements of a contract
. Intention to form legal relations
Offer & Acceptance
. Consideration
Consideration
Consideration exists whan a party either gives (or promises to give) a benefit to
someone else, or suffers (or promises to suffer) a detriment.
Consideration must move from each party but not necessarily to the other party.
Sufficient vs adequate
Sufficient Consideration may be almost anything of value.
Adequate Consideration has essentially the same value for that which it is exchanged.
A court will only inquire as to whether the consideration is sufficient. It does not care
if it is adequate.
Forbearance to Sue
Igor works as a stockbroker for a company. Following procedures that he remembered
reading in the companys official policy, he purchased $100 000 worth of shares on
instructions from a client. Unfortunately, despite Igors repeated demands, the client
refused to pay for those shares. Worse yet, during that time, the value of the shares
dropped by 60 percent. Eventually, the company took control of the account, sold the
shares for $40 000, and threatened to sue Igor for $60 000.
In the companys view, the whole fiasco was Igors fault. He vigorously denied liability,
but he was worried that a lawsuit would damage his professional reputation. He was
also unable to find the policy document that he had relied on. He therefore agreed to
pay $50 000 in exchange for the companys promise to drop the matter. Before actually
making the payment, however, Igor located the lost document. It proved that he could
not be held liable in the circumstances.
Past consideration
Consists of something that a party did prior to the contemplation of the contract
Mutuality of Consideration requires that each party provide consideration in exchange
for the other partys consideration
Therefore, Past Consideration is not actually good consideration at all.
Past Consideration
While strolling on a beach, you discover HeLena unconscious and face down in the
water. You pull her ashore, administer first aid, and bring her back to life. Shaken, but
grateful, she promises to pay you $500 every year for the remainder of your life.
However, when you attempt to collect the first payment, she states that she has changed
her mind and refuses to pay anything.
Questions for Discussion
Does HeLena have a moral obligation to pay any money to you? Does she have a legal
obligation to do so?
Leaving aside the rule governing past consideration, do you believe that HeLena should
be required to pay anything to you?
Pre-existing obligations
Pre-existing Public Duty
Pre-existing Contractual Obligation to a Third Party
Pre-existing Contractual Obligation to the Same Party
Pao On v Lau Yiu Long [1980] AC 614 (PC)
The plaintiff bought 4 200 000 shares from a company called Fu Chip. Under the terms
of that agreement, the plaintiff promised Fu Chip that it would not resell more than 60
percent of those shares within one year. Resale of a larger number of the shares would
hurt Fu Chips financial situation.
The plaintiff later realized that it might suffer a financial loss itself if, for some reason,
the value of the shares dropped. It would be required to hold on to the shares while their
value declined. The plaintiff therefore approached the defendants, who were the
majority shareholders in Fu Chip, and persuaded them to enter into a separate,
indemnification contract.15 The plaintiff promised to honour its earlier sale contract
with Fu Chip, and the defendants promised to compensate the plaintiff for any loss that
it suffered as a result.
As feared, the value of the shares dropped and the plaintiff demanded indemnification
under its contract with the defendants. The defendants argued that the indemnity
agreement was unenforceable because the plaintiff could not use the same promise (not
to resell the shares) for two different contractsfirst the sale contract with Fu Chip,
and then the indemnity contract with the defendants. The court disagreed. The plaintiff
was allowed to use a single promise to support two different agreements.
Gilbert Steel Ltd v University Construction Ltd (1976) 67 DLR (3d) 606 (Ont CA)
The plaintiff contractually agreed to sell several shipments of steel to the defendant at
a set price. After that agreement was partially fulfilled, the plaintiffs own supplier
raised its prices. The plaintiff consequently persuaded the defendant to promise a higher
price for the remaining shipments. The plaintiff delivered the rest of the steel, but the
defendant refused to honour its promise to pay the extra amount. It argued that the
plaintiff had already promised to deliver the steel under the initial contract and therefore
did not provide anything in exchange for the later promise of the higher price.
The court agreed. Since the plaintiff had not given anything new for the promise of
extra payment, the defendant only had to pay the original price
Contracts Enforceable without Consideration
Under Seal
Promissory Estoppel
ELEMENTS OF PROMISSORY ESTOPPEL
1. Representation
2. Reliance
3. Inequitable Behaviour
4. Existing Legal Relationship
Central London Property Ltd v High Trees House Ltd [1947] KB 130 (KB)
The defendant leased an apartment block in London, England, from the plaintiff. The
lease began in 1937 and was to run for 99 years, at a yearly charge of £2500. The
defendant intended to rent out the individual apartments to other tenants. Unfortunately,
once World War II began, the defendant could not rent out enough apartments to cover
its obligations under the main lease. The plaintiff was sympathetic and therefore
promised to reduce the rent to £1250 per year. That was a gratuitous promise because
the defendant did not give any consideration in exchange for it.
The parties proceeded on that basis for several years. By 1945, however, the war had
ended and the building was fully occupied. The plaintiff then brought an action to
determine (i) whether it could charge the original rent of £2500 in the future, and (ii)
whether it could recover, as back rent, the amount that it had allowed the defendant to
not pay during the war.
The dispute was decided by Lord Denning MR. He held that while original rent could
be reinstated in future years, the plaintiff was estopped from retracting its promise to
charge only half rent during the war. In other words, for the past years, the plaintiffs
promise was enforceable even though it was not supported by consideration
Privity of Contract
1. Assignment
2. Trusts
3. Statute
4. Employment
5. Himalaya Clause
PRE CONTRACTUAL STATEMENTS VS CONTRACTUAL TERMS
A Contractual Term is a provision in an agreement that creates a legally enforceable
obligation.
A Pre Contractual Representation is a statement a party makes by words or conduct
with the intention of inducing another to enter into a contract
STATEMENT OF FACT OR OPINION?
MRSAND MRPERRY DECIDED TO CONSTRUCT A BUILDING, WHICH THEY
COULD RENT OUT TO STORES AS PART OF A SHOPPING COMPLEX. IN
ORDER TO MAKE A PROPER RETURN ON THEIR INVESTMENT, THEY
DETERMINED THAT THEIR DEVELOPMENT HAD TO BE CONSTRUCTED
FOR LESS THAN $120 000. THE PERRYSMET WITH AN ARCHITECT WHO
GUESSTIMATED THAT HE COULD DESIGN A PLAN THAT COULD BE
CONSTRUCTED FOR $120 000 OR LESS. THE PERRYS AGREED TO HAVE THE
ARCHITECT DRAW UP THE DESIGN PLANS FOR A FEE OF $5000. WHEN THE
PERRYSLATER BROUGHT THE ARCHITECTS PLANS TO A CONTRACTOR,
THEY WERE TOLD THAT CONSTRUCTION OF THAT BUILDING WOULD IN
FACT FAR EXCEED THEIR SPENDING LIMIT. THE PERRYSNOW REFUSE TO
PAY THE ARCHITECT THE AGREED FEE FOR HIS PLANS ONTHE BASIS OF
WHAT THEY CLAIM TO BE A PRE-CONTRACTUAL MISREPRESENTATION
ABOUT THE COST TO IMPLEMENT HIS CONSTRUCTION PLANS.
CONSEQUENCES OF MISREPRESENTATION
Rescission the cancellation of the contract with a view to restoring the parties to their
pre contractual positions. Damages monetary compensation for the losses suffered as
a result of reliance on a misrepresentation.
TYPES OF MISREPRESENTATION Negligent – a false inducing statement made in a
careless or unreasonable manner. Innocent – a statement made carefully and without
knowledge that it is false. Fraudulent a statement that is known to be false, or made
recklessly without regard to the truth
CONTRACTUAL TERMS
Express – a statement made that a reasonable person would believe was intended to have
a legally enforceable effect.
Implied – implied by either the Court or by Statute to give appropriate legal effect
PAROLEVIDENCE RULE 1. To rectify or fix a mistake in a contract document 2. To
prove that a contract was not actually formed or is materially defective 3. To resolve
ambiguities in the contractual document 4. To demonstate that the contractual document
does not contain the complete agreement 5. To show a collateral contract
STANDARD FORM AGREEMENTS
Exclusion Clauses a contractual term that seeks to limit or eliminate legal liability
Ticket Cases
Signed Forms
INTERFOTOPICTURE
PROGRAMMESLTD
LIBRARY
LTD.
V
STILETTO
VISUAL
INTERFOTO, AT THE REQUEST OF STILETTO, DELIVERED 47
PHOTOGRAPHIC TRANSPARENCIES TO STILETTO IN A JIFFY BAG.
STILETTO TELEPHONED INTERFOTO SAYING THERE WERE ONE OR TWO
WHICH THEY WERE PLANNING TO USE IN A PRESENTATION, BUT IN THE
EVENT THEY DID NOT. STILETTO NEVER READINTERFOTO’S STANDARD
TERMS AND CONDITIONS, WHICH WERE ON A DELIVERY NOTE INSIDE
THE BAG. CONDITION 2 OF THE TERMS SAID THERE WAS A HOLDING FEE
OF £5FOR EACH DAY OVER FOURTEEN DAYS. AFTER APPROXIMATELY A
MONTH, INTERFOTOSENT A BILL FOR £3,783.50 AND AFTER THE INVOICE
WAS REFUSED BROUGHT AN ACTION AGAINST STILETTO. THE LOWER
COURT JUDGE AWARDED THEM THE AMOUNT WHICH STILETTO
APPEALED.
TICKET CASES
ON THE FRONT OF MALAYKOSLIFT PASS IS PRINTED: PLEASE READ THE
EXCLUSION OF LIABILITY AND ASSUMPTION OF RISK NOTICE ON THE
BACK. ON THE BACK OF THE TICKET IS PRINTED: NOTICE TO ALL USERS
OF THESE FACILITIES: EXCLUSION OF LIABILITY ASSUMPTION OF RISK.
THESE CONDITIONS WILL AFFECT YOUR LEGAL RIGHTS PLEASE READ
CAREFULLY! AS A CONDITION OF THE USE OF THE SKI AREA FACILITIES,
THE TICKETHOLDER ASSUMES ALL RISK OF PERSONAL INJURY FROM
ANY CAUSE WHATSOEVER INCLUDING BUT NOT LIMITED TO THE RISKS,
DANGERS, AND HAZARDS OF SKIING; THE USE OF SKI LIFTS; AND
NEGLIGENCE. THE TICKET HOLDER AGREES THAT THE SKI AREA
OPERATOR SHALL NOT BE LIABLE FOR ANY SUCH PERSONAL INJURY,
DEATH OR PROPERTY LOSS AND RELEASES THE SKI AREA OPERATOR AND
WAIVES ALL CLAIMS WITH RESPECT THERETO.
TILDEN RENT-A-CAR CO V CLENDENNING(1978) 83 DLR (3D) 400 (ONTCA)
WHILE FILLING OUT A CAR RENTAL APPLICATION AT THE VANCOUVER
AIRPORT, MRCLENDENNING WAS ASKED BY THE RENTAL AGENT AT
TILDEN RENT-A-CAR WHETHER HE WANTED TO PURCHASE COLLISION
INSURANCE FOR AN ADDITIONAL, MODEST FEE. AFTER AGREEING TO PAY
EXTRA, CLENDENNINGWAS HANDED A COMPLICATED RENTAL
CONTRACT. BEING IN A HURRY, HE SIGNED THE DOCUMENT WITHOUT
READING IT. THE RENTAL AGENT NEITHER ASKED HIM TO READ THE
CONTRACT NOR MENTIONED THAT IT INCLUDED AN UNUSUAL TERM
THAT EXCLUDED INSURANCE COVERAGE IF THE DRIVER HAD
CONSUMED ANY AMOUNT OF ALCOHOL. DURING THE RENTAL PERIOD,
CLENDENNINGGOT INTO AN ACCIDENT AND DAMAGED THE VEHICLE. HE
ADMITTED TO DRINKING A SMALL QUANTITY OF ALCOHOL THAT DAY.
NOT HAVING READ THE AGREEMENT, CLENDENNINGWAS UNAWARE OF
THE TERM THAT EXCLUDED COVERAGE IF ANY ALCOHOL WAS
CONSUMED. THAT TERM DID NOT APPEAR ON THE FACE OF THE
CONTRACT; IT WAS FOUND ON THE BACK IN SMALL PRINT.
CLENDENNINGCLAIMED HE WAS LED TO BELIEVE THAT THE INSURANCE
PROVIDED COMPLETE COVERAGE. TILDEN, ON THE OTHER
HAND,ARGUED THAT CLENDENNINGSSIGNATURE WAS SUFFICIENT TO
BIND HIM TO THE TERMS OF THE CONTRACT. TILDEN ALSO CLAIMED
THAT CLENDENNINGSPREVIOUS DEALINGS WITH TILDEN PROVIDED
HIM WITH AMPLE OPPORTUNITY TO READ THE TERMS OF THE CONTRACT
DESPITE THE FACT THAT HE SIGNED IT THAT DAY IN A HURRY
BOILERPLATE CLAUSES
1. Exclusion clauses 2. Force majeure 3. confidentiality 4. arbitration 5. jurisdiction 6.
Entire agreement
LESSON4 Contractual Defects/ Warranties and Conditions
contractual defects
1. Capacity.
2. Absence of Writing
3. Mistake
4. Unfairness
5. Illegality
Capacity
1. Minors a contract is voidable if a minor is entitled to avoid the legal obligations
that the contract would otherwise have created
2. Mental Incapacity a contract may be voidable if a party can be shown to have had
a capacity issue
3. Intoxication a contract may be voidable if a party was intoxicated at the time of the
contract
Bawlf Grain Co. v Ross [1917] SCJ No 22, 37 DLR 620
Ross had been drinking heavily for hours and entered an agreement to sell wheat to the
plaintiff while he was intoxicated. The plaintiff was well aware of Rosss intoxication
when the contract was formed. Once sober, Ross realized that he was therefore entitled
to terminate his obligations under the contract. However, Ross also knew that the price
of wheat fluctuates on an almost daily basis. So, he decided to wait and see whether the
market price of wheat would increase, in which case he would avoid the contract and
sell the wheat at a better price, or whether the price would decrease, in which case he
would keep the contract with the plaintiff. When the price of wheat increased shortly
thereafter, Ross decided to avoid the contract with the plaintiffs. The plaintiffs brought
Ross to court to enforce their contract.
The court recognized that intoxication could give rise to a contractual defect. However,
it held that the intoxicated party must exercise their right to repudiate the contract within
a reasonable time. In this case, Ross waited over a month to see what would happen to
the price of wheat. In light of the regular fluctuation in the price of wheat, the court
found that a reasonable time for repudiation would be within a few days of Ross
becoming sober, not weeks. Rosss delay in repudiating the contract was tantamount to
an express ratification of the contract. He was therefore bound to deliver the wheat to
the plaintiffs at the agreed upon price, despite his having been intoxicated during the
formation of the contract.
Absence of writing
1. Guarantees
2. Contracts for the sale of an interest in land
3. Contracts not to be performed within one year
Mistake
1. Mistaken Identity
2. Mistakes About Subject Matter
3. Mistake about the Existence of the Subject Matter
4. Frustration
5. Documents Mistakenly Signed
Unfairness
1. Duress
2. Undue Influence
3. Unconscionable Transactions
Duress
1. Duress of person
2. Duress of Goods
3. Economic Duress
UNDUE INFLUENCE
UNCONSCIONABLE TRANSACTIONS
WATERS V SUN ROUTE TOURS INC {1994} bcj No 16
Mr Wa…
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