Legal Fundamentals for Canadian Business, 4e (Yates)

Chapter 3 Formation of Contracts

1) Which of the following is an ingredient necessary to form a contract?

A) exemption clauses
B) fairness
C) privity
D) capacity
E) assignment
Answer: D
Diff: 1 Type: MC Page Ref: 70
Skill: Recall

2) Joel has an old lawnmower that is constantly breaking down. He decides to purchase a new
one. He goes to the local hardware store. He finds a new model that he saw advertised in the
newspaper. He pushes the lawnmower up to the cashier. She scans the price tag and tells him
what he must pay. Joe hands the money to the cashier. In this fact situation an offer comes into
existence when:
A) the cashier scans the price tag and tells Joel how much the mower costs.
B) Joel hands the money to the cashier.
C) Joel sees the price in the newspaper.
D) Joel sees the price of the mower in the store.
E) Joel takes the mower from the display area and heads to the front counter.
Answer: B
Diff: 2 Type: MC Page Ref: 72
Skill: Applied

3) An ad in the morning paper reads: "Brand new 2012 Ford Escorts $16 499. No payment until
January 2012. We make your first payment." This is an example of which of the following?
A) invitation to treat
B) gratuitous promise
C) offer
D) unilateral contract
E) bilateral contract
Answer: A
Diff: 1 Type: MC Page Ref: 72
Skill: Applied
4) Four days ago, Pete was reading the newspaper and saw the following: "Best offer in town!
Zenith XX Laser Printer—$1000!" When he went to the store this afternoon and said he wanted
one, the employees replied that they didn't have any left, nor could they get any. On these facts,
which of the following is true?
A) Pete could sue for breach of an option contract.
B) The offer by the store had lapsed before Pete tried to accept it.
C) The wording in the newspaper was merely an invitation to the public to do business, and no
contract was formed.
D) The store had revoked the offer before Pete tried to accept it.
E) Pete could sue the store for breach of contract because he was accepting the offer in the
newspaper.
Answer: C
Diff: 2 Type: MC Page Ref: 72
Skill: Applied

5) Which of the following is an offer as opposed to an "invitation to treat"?

A) A notice in the catalogue from the gift shop of the Edmonton Aquarium: "15% off the price of
all jewellery until January."
B) A notice in the Toronto Star: "I will pay $100 to whomever finds and returns my lost female
calico cat who answers to the name Marx."
C) The display of goods on the shelves of Safeway.
D) A sweater displayed in the window of a shop with the price tag attached and showing.
E) An ad in a real estate paper: "Best offer in Vancouver! 3-bedroom home in Kitsilano for only
!"
Answer: B
Diff: 3 Type: MC Page Ref: 72
Skill: Applied

6) Which of the following would best satisfy the requirements for a good legal offer?
A) "I'll drive you to Seattle on Saturday."
B) On a flyer (placed on your windshield): "We have the best offer in town! A mint 1956
Chevrolet for $20 000."
C) "I'll give you $1 for your new green bike."
D) "I'll pay you at least $300 for your horse, Blackie, and even more if the horse is lucky."
E) "The purchaser will pay $10 for one of the seller's laser printers, the exact model to be
determined at a later date."
Answer: C
Diff: 2 Type: MC Page Ref: 72
Skill: Applied
7) Which one of the following will cause an offer to end?
A) the purchase of an option to hold the offer open for a designated period of time
B) the expiration of a reasonable time if the offeror did not specify that the offer would end at a
definite time or upon the happening of a specific event
C) the arrival of 4:00 p.m., if the offeror specified that the offer would end at 5:00 p.m.
D) the sale of the object of the offer to someone other than the original offeree
E) the communication of a revocation to the offeree after acceptance
Answer: B
Diff: 2 Type: MC Page Ref: 74
Skill: Recall

8) Sylvia had contracted with Produce Palace to sell it her entire crop of elephant garlic (100
kilograms) and her entire crop of tomatoes (100 kilograms). On the day for delivery, Produce
Palace took the garlic but not the tomatoes. In an effort to mitigate her loss, Sylvia called the
owner of Val's Veggies and offered her the tomatoes at a reduced price with the words, "Let me
know quickly; they are ripe and must be moved out today." That afternoon, Val sent Sylvia a
letter accepting the offer. On these facts, which is the most likely outcome?
A) There is no contract between Sylvia and Val because the offer had probably lapsed before the
acceptance was received by Sylvia.
B) There is a contract between Sylvia and Val the moment Val drops the letter of acceptance in
the postbox.
C) There is a contract between Sylvia and Val on the day the letter of acceptance is received by
Sylvia.
D) If the post-box rule does not apply, there would be a contract as soon as Val mails the letter
unless Sylvia had sold the tomatoes to someone else.
E) There is no contract between Sylvia and Val because Sylvia had revoked the offer.
Answer: A
Diff: 2 Type: MC Page Ref: 74
Skill: Applied

9) Franz bought two front-row tickets to a sold-out concert. Unfortunately, a week before the
concert, he found out he had to go on a business trip and would miss the concert. He offered his
co-worker, Joe, the tickets for 80% of the full price, offer to remain open until 10:00 p.m. on
December 15. Indicate to Joe which of the following is true with regard to the law of offer and
acceptance.
A) If Franz sells to someone else, it is too late for Joe to accept the original offer.
B) A letter of acceptance is always effective when it is dropped in the mailbox.
C) If Joe makes a counter-offer of 50% of the full price, and Franz rejects the counter-offer, Joe
can still accept the original offer.
D) Franz could revoke the offer at any time before acceptance, even before 10:00 p.m. on
December 15.
E) To create a contract, an offer must be in writing.
Answer: D
Diff: 3 Type: MC Page Ref: 74
Skill: Applied
10) If an offer is made by mail and an acceptance by mail is requested, when does a letter
revoking the previous offer actually take effect?
A) at the time it is posted
B) at any time before a letter of acceptance is received by the offeror
C) at the time it is received, if before acceptance
D) at any time before actual performance of the contract has begun
E) Never. A revocation must be done in person.
Answer: C
Diff: 2 Type: MC Page Ref: 74
Skill: Recall

11) If an offeror makes an offer that states "This offer to be open until noon tomorrow," which of
the following ends the offer?
A) an inquiry by the offeree
B) the insanity of the offeree
C) revocation of the offer by the offeror before the time specified (i.e., before "noon tomorrow")
D) a counter-offer by the offeror
E) the selling of the item to someone else before noon tomorrow
Answer: C
Diff: 2 Type: MC Page Ref: 74
Skill: Applied

12) Mary bought a new Macintosh computer and advertised her old computer system for sale for
$1500. Mr. Jones offered to pay $1000. Mary said no, that she wanted $1500. Mr. Jones offered
$1250. Mary rejected that offer and said she wanted $1500, but then said, "I withdraw my offer,
I've decided to give it to a school and apply for the tax benefit." Mr. Jones said, "All right, I'll
accept your offer of $1500." Which of the following is true?
A) There is a contract and Mr. Jones has to pay a reasonable price for Mary's old computer.
B) There is a contract, because once a seller makes an offer she cannot change her mind; she is
bound to receive an acceptance.
C) There is no contract because Mary revoked the offer before Mr. Jones attempted to accept it.
D) There is a contract because at some point in time Mary was willing to sell and Mr. Jones was
willing to buy the computer system for $1500.
E) There is no contract because the last offer had lapsed.
Answer: C
Diff: 3 Type: MC Page Ref: 74
Skill: Applied
13) The owner of a new building wanted four maple trees, each six metres tall, planted on the
north side of the building. Lloyd Landscaper submitted his offer of four six-metre maples planted
for $800. The owner said he would pay $600 for that. Lloyd said that for $600 he would supply
four smaller, five-metre trees. The owner said, "$600 for five-metre trees plus a Christmas tree
for my kids." Lloyd was disgusted and said, "Forget it. I don't need this job." As he was leaving,
the owner said, "All right, I'll accept your offer of $600 for the five-metre maples planted." Lloyd
kept on walking. Which of the following is true?
A) There is no contract because Lloyd's last offer had been rejected by a counter-offer.
B) There is no contract because Lloyd's last offer was revoked.
C) There is no contract because there is a presumption in law in these circumstances that the
parties did not intend to create a legal relationship.
D) There is no contract because Lloyd's last offer had lapsed after a reasonable time.
E) There is a contract because at one point in the conversation Lloyd was willing to sell and the
owner was willing to buy four trees.
Answer: A
Diff: 3 Type: MC Page Ref: 74, 75
Skill: Applied

14) Sarah wanted an antique lamp for the bedroom. While in a second-hand shop, she saw a lamp
that she really wanted marked $100. She offered the owner $75 for it. He said, "I'll take $95."
She answered, "$80!" He said, "Lady, you're pushing me a bit, aren't you? I'll take $90, that's it."
She said "Okay, I'll pay $90 if you throw in this old 'Vote-for-Trudeau' button." He said, "Forget
it, lady, my shop is closed," and asked her to leave. She said, "Okay, I accept your offer of $95."
He made no response. If she sues for breach of contract, which of the following is true?
A) There is no contract because the owner's offer to sell the lamp for $95 was rejected by
counter-offer, and Sarah's offer to buy it for $95 wasn't accepted.
B) There is a contract because at one time the owner offered to sell the lamp for $95 and Sarah
accepted it.
C) There is a contract because the owner wanted to sell the lamp for $95 and Sarah was willing
to pay that much.
D) There is no contract because the owner's offer to sell for $95 lapsed after a reasonable time.
E) There is no contract because the owner's offers to sell the lamp for $95 and $90 were revoked
and he didn't accept Sarah's offers.
Answer: A
Diff: 3 Type: MC Page Ref: 74, 75
Skill: Applied
15) Ann was offered a job that would pay $20 000, that would provide for 18 days of vacation
after one year of employment, and that would begin one week after her graduation. She wrote
back that she would accept the job, but that she would not begin until three weeks after
graduation and needed at least 21 days of vacation after the first year of work. On these facts,
which of the following is true?
A) There is no contract because an acceptance must be unconditional, and Ann's counter-offer
has not been accepted.
B) There is a contract as soon as Ann drops her letter in the mailbox.
C) If Ann had not responded, there would have been a contract because silence is the standard
form of acceptance.
D) Ann is still free to reconsider and take the original offer even after the prospective employer
receives her letter.
E) Since Ann accepted the offer, there is a contract.
Answer: A
Diff: 2 Type: MC Page Ref: 74, 75
Skill: Applied

16) Which one of the following will not end an offer?

A) The offeror communicates a revocation of the offer.
B) The offer is said to be open for three weeks and the three weeks expire.
C) The offeror sells the goods being offered to someone else.
D) The offeror dies.
E) The offeree makes a counter-offer.
Answer: C
Diff: 1 Type: MC Page Ref: 75
Skill: Recall

17) Martin offered to buy a property for $200 000, "offer to remain open until 5:00 p.m. on
Thursday, January 21." Which one of the following situations will not cause the offer to end?
A) a counter-offer from the offeree
B) death of the offeror
C) insanity of the offeror before the offer is accepted
D) Martin sells the property to another party before the expiration of the period stipulated and
before hearing from the offeree
E) the offeree has not accepted and the stipulated time has expired
Answer: D
Diff: 2 Type: MC Page Ref: 75
Skill: Applied
18) Last week, Chris offered to sell her printer to a classmate for $200. Her offer included these
exact words: "This offer to be open until noon, February 20." She now has second thoughts and
thinks she should give or sell it to her brother, who has gone back to school. She wants to end the
offer. Which of the following would not end the offer?
A) Chris's death before acceptance
B) the sale of the printer to her brother before acceptance
C) revocation of the offer by Chris before acceptance
D) expiration of the offer at noon on February 20 if there has been no acceptance
E) a counter-offer by an offeree
Answer: B
Diff: 2 Type: MC Page Ref: 75
Skill: Applied

19) Jed, who lives on Cape Breton Island, needed money for a trip to France. He decided to sell
his electric guitar. On Monday, October 29, he called the owner of a music store in Halifax and
offered to sell his Fender Stratocaster guitar for $400, the offer to be open until Friday at noon,
November 2. Jed told the store owner to send a letter of acceptance since Jed would be away for
a few days. The store owner examined his inventory and mailed a letter of acceptance on
Thursday, November 1. When Jed returned home on Saturday, November 3, the letter had not yet
arrived, so that afternoon he sold the guitar to a music teacher in his town. The store owner in
Halifax sued for breach of contract. Which of the following is true?
A) Sending a letter by mail was not a reasonable method of acceptance.
B) The acceptance was effective before the offer lapsed, so there was a contract between Jed and
the store owner.
C) The offer lapsed before the store owner accepted.
D) The offer was revoked before the store owner accepted.
E) The letter of acceptance was effective when it was received, and by then Jed had sold the
guitar, so there was no contract.
Answer: B
Diff: 2 Type: MC Page Ref: 74, 78
Skill: Applied
20) Carlos visited Vancouver last summer and instead of going back to Ontario he stayed and
enrolled at Simon Fraser University. He needed money but didn't need things left in Ontario,
including his car. In mid-December, he wrote a friend and offered to sell the car for $4000 and
told him to send him a letter with his answer. His friend received the letter on January 2, checked
his financial situation, and sent a letter of acceptance on January 3. Meanwhile Carlos, short of
cash and not having heard from his friend, sold the car to Mr. Reno on December 31. Carlos
received his friend's letter on January 8. On these facts, which of the following is true?
A) In order for there to be a binding contract, there must be an offer and receipt of the letter.
B) All methods of acceptance are effective upon receipt by the offeror.
C) The letter of acceptance was effective when it was received, and by then Carlos had sold the
car, so there was no contract.
D) The acceptance was effective before it was received, so there was a contract between Carlos
and his friend.
E) Sending an acceptance by mail was not a reasonable method of acceptance in this situation.
Answer: D
Diff: 2 Type: MC Page Ref: 74, 78
Skill: Applied

21) Jon was developing a computer program for use by owners of track clubs to aid them in
keeping records of the members, their runs, times, injuries, etc. Eager to finish the program, Jon,
in Edmonton, called his friend Sam, in Calgary, and offered him $2000 to help: five hours per
working day, five days per week, for five weeks. Sam said that he would have to think about it.
Jon told Sam that he was eager to get going, but that he would hold the offer open until Friday,
February 6, at noon. Which of the following is true? (Read each separately.)
A) If Jon revokes his offer before Friday at noon, Sam could sue him for breach of contract
because Jon had promised to hold the offer open.
B) If the court held that acceptance by mail was reasonable in the circumstances and if Sam
accepts by mail, the place of contract is Edmonton.
C) If Jon goes ahead and hires Betsy from Edmonton at noon on February 3, it would be too late
for Sam to accept.
D) If Sam wants to ensure that the offer will remain open until noon on February 6, he should
give Jon some consideration (that is, purchase an option agreement).
E) If Sam accepts by phone within the time specified in the offer, the place of contract would be
Calgary.
Answer: D
Diff: 2 Type: MC Page Ref: 75, 76
Skill: Applied
22) Which of the following is true with regard to contract law?
A) An option is a contract in which one person is buying a period of time within which he may
accept the offer contained within the option.
B) A newspaper notice offering to pay a reward for the return of lost kittens is an invitation to
treat.
C) A revocation is effective only when sent.
D) An important criterion for determining the place of the contract is the place where the offer is
mailed.
E) A counter-offer does not end an offer.
Answer: A
Diff: 2 Type: MC Page Ref: 75, 76
Skill: Recall

23) Which of the following is true with regard to the offer and acceptance necessary to form a
contract?
A) An ad in the newspaper that reads "Best offer in town! A new 2012 Honda Civic for only
$15 999!" is considered an offer.
B) If a seller offers to sell for $100 and the buyer makes a counter-offer of $90 that is rejected by
the seller, the buyer can accept the original offer of $100 and bind the seller in contract.
C) A purchased option that states "This offer to be open until noon tomorrow" prohibits the
offeror from revoking the offer before that time.
D) A person can accept an offer after it has lapsed.
E) Where the acceptance is effective is not an important factor in determining the place of
contract.
Answer: C
Diff: 2 Type: MC Page Ref: 75, 76
Skill: Recall

24) Roberts has the chance to buy three adjacent city lots zoned as "duplex." The most profitable
return would be the building of four townhouses across the three lots, but that would necessitate
getting permission from the city, and that procedure takes time. If Roberts buys a 60-day option
from the seller of the properties for $400, which of the following is true?
A) By buying the option, Roberts has bought a period of time during which she must accept the
land offer.
B) If Roberts does not exercise the option during the option period, she can later force the seller
to sell that property to her at that price.
C) If Roberts does not exercise the option, she will get her $400 back because she didn't get what
she was bargaining for.
D) The seller is bound by contract neither to sell the property to any other party nor to revoke the
offer within the option period.
E) The offer for the properties will expire before the end of the designated 60-day period if
another person offers a higher price.
Answer: D
Diff: 2 Type: MC Page Ref: 75, 76
Skill: Applied
25) The City issued a request for bids for the construction of an events centre with the closing
stated as June 15 at 4:00 p.m of the current year. The tender stated that no changes could be
allowed to bids after submission. XYZ Construction submitted its bid a week in advance of the
closing date. However, on June 12, XYZ Construction advised the City that it needed to increase
the price of the events centre project in its bid, as it had discovered a major calculation error in
its bid submission. The City refused to allow a change to XYZ's bid. After the specified close
date, the City awarded the construction contract to XYZ Construction, as it was the lowest
bidder. XYZ Construction refused to perform the work. This caused the City to award the
contract to the company with the second-lowest bid, thus increasing the City's cost for the
project. The City sued XYZ Construction. What is the legal position of the parties?
A) XYZ will win, as it advised the City in advance of the closing date that it needed to revise its
bid.
B) XYZ will win, as it had only bid on the construction job but had not signed a construction
contract to build the events centre.
C) XYZ will win, as bidders are not obligated to accept a contract based solely on the fact that
they have bid on it.
D) The City will win because the lowest bidder is always selected and obligated to perform.
E) The City will win, as XYZ was bound by a subsidiary agreement when it submitted its bid.
Answer: E
Diff: 2 Type: MC Page Ref: 76
Skill: Applied

26) A company put a job out to tender. The tendering process requires the company to follow
certain rules typically associated with this process. Which of the following is most likely not a
requirement in a tendering process?
A) The company must disclose all relevant information affecting the project.
B) The company must accept only bids that comply with the terms of the tender.
C) The company must accept the lowest bid price.
D) The company must not accept bids after the specified closing date.
E) The company must treat all parties equally and in good faith.
Answer: C
Diff: 1 Type: MC Page Ref: 76
Skill: Applied
27) The City issued a request for bids for the construction of an events centre; the terms stated
that the closing would be June 30 at 4:00 p.m. of the current year. At 4:15 p.m. on June 30, a
representative of Joe's Construction arrived at the City offices to submit a bid. There was
discussion about the fact that the stated deadline had passed, but the person from Joe's
Construction said that the submission was being made on June 30 while the City offices were
still open, and the only reason there had been a delay was a problem locating the company
managers who needed to sign the bid. Which of the following statements is true?
A) If Joe's Construction's bid is the most competitive bid, the City will be obligated to accept it
and award the contact to Joe's Construction.
B) The City must still consider the bid from Joe's Construction as it is required to treat all parties
equally and in good faith.
C) If Joe's Construction has worked for the City previously and this is the first time there has
been a problem with a late submission, the City should consider the bid in good faith.
D) The bid from Joe's Construction cannot be considered, as it does not comply with the terms of
the tender.
E) The City should confirm that there was a problem getting the signatures and, if so, consider
the bid from Joe's Construction as having been submitted on time.
Answer: D
Diff: 2 Type: MC Page Ref: 76
Skill: Applied

28) Which of the following is true with regard to contract law?

A) An exchange of promises is not adequate consideration to form a contract.
B) A contract for a $50 000 boat must be evidenced in writing to be a valid contract.
C) To form a contract, there must be an offer that is accepted unconditionally.
D) The parties to a contract can always go to court and have the court declare a contract void if
the consideration is not adequate (i.e., fair).
E) A contract is void if it is required to be evidenced in writing under the Statute of Frauds, and
is not.
Answer: C
Diff: 2 Type: MC Page Ref: 77
Skill: Recall

29) Which of the following is an example of a unilateral contract?

A) Sam orders a meal in a restaurant.
B) Joe agrees to paint Sam's house for $500.
C) C returns a lost dog and claims the $50 reward.
D) Joe promises to give Harry his old boat when he gets his new one.
E) Joe pays $50 for groceries at a grocery store.
Answer: C
Diff: 1 Type: MC Page Ref: 77
Skill: Applied
30) Sam placed an announcement in the newspaper as follows: "$200 reward for the return of
two lost Siamese kittens." Joe read the ad, found the kittens, and returned them. This is an
example of which of the following?
A) bilateral contract
B) invitation to treat
C) offer
D) gratuitous promise
E) unilateral contract
Answer: E
Diff: 2 Type: MC Page Ref: 77
Skill: Applied

31) Which of the following is correct with respect to the operation of the post-box rule?
A) If the post-box rule applies, the acceptance is effective at the point of mailing.
B) For the post-box rule to apply, the offer must be made by mail.
C) For the post-box rule to apply, the offeror must make that clear when the offer is made.
D) If the post-box rule applies, the only way for an acceptance to be effective is to send it by
mail.
E) If the post-box rule applies, an acceptance must be communicated and heard by the offeree
before it is effective.
Answer: A
Diff: 2 Type: MC Page Ref: 78
Skill: Recall

32) Jones is a caterer; Smith is a florist. Jones won a contract to provide a banquet for a
convention of florists. He wanted to decorate the hall with flowers. He sent a letter to Smith
describing what he wanted and asked for a price quote. Smith responded in a letter dated January
5, offering to supply the flowers for $5000. Jones received the letter on January 10 and
responded on the same date, saying Smith's price was too high and that he would pay $4500.
While that letter was in the mail, but before it had been received by Smith, Jones learned that the
convention was on artificial flowers and the organizers wanted no real flowers on display. On
January 13, Jones quickly sent another letter telling Smith to ignore the letter of January 10 and
that he wouldn't need any flowers at this time. This letter of January 13 was received on January
18. Smith had received the letter of January 10 on January 15 and had sent his letter of
acceptance on the same day, and had placed orders with his suppliers for the flowers. The letter
of acceptance was received by Jones on January 20. Which of the following is true?
A) If the post-box rule does apply, there is a binding contract.
B) If the post-box rule applies, there is no contract because the letter of revocation was mailed
before the letter of acceptance.
C) If the post-box rule does not apply, there is a binding contract.
D) Jones's offer in the letter of January 10 lapsed before acceptance.
E) The post-box rule is irrelevant; there is no contract simply because Jones cannot use the fresh
flowers.
Answer: A
Diff: 3 Type: MC Page Ref: 78
Skill: Applied

33) Which of the following is correct with respect to the post-box rule?
A) Because of modern advances in communication, the post-box rule no longer applies.
B) The post-box rule applies to emails as well as to the mail.
C) The post-box rule applies only when response by mail is appropriate.
D) The post-box rule applies to communications via fax, postal service, and telegrams.
E) When acceptance is mailed, it is effective when and where it is received.
Answer: C
Diff: 1 Type: MC Page Ref: 78
Skill: Recall

34) The post-box rule applies when which of the following means of communication is used?
A) mail
B) electronic mail
C) fax
D) messenger
E) telephone
Answer: A
Diff: 2 Type: MC Page Ref: 78
Skill: Recall

35) Which of the following can be used as consideration?

A) a promise to give up a legal right
B) a kilogram of green beans
C) a promise to deliver three tonnes of steel
D) 50 cents
E) all of the above
Answer: E
Diff: 1 Type: MC Page Ref: 79
Skill: Recall

36) With regard only to the requirement of consideration, which one of the following would be a
binding contract?
A) an agreement between a contractor and a home owner that the home owner will pay an
additional $1000 if the contractor completes the existing contract according to all its terms
B) a promise by Tom to drive a co-worker to Timmins, Ontario
C) a promise to give $10 exchanged for a promise to give a can of pop
D) a written promise, but not under seal, to give John $50 on Saturday
E) a promise by Mr. Brent to pay $25 to John, who found and returned Brent's wallet, which
Brent didn't even know he had lost until John delivered it
Answer: C
Diff: 2 Type: MC Page Ref: 79, 80
Skill: Recall
37) Which of the following is not an example of a contract?
A) a verbal agreement for the sale of a car where neither the money nor the car has yet changed
hands
B) a verbal agreement to work for someone starting next week
C) an implied promise to pay for a meal when you order it
D) an agreement not to sue someone for negligence in exchange for their promise to pay you a
specified amount
E) a written promise to give your husband a ring for Christmas
Answer: E
Diff: 1 Type: MC Page Ref: 80
Skill: Recall

38) Assume that all other requirements for a valid contract are present and indicate which of the
following would not be a binding agreement because of a problem with consideration.
A) Laura promises to pay a carpenter, who is renovating the living room of her home, an
additional $100 if he will install an extra cabinet to store her files.
B) Smith sold a valuable watch to Sarah for only $1.
C) John tells his neighbour, Eric, that he will give him $30 to show his gratitude for Eric's
extraordinary work for Little League.
D) Mr. N promises to give $50 to the cystic fibrosis society and makes that promise under seal.
E) Jones agrees to accept $80 as full payment of a $100 debt if Kahn, the debtor, agrees to pay
the $80 a week before the due date.
Answer: C
Diff: 2 Type: MC Page Ref: 80
Skill: Applied

39) Which one of the following is enforceable?

A) An ad in the paper promises to pay $5 for the return of a lost ring, but the person who finds
and returns the ring never saw the offer in the newspaper.
B) Mr. Baker was so sick of an old chair that, when Mr. Venson offered him $10 for it, he agreed
(i.e., promised to sell it to him), although the market value of the chair was $80.
C) Ms. Jones promised to pay an additional $1 to Mr. Wood if he finished the existing contract
on time, according to the terms of the contract.
D) Mr. Ho promised to give his needy friend, Mr. Jahn, $1.
E) Ms. Goode promised to send $10 to Mr. Paul, who kindly came and warned her when he saw
a tow truck approach her car.
Answer: B
Diff: 2 Type: MC Page Ref: 79, 80
Skill: Applied
40) Read the following and indicate which agreement would be a binding contract. Assume that
all other requirements for a binding contract have been met.
A) Mary promised to give Planned Parenthood a donation of $1.
B) John, late for work, found that his car battery was dead. He flagged down a passing truck and
told the driver "he would be in his debt forever" if he would agree to do him the favour of jump-
starting the car. The driver of the truck agreed.
C) Mr. Kooner sold a farm valued at $190 000 to his nephew for only $50 000.
D) Peter agreed to pay Ace Computers Ltd. $50 above the contract price if the company would
have his new computer ready on the date specified in the original contract.
E) Len agreed to sell and Karen agreed to buy four of Len's records for "some money."
Answer: C
Diff: 2 Type: MC Page Ref: 79, 80
Skill: Applied

41) A promise that is made to do something for someone else expecting nothing in return is a:
A) covenant.
B) promissory estoppel.
C) quantum meruit.
D) consideration.
E) gratuitous promise.
Answer: E
Diff: 2 Type: MC Page Ref: 80
Skill: Recall

42) In contract cases, the court generally:

A) attempts to punish the party in breach of the contract by imposing a sentence.
B) does not look to see if the bargain is fair.
C) will require the recipient of a service to pay a reasonable price where it is determined that the
agreed-upon price was too low.
D) will rewrite an agreement for the parties if their existing agreement did not include all
essential terms.
E) will enforce all promises.
Answer: B
Diff: 2 Type: MC Page Ref: 80
Skill: Recall

43) Which of the following is correct with respect to the adequacy of consideration?
A) Consideration need not be legal if both parties clearly consent.
B) Both parties must be present if the agreement is under seal.
C) Consideration may be only love and affection.
D) Consideration need not be fair, unless there are extenuating circumstances (i.e., insanity or
fraud).
E) Consideration might result from existing duty: a change in the contract requires no new
consideration.
Answer: D
Diff: 2 Type: MC Page Ref: 80
Skill: Recall

44) Indicate the correct statement about consideration.

A) Consideration is "the price for which the promise (or the act) of the other is bought."
B) In a unilateral contract, the performance of the promisee provides no consideration to the
promisor.
C) In a bilateral contract, the exchange of promises does not provide consideration for both
parties.
D) An altered course of action (e.g., forbearance) is not good consideration.
E) The common law holds that consideration must be adequate to ensure that contracts are fair
bargains.
Answer: A
Diff: 2 Type: MC Page Ref: 79, 80
Skill: Recall

45) Mr. Adams telling the local Boys and Girls Club that he will give them $5000 if they promise
to use the funds for their summer camping program is an example of which one of the following?
A) promissory estoppel
B) when accepted by the club, a bilateral contract
C) when accepted by the club, a unilateral contract
D) gratuitous promise
E) inadequate consideration
Answer: B
Diff: 2 Type: MC Page Ref: 80
Skill: Applied

46) Manny agrees to provide pool-cleaning and lawn-care services to Janice in preparation for a
party Janice is holding for family and friends. The agreement requires that Janice pay Manny
$250.00 for three hours work. After completing approximately half the job, Manny requests that
Janice pay him an extra $50.00 because the cost of gasoline used for the lawnmower had gone up
that morning. Janice agrees to pay the additional $50.00. Is she legally liable to do so?
A) Yes, because she told Manny she would pay him and he finished the job on the basis of her
promise.
B) Yes, because the rising price of gas should be borne by Janice.
C) No, because Manny had an existing contractual obligation to perform the services for $250.00
and there is no consideration for the subsequent agreement to pay $50.00 more.
D) No, because Janice is promising to reward Manny for something he has previously done and
past consideration is no consideration.
E) Yes, because Manny relied on Janice's promise.
Answer: C
Diff: 2 Type: MC Page Ref: 81, 82
Skill: Applied
47) George contracted with Bob to have a racing bike modified for him to be delivered on
February 20, for a race on February 22. The price for the modification was agreed on as $100.
About February 10, George became nervous about the bike being finished on time and went to
see Bob. Bob said that he was very busy, but if he really wanted to be sure that it would be
finished on time, George would have to pay him an extra $25 so he could pay his employees
overtime. George agreed and Bob completed the modifications as requested, on time. How much
does George legally owe?
A) only $100 because Bob had an existing duty to modify the bike and the price was settled
B) $25 because past consideration is no consideration
C) $125 because Bob gave consideration for George's promise to pay the additional $25
D) $100 plus whatever it cost for the overtime
E) a reasonable amount only
Answer: A
Diff: 2 Type: MC Page Ref: 81, 82
Skill: Applied

48) XYZ Company, a distributor of auto parts, is in debt to the bank for $35 000 due on February
25. The company is having difficult times and wants to negotiate with the bank to pay only
$33 000 as payment in full. With these facts in mind, which of the following statements of the
law is true?
A) If the bank agrees to accept the $33 000 as payment in full if paid early, by February 15, and
the company does as requested, the bank could later sue for the remainder because the company
gave good consideration for the bank's forgiveness of the debt.
B) Even if the bank takes the $33 000, the bank can still sue for the entire amount plus punitive
damages.
C) If the company obtained from the bank the bank's promise to forgive the $2000 under seal, the
bank could later sue for the remainder.
D) A statutory provision provides that the creditor who accepts less than full payment as payment
in full cannot later sue for the remainder.
E) At common law, if the bank accepted the $33 000 as payment in full, even absent additional
consideration, it could not later sue for the remainder because such promises are always binding.
Answer: D
Diff: 2 Type: MC Page Ref: 82
Skill: Applied
49) Which of the following would be resolved by a contract and would not need the use of
promissory estoppel? Assume that all facts given can be proven.
A) The contract called for the band to play for 3 hours, but the club owner agreed to pay the
same price for only 2.5 hours of play. Later, the club owner sued for breach of contract.
B) The painter contracted with Frank to paint the kitchen for $400. When the painter found the
job more difficult than he had expected, Frank said he would still pay $400 but that the painter
didn't have to do all the work agreed upon; he didn't have to paint inside the cabinets. After the
job was completed, Frank sued the painter for breach of contract.
C) The landlord forgave a tenant half of his October rent because the tenant had had an accident
at work. Two days ago, the landlord sued for the unpaid rent on the grounds that his promise to
forgive it was gratuitous.
D) Jon negotiated with the bank, which agreed to take $18 000 in full satisfaction of an overdue
debt of $20 000. A week after Jon paid the $18 000, he was sued by the bank for the balance.
E) Kent loaned $3000 to Joan, who promised to pay back $3300 on January 3. Kent then called
Joan and said that he would settle for $3000 if she would repay it that day, November 28. She
paid on the 28th. On January 5, Kent sued Joan for the other $300.
Answer: E
Diff: 3 Type: MC Page Ref: 81, 82
Skill: Applied

50) Which of the following shows the use of the doctrine of promissory estoppel?
A) Lam contracted to supply Jones with steel. Before the steel was delivered, Lam's supplier
increased the price. Lam could use the doctrine to force Jones to pay more to Lam.
B) Lee, a defendant, can use this doctrine as a defence against a plaintiff insisting on his full
legal right when he had promised to forgive Lee some of Lee's legal obligation and Lee had
relied on that promise.
C) This doctrine can be used by a plaintiff to enforce a written promise that has been signed and
sealed (i.e., a seal has been affixed next to the signature of the promisor).
D) Val told Jim that she would give him her printer. If she doesn't, Jim could use the doctrine to
force her to do so.
E) George rented a video and watched it with Elaine. She thought the movie was great and said
that she'd pay half the rental price. George could use the doctrine to force her to pay as she
promised.
Answer: B
Diff: 2 Type: MC Page Ref: 82, 83
Skill: Applied
51) Indicate which one of the following is the correct statement about the effect of promissory
estoppel on a promisor.
A) Promissory estoppel can be used only "as a sword and not as a shield."
B) When a victim relies on the promise and suffers injury, he or she can sue the promisor for
compensation even where no consideration has been given in return for that promise.
C) Promissory estoppel has no effect on a promisor because it relates only to statements of fact,
not to promises.
D) If you agree to pay a contractor an extra $10 000 to complete a contract as originally agreed
and you actually pay him, you can later sue successfully for the return of the additional $10 000.
E) Promissory estoppel can be used as a defence only against a promisor who reneges on his or
her promise.
Answer: E
Diff: 2 Type: MC Page Ref: 83
Skill: Recall

52) Which of the following shows the use of the doctrine of promissory (equitable) estoppel?
A) This doctrine can be used by a plaintiff to endorse a written promise signed and sealed (i.e., a
seal has been affixed next to the signature of the promisor).
B) George told Hans that he would give him his printer. If he doesn't, Hans could use the
doctrine to force him to do so.
C) George wants to force Elaine to honour her promise to pay him $2. After he paid for a video
they watched, she was so moved by the movie she said she would pay half of the rental cost.
D) If Lam requests services from Jones and there is no mention of price and if Lam doesn't pay
Jones, this doctrine can be used to force Lam to pay a reasonable amount.
E) Lee, a defendant, can use this doctrine as a defence against a plaintiff insisting on his full
legal right when he had promised to forgive Lee some of Lee's legal obligation and Lee had
relied on that promise.
Answer: E
Diff: 3 Type: MC Page Ref: 83
Skill: Applied

53) Mr. Goode, a neighbour of your parents, offered to sell you his house for $200 000, a bit
below market value. You are definitely interested but would like to see if your employment
contract will be renewed and check on financing. Mr. Goode says that he'll hold the offer open
for you until May 1. On these facts, which of the following is true?
A) Mr. Goode will be bound to hold the offer open until May 1.
B) Mr. Goode's promise to hold the offer open is sufficient; the offer is safe until May 1, when it
will expire.
C) Mr. Goode will be bound to hold the offer open indefinitely.
D) If Mr. Goode sells the property to someone else before May 1 and informs you of that, you
can still sue him.
E) Mr. Goode will be bound to hold the offer open until May 1 if his promise to do so was
written and under seal.
Answer: E
Diff: 2 Type: MC Page Ref: 83
Skill: Applied

54) Assume that all other requirements for a valid contract are present and indicate which of the
following would be a binding agreement.
A) Mr. Ng promises to give $25 to the Canadian Cancer Society and makes that promise under
seal. The association accepts but gives him nothing in return.
B) John, so grateful that Jim returned a lost computer disk on which John had saved a term
project, promised to give Jim $50. Jim stated that he deserved $100.
C) Len offered to sell his $300 snowboard to Chuck for $400. Chuck said no.
D) Joe offered to pay a florist to put flowers on Marilyn's grave once a week for a whole year for
$500. The florist agreed to the terms of the offer but only for 10 weeks.
E) Nervous that the programmer would not finish the project by the time specified in the
contract, the owner of the company promised to give the programmer an extra $400 if he would
complete the work according to the contract. The programmer agreed.
Answer: A
Diff: 2 Type: MC Page Ref: 83
Skill: Applied

55) Which of the following statements is correct with respect to the law of consideration?
A) Consideration must have some value but need not be specific.
B) For a contract to be binding, something valuable must have changed hands. This
consideration may have been paid before the agreement (past consideration) or at the time of the
agreement (present consideration), but future consideration is no consideration.
C) Without consideration or a seal, there can be no contract.
D) The amount of consideration to be paid in a contract must be reasonable (that is, fair) from the
point of view of each party.
E) Consideration need not be specific, but both parties must get something out of the deal.
Answer: C
Diff: 1 Type: MC Page Ref: 83
Skill: Recall

56) Which one of the following correctly indicates the position of the parties in respect to
contracts involving minors?
A) Contracts with minors are void, except beneficial contracts of service.
B) Contracts with minors are unenforceable by the minor against the adult and by the adult
against the minor.
C) An adult cannot sue the minor on the contract even if the minor affirms the contract after
reaching the age of majority.
D) All contracts with minors are void.
E) A minor can enforce a contract made by an adult with him despite the fact that he is a minor.
Answer: E
Diff: 2 Type: MC Page Ref: 84
Skill: Recall
57) In which of the following situations would one of the parties not be bound on the basis of
incapacity?
A) An adult man sells his home to his mother.
B) An Ontario corporation sells land it owns for the construction of a shopping mall.
C) A merchant sells a new stereo to a minor.
D) A person who is drunk but appears sober sells his car to another customer at a bar.
E) A minor paid a reasonable price for a bike needed for work.
Answer: C
Diff: 2 Type: MC Page Ref: 84, 85
Skill: Recall

58) Clem had wanted a piano for a long time. Although he was a minor, his mom gave him $300
and he took this with some savings and made a $500 down payment on a $3000 piano. The
balance was to be paid over a three-year period. His mom signed the contract as a guarantor.
Clem made the first three payments, but he damaged the piano while trying to move it from the
living room to his upstairs bedroom. He didn't have the money to get it fixed. He quit playing
piano, lost interest, and quit making his payments. On these facts, which of the following is
false?
A) Although the contract is unenforceable against Clem, if he affirms the contract after he
reaches the age of majority, the seller will be able to sue him for breach of contract.
B) Clem's mother will be liable on the guarantee only if it is in writing.
C) If Clem's mother guaranteed the deal, she would be liable on her guarantee even if the
contract is unenforceable against Clem.
D) Unless Clem affirms the contract or partly performs the contract after he reaches the age of
majority, the seller cannot get any compensation from him.
E) Because Clem is a minor, he cannot sue the seller, even if the piano is defective.
Answer: E
Diff: 2 Type: MC Page Ref: 85
Skill: Applied

59) Ted, a 17-year-old high school student, was hired to perform in four episodes of a TV series
filmed in Vancouver. To keep up with his schoolwork, he contracted with Mr. Tech, of
Technoland, for a $3000 laptop computer. He agreed to pay $500 as a down payment and the
balance in monthly payments of $250. Read each of the following separately and indicate which
is true.
A) If Ted doesn't make his payments, Tech can sue Ted's parents, because parents are liable for
the debts of their minor children.
B) If this contract is in writing and Ted doesn't make his payments, Tech can sue Ted for breach
of contract.
C) This contract is a legal contract enforceable against Ted.
D) This contract is a legal contract enforceable by Ted.
E) This contract is void; therefore, Tech can repossess the laptop, which is technically still his
whether or not Ted makes the payments.
Answer: D
Diff: 2 Type: MC Page Ref: 85
Skill: Applied

60) In his last year of high school, Larry, a minor, saw a friend's computer and felt that the word
processing function would help him get through high school. He visited Computer Heaven Ltd.
and contracted for an Apple Macintosh, printer, paper, and the program. The total cost was
$4000. He paid $1800 as a down payment and promised to pay another $300 on July 3, his
birthday; the remainder would be paid in monthly installments of $100. Larry made the July 3
payment and some of the monthly payments, but by then had graduated, thanks to his passing
mark in English, and didn't have a use for the computer anymore. Furthermore, he wanted to
save his money for a down payment on a compact disc player and speakers. When he stopped
making payments to Computer Heaven, the balance outstanding was $1700. On these facts,
which of the following is true?
A) Computer Heaven must suffer the loss because all contracts with minors are void.
B) Computer Heaven can enforce the contract even though Larry is a minor because Larry has
paid over half of the agreed-upon price.
C) Computer Heaven can sue Larry for breach of contract if it sues Larry after he reaches the age
of majority.
D) If the July 3 payment was made after he reached the age of majority, Computer Heaven can
successfully sue Larry for breach of contract.
E) Computer Heaven's only chance for any money would be if Larry accidentally causes the
computer to break down. In that instance, it could sue Larry for negligence to get around the
difficulties in contract law.
Answer: D
Diff: 2 Type: MC Page Ref: 85, 86
Skill: Applied

61) In his last year of high school, Larry saw a friend's computer and felt that the word
processing function would help him get through high school. He visited Computer Heaven Ltd.
and contracted for an Apple Macintosh, printer, paper, and the program. The total cost was
$2500. He paid $500 as a down payment and promised to pay another $500 on July 3, when he
reached the age of majority, with the remainder to be paid in monthly installments of $250. By
July 3, Larry had graduated, thanks to his passing mark in English, and he had no more use for
the computer. Furthermore, he wanted to use his $500 birthday/graduation present for a down
payment on a compact disc player and speakers. He failed to make his July 3 payment or any
other payment to Computer Heaven. The balance outstanding at the time he stopped making
payments was $2300, including unpaid interest. On these facts, which of the following is true?
A) Although the contract is unenforceable against Larry, if he affirms the contract after he
reaches the age of majority, the seller will be able to sue him for breach of contract.
B) Computer Heaven can sue Larry for breach of contract if it sues Larry after he becomes an
adult.
C) If Larry doesn't pay, Computer Heaven can sue Larry's parents because parents are liable for
the debts of their minor children.
D) Because a contract with a minor is void, Computer Heaven has never passed title and can
retrieve the computer, printer, paper, and program even if these goods have been resold to
someone else.
E) none of the above
Answer: A
Diff: 2 Type: MC Page Ref: 85, 86
Skill: Applied

62) Which one of the following categories of persons has their capacity to enter into contracts
limited?
A) divorced women
B) married women
C) landed immigrants
D) refugees
E) insane or intoxicated persons
Answer: E
Diff: 1 Type: MC Page Ref: 86
Skill: Recall

63) Joe was in a bar and saw his friend Sam. Sam had a considerable amount to drink and then
offered to sell Joe his Porsche automobile for only $15 000. Joe made sure to have Sam sign a
written agreement to that effect. The next day, Joe went to pick up the car, but Sam didn't
remember anything about it. Even when Joe showed Sam the written agreement signed by him,
Sam refused to deliver the car. Joe sued. Which of the following correctly states the legal
position of the parties?
A) Sam has to show he was legally intoxicated and he will not be bound.
B) As long as Joe can produce the agreement in writing, there is nothing Sam can do to get out of
the deal. Once Sam has signed the document, he is responsible for its contents.
C) If Joe can show that there was no indication that Sam was drunk, even though Sam was
completely incapacitated, Sam will be required to go through with the deal.
D) Sam will not have to go through with the deal because no money has yet changed hands.
E) Being drunk is no excuse; the contract is binding.
Answer: C
Diff: 2 Type: MC Page Ref: 86
Skill: Applied
64) One afternoon while Mr. Reston was going home on the bus, his neighbour, Mr. Outovit,
offered to sell Reston his car for $4000, a bit below the market value. Reston said, "You might
change your mind on that. Better not be too hasty with your offers." Outovit answered, "I want to
sell it quickly," and wrote on the back of an envelope: "I hereby offer my neighbour, Reston, my
2011 Chevrolet for $4000 in cash." Outovit then signed his name. Reston wrote, "I accept." The
next day, Reston went to his neighbour's house to pay the money and get the car. He learned that
Outovit was in the hospital suffering from a reaction to medicines given to him the day before. If
Outovit (or his legal representative) refuses to honour the contract on the basis of mental
incapacity, which of the following is true?
A) If it is established that Reston didn't know Outovit was incapacitated at the time of contract
and that the deal was fair, Outovit will be bound by the contract even if he didn't understand the
nature and quality of his act.
B) If Reston can show the written contract, Outovit has no argument and will be bound to honour
the contract.
C) Outovit need only prove that he didn't understand the nature and quality of his act to void the
contract.
D) Outovit won't be bound by the contract because there hadn't yet been payment for, or delivery
of, the car.
E) To get out of a contract on the basis of insanity, you have to be institutionalized.
Answer: A
Diff: 2 Type: MC Page Ref: 86
Skill: Applied

65) Requirements of a contract include capacity of the parties to contract, legality, and intention
of the parties to be legally bound. Which of the following is true with regard to these elements?
A) A seller that contracts with an infant can avoid the difficulties of enforcing the contract by
suing him in tort instead of breach of contract.
B) A person with mental incapacity may still be held to a contract even if, at the time of the
contract, he didn't understand the nature and quality of his or her act.
C) The court can presume the intention of the parties to be legally bound, in which case, a party
to the contract cannot bring forward contrary evidence to rebut the presumption.
D) A restrictive covenant prohibiting one party to the contract from competing with the other is
not enforceable.
E) If an adult cannot sue the other party to the contract because the other party is a minor, neither
can the infant sue the adult.
Answer: B
Diff: 2 Type: MC Page Ref: 86
Skill: Recall
66) Which of the following contracts is void?
A) a contract to sell a crop of marijuana growing in a particular field
B) a contract containing an exculpatory clause limiting the liability of one of the parties
C) a contract with an insane person for a TV, where the insane person, or his or her legal
representative, can prove that he or she was insane at the time of the contract but cannot prove
anything else about the incident
D) a contract with an insane person for necessaries such as food and shelter
E) any contract with a status Indian
Answer: A
Diff: 2 Type: MC Page Ref: 87
Skill: Recall

67) Which one of the following contracts is an example of an illegal contract, not binding on the
parties?
A) a contract between camera dealers and distributors whereby they agree to sell a specific
model of camera
B) a contract whereby one person agrees to perform services for another, but payment will be
made at the end of the contract
C) a contract whereby one person agrees to buy a car from another person
D) a contract whereby one person agrees to sell a desk to another
E) the act of paying for sexual favours (prostitution)
Answer: E
Diff: 1 Type: MC Page Ref: 87
Skill: Recall

68) Assuming that all other elements of a contract are present, which of the following would
most likely be held to be a binding contract, considering only the requirement that the object of a
contract must be legal and not contrary to the public interest?
A) a provision in a contract of employment where the employee agrees that, upon leaving, he or
she will not work in a similar business anywhere for five years
B) a life insurance policy bought by Harvey insuring the life of his neighbour Kneival without
Kneival's consent
C) an agreement to pay $500 to Mildred if Mildred spreads the false rumour that Helen, a nurse,
has AIDS
D) an insurance policy paid by a shareholder to insure the business premises of a company in
which he holds shares
E) an agreement among city-wide gas station owners to set a common price for gas
Answer: D
Diff: 2 Type: MC Page Ref: 87, 88
Skill: Applied
69) Sam agreed to loan Carmine $5000 on the understanding that the monies would be repaid
with interest within thirty days. The loan was not repaid. As a result, Sam entered into a separate
contract with Ronnie and George. Sam agreed to pay them $500 in exchange for them agreeing
to attend at Carmine's residence and "rough him up" reminding him that the initial loan was
delinquent. Ronnie and George took the money and attended at the local casino instead of going
to Carmine's house. Sam sued them for breach of contract. His claim in court will:
A) succeed because the essential elements of a contract exist.
B) succeed because they clearly failed to comply with their contractual obligations.
C) fail because they still have time to complete the attendance at Carmine's residence.
D) fail because the essence of the contract contemplates an illegal act and as such is void.
E) succeed because the monies were not repaid by the time of the trial.
Answer: D
Diff: 2 Type: MC Page Ref: 87
Skill: Applied

70) A provision in a contract for the sale and purchase of a business reads as follows: "The
vendor (Jones) shall not, directly or indirectly, in any capacity whatsoever, carry on a similar
business in any location for one year." Six months later, Kates (the buyer) found that Jones was
competing directly by opening up a similar business, contrary to the contract drafted by Kates.
Kates sued Jones for breach of contract, namely, breach of the restrictive covenant. Which of the
following best describes the legal position of the parties?
A) This provision is in restraint of trade and causes the whole contract to be void.
B) Agreements such as these are always binding, being the result of a free bargain between the
parties.
C) Although this type of provision is illegal, this particular one would be enforceable because it
is reasonable between the parties and not contrary to public policy.
D) Such provisions are always void, being an illegal restraint of trade.
E) Although this provision would be void, the remainder of the contract for the sale of the
business would be enforceable.
Answer: E
Diff: 3 Type: MC Page Ref: 88
Skill: Applied
71) Smith runs a software-design business. He needed someone to handle some product
demonstrations, so he hired Janet to do this work. In the employment contract, Smith insisted
that Janet promise that, if she left the firm, she would not work for Smith's competitors within a
stated period of time and within a stated geographical region. If Janet now wishes to leave the
job, indicate the statement that accurately describes the likely effect of her promise.
A) Such promises are in restraint of trade and thus the courts invariably hold them to be invalid.
B) If the court thinks that such a promise is reasonable between the employer and employee and
that the public interest will not be damaged, it will enforce it.
C) Such promises are valid only if given under seal.
D) Such promises are invariably held to be valid when they are part of the terms of employment
and thus are given in consideration for getting the job.
E) If the court holds such a promise to be invalid, the whole employment contract is necessarily
void as well.
Answer: B
Diff: 3 Type: MC Page Ref: 88
Skill: Applied

72) Which of the following is correct with respect to the law of intention?
A) In commercial arrangements, there is always an intention to be bound by agreements no
matter what the parties state to the contrary.
B) In domestic agreements, there is a presumption that there is no intention to be legally bound.
C) Since domestic relationships are serious, the parties to such relationships are always bound by
their contracts with each other.
D) Since domestic relationships are serious, there is a legal presumption that in such
relationships there is an intention for the parties to be legally bound by their agreements.
E) Where intention is the issue, there is never any presumption for or against intention; the courts
will always apply the reasonable person test.
Answer: B
Diff: 2 Type: MC Page Ref: 89
Skill: Recall

73) Mrs. Johnson is thinking of selling some property to her son. Which of the following is
correct with respect to intention when entering into such a contract?
A) In domestic agreements, there is a presumption that there is no intention to be legally bound.
B) Commercial contracts are always binding, no matter what the stated intention.
C) When intention is the issue, there is never any presumption for or against intention; the courts
will always apply the reasonable person test.
D) Since domestic relationships are serious, there is a legal presumption that in such
relationships there is an intention for the parties to be legally bound by their agreements.
E) In commercial arrangements, there is always an intention to be bound by agreements no
matter what the parties state to the contrary.
Answer: A
Diff: 2 Type: MC Page Ref: 89
Skill: Applied
74) A necessary element of a contract is that the parties must have the intention to be legally
bound. Which of the following is true with regard to this element of a contract?
A) Family members can never have the intent to be legally bound in their agreements because
family matters are private matters.
B) The court always presumes an intention to be legally bound, so this is never an issue in a
contract case.
C) The court can presume the intention to be legally bound, but a party to the contract can bring
forward contrary evidence to rebut that presumption.
D) If the parties fail to state expressly in their contract their intention to be legally bound, there is
no contract.
E) In contract cases, the court hears evidence as to what the parties actually had in their minds at
the time of contract.
Answer: C
Diff: 2 Type: MC Page Ref: 89
Skill: Recall

75) Which of the following is true with regard to the intention of the parties to an agreement to
enter into a legal relationship? Where appropriate, assume that all other elements necessary to
form a contract are present.
A) Since family matters are private matters, an agreement between a husband and wife to
transfer property from the husband to the wife could not be a contract even if all other elements
of a contract are present.
B) The court will presume that there is always an intent to be legally bound in family situations.
C) The court makes presumptions about the intention of parties to be bound; whether that
presumption may be rebutted by evidence to the contrary makes no difference to the court.
D) An intention to be legally bound is not a necessary element of a contract.
E) Parties may expressly state their intention to be legally bound, in which case the court need
not rely on presumptions.
Answer: E
Diff: 2 Type: MC Page Ref: 89
Skill: Applied
76) Susan invites her brother Ralph and sister Sarah, along with their family members, to a
surprise birthday party for their mother. Both siblings agree to come and also agree to provide
certain beverages, salads, and dessert. At significant expense, Sarah arranges to hire a live band
as entertainment as well as a clown to provide face painting and balloon animal making for the
kids. Her brother and sister fail to show up for the party. Sarah is extremely upset and
commences an action against them for breach of contract seeking damages for the costs she paid
to the band as well as to the clown. Her court action will likely:
A) fail because the contract was not reduced to writing.
B) fail because contracts which in any way involve minors are unenforceable.
C) succeed because all of the essential elements of a valid contract exist.
D) succeed because her brother and sister did not provide prior notice that they were not going to
attend.
E) fail because where domestic relations are involved, there is a presumption at law that there
was no intention to be legally bound and as such there is no legally enforceable agreement.
Answer: E
Diff: 2 Type: MC Page Ref: 89
Skill: Applied

77) Mr. Buyer, the plaintiff in the action, was attempting to enforce a contract in which the
defendant, Mr. Seller, agreed to sell to the buyer his property, Blackacre, for $100 000. Which of
the following, by itself, would be sufficient to allow Mr. Seller to get out of the contract?
A) At the time of the contract, unknown to Mr. Buyer, Mr. Seller did not understand the quality
and nature of this act because of mental incapacity.
B) The $10 000 was not enough (i.e., not fair).
C) Although both parties agreed to this, no money had actually been paid on the contract, not
even a deposit or a down payment.
D) Mr. Buyer referred to essential terms in a letter sent to Mr. Seller.
E) There was only a verbal agreement between Mr. Seller and Mr. Buyer.
Answer: E
Diff: 2 Type: MC Page Ref: 90
Skill: Applied

78) Given the provisions of the Statute of Frauds, which of the following contracts should be
evidenced in writing?
A) domestic agreements
B) a sale of goods involving $4
C) a sale of land
D) an employment contract
E) a retainer with a lawyer
Answer: C
Diff: 2 Type: MC Page Ref: 90
Skill: Recall
79) Which of the following agreements has to be made in writing under the original Statute of
Frauds in order to be enforceable?
A) an agreement for the sale of a farm animal
B) a lease of a vehicle for a term commencing on November 1, 2012, and expiring on October
31, 2013
C) an agreement to sell a car on January 1 of the following year
D) an agreement for the sale of a building lot
E) an agreement by a creditor to accept $800 in full satisfaction of a debt in the amount of $1000
Answer: D
Diff: 2 Type: MC Page Ref: 90
Skill: Recall

80) Negotiations between Dave and Mary resulted in the following agreement: Dave would sell
his property to Mary for the sum of $150 000, closing date to be August 10, 2004. When the two
completed their discussion, Mary paid Dave $5000 as part payment of the purchase price and
received a receipt. The contract was not in writing. On August 10, Mary tendered the remainder
of the money, but Dave refused to convey the property. Mary sued Dave for breach of contract.
On these facts, which of the following is true? (Assume that all facts can be proved.)
A) Mary can enforce this contract if the receipt specified that the part payment was for the
property in question.
B) Mary cannot enforce the agreement because all of the consideration was not paid.
C) Mary cannot enforce this contract because the contract was not evidenced in writing.
D) Mary cannot enforce this contract because the contract was not in writing.
E) Mary cannot enforce the agreement because she had not paid Dave all of the money.
Answer: A
Diff: 2 Type: MC Page Ref: 90
Skill: Applied

81) A contract is a single promise, made by one person to another, enforceable in court.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 70
Skill: Recall

82) All contracts must be in writing to be enforceable.

Answer: FALSE
Diff: 1 Type: TF Page Ref: 70
Skill: Recall

83) All commercial contracts must be evidenced by writing to be enforceable.

Answer: FALSE
Diff: 2 Type: TF Page Ref: 70, 73
Skill: Recall

84) Contracts may be in writing, under seal, verbal, or even implied.

Answer: TRUE
Diff: 2 Type: TF Page Ref: 73, 83, 90
Skill: Recall

85) An invitation to treat is an offer published in the newspaper.

Answer: FALSE
Diff: 1 Type: TF Page Ref: 72
Skill: Recall

86) Only the essential terms of a contract must be set out in the offer.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 72
Skill: Recall

87) All of the essential terms of a contract except for consideration must be clearly specified.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 72
Skill: Recall

88) Only the person or group to whom an offer is made can accept it.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 75, 77
Skill: Recall

89) Even though a person promises to hold an offer open for a specified period of time, the
offeror can revoke that offer before that time if he or she feels like it.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 74
Skill: Recall

90) Once a person has promised to hold an offer open for a specified period of time, she cannot
change her mind.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 74
Skill: Recall

91) A letter of revocation takes effect when received by the offeree.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 74
Skill: Recall

92) A revocation of an offer is effective only when it has been communicated to the offeree.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 74
Skill: Recall

93) An offer will end when the subject matter of the offer is sold to someone else.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 75
Skill: Recall

94) When you pay for an option, this prevents a person from revoking an offer before the
expiration of the specified time.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 75, 76
Skill: Recall

95) For standard types of contracts (e.g., insurance), lawyers are likely to use a standard form
contract.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 76
Skill: Recall

96) Generally, acceptance must be communicated to the offeror to be effective unless there has
been a history of similar relations between the parties.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 77
Skill: Recall

97) An acceptance of an offer applies when and where it is received except when it is
communicated by telephone.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 77
Skill: Recall

98) An ad in the newspaper providing for a reward for return of a lost dog is an example of an
invitation to treat.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 77
Skill: Recall

99) The post-box rule makes it clear that, when people choose to communicate by mail, they take
the risk of delay or loss, and the acceptance as a result will be binding only when or if received.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 78
Skill: Recall

100) When the post-box rule applies, the place of mailing of the acceptance may determine the
place of the contract.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 78
Skill: Recall

101) For the post-box rule to apply, the offer must be made by mail.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 78
Skill: Recall

102) For the requirement of consideration to be satisfied, at least one of the parties must have
performed what was promised.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 79, 80
Skill: Recall
103) The courts never enforce an unfair bargain, even if there is a case of mental incapacity.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 80
Skill: Recall

104) A person is required to honour a gratuitous promise if made under seal.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 83
Skill: Recall

105) Whenever an adult enters into a contract with a minor, the adult is bound.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 84
Skill: Recall

106) Neither party is bound by a contract with a minor.

Answer: FALSE
Diff: 1 Type: TF Page Ref: 84
Skill: Recall

107) An adult can sue a minor in tort to get around the minor's contractual incapacity.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 86
Skill: Recall

108) A person who has voluntarily become intoxicated by drugs or alcohol cannot escape a
contract on the basis of his or her incapacity.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 86, 87
Skill: Recall

109) An insane person can escape a contract on the basis of incapacity only if the other person
knew or ought to have known of the insanity.
Answer: TRUE
Diff: 1 Type: TF Page Ref: 86
Skill: Recall
110) Because of the Charter of Rights and Freedoms, status Indians no longer have their capacity
to contract limited.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 87
Skill: Recall

111) Only contracts that involve the commission of a crime or tort are void on the basis of
illegality.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 87, 88
Skill: Recall

112) Contracts to commit a crime or a tort are void.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 87
Skill: Recall

113) Contracts involving activities that, while not illegal, are considered immoral or contrary to
public interest, may also be void.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 87
Skill: Recall

114) All contracts to restrict competition are void.

Answer: FALSE
Diff: 3 Type: TF Page Ref: 88
Skill: Recall

115) Contracts that unduly restrict competition are void.

Answer: TRUE
Diff: 1 Type: TF Page Ref: 88
Skill: Recall

116) If a person says that he had not intended to be bound by an agreement when he entered it,
there can be no contract.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 89
Skill: Recall

117) Contracts involving domestic relationships are presumed to be binding.

Answer: FALSE
Diff: 3 Type: TF Page Ref: 89
Skill: Recall
118) Only contracts involving significant sums of money must be in writing to be enforceable.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 90
Skill: Recall

119) In Canada, most provinces have either repealed or severely limited the application of their
versions of the Statute of Frauds.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 90
Skill: Recall

120) An unwritten contract that the Statute of Frauds requires to be evidenced in writing is still
valid; it is merely unenforceable by the courts.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 90
Skill: Recall

121) If a contract is not evidenced in writing (but is required by law to be in writing), this does
not make it void, only unenforceable.
Answer: TRUE
Diff: 2 Type: TF Page Ref: 90
Skill: Recall

122) Why is an understanding of contract law important for a business person?

Answer: Most commercial transactions have contracts at their base.
Diff: 1 Type: ES Page Ref: 70
Skill: Applied

123) List the five ingredients necessary to form a contract.

Answer: A contract must include consensus (including offer and acceptance), consideration,
capacity, legality, and intention. Writing is not a requirement.
Diff: 1 Type: ES Page Ref: 70
Skill: Recall
124) Discuss the requirement of consensus in the formation of contract. In your answer, consider
the role of offer and acceptance, and also look at the degree of understanding required between
the parties.
Answer: Consensus is the first element discussed that must be present for a contract to exist.
Usually most attention is focused on offer and acceptance, and to answer this question, students
should show a good understanding of these requirements. This discussion should include the
difference between an offer and an invitation to treat, as well as an understanding that it is the
offer that contains the terms of the contract and that all major terms must be clear in that offer,
although some minor ones can be implied. As far as acceptance is concerned, it should be clear
that students know that consensus is not effective until communicated, thus completing the
connection between the minds of the parties. They should also show an understanding of the
operation of the post-box rule. But a vital component of the answer should relate to the concept
of the meeting of the minds between the parties. It is not necessary that all parties understand the
agreement or even that they have read the agreement, only that the terms are clear and that, had
they read it, they could have understood it. This is an objective rather than a subjective test. They
then will discuss how the court deals with a mistake over the terms where both parties have a
different understanding. Here, the court will apply the principle that the reasonable expectations
of the parties are to be enforced.
Diff: 2 Type: ES Page Ref: 70-73, 77, 78
Skill: Recall

125) "For a contract to be binding, both parties must have a clear understanding of all terms of
that agreement." Discuss the accuracy of this statement.
Answer: It's only necessary that the terms of the agreement are clear and unambiguous. One
party's failure to read or understand the clear provisions of a contract will not affect the validity
of that agreement.
Diff: 2 Type: ES Page Ref: 71
Skill: Applied

126) Distinguish between an offer and an invitation.

Answer: An invitation to treat is an advertisement or other form of inducement to encourage
someone to come and deal or negotiate and has no legal significance. An offer is a clear
indication by one of the parties that he or she is willing to be bound by certain terms if the other
party accepts. The offer is the first stage of the creation of the contract, whereas the invitation to
treat is merely the communication process that takes place to bring the parties to the point where
one makes the offer.
Diff: 2 Type: ES Page Ref: 72
Skill: Applied
127) In the Pharmaceutical Society case, it was decided that goods displayed on the shelf in a
self-service merchandising situation were an invitation to treat, rather than an offer. Discuss.
Answer: This question gives students the opportunity to deal with the subject of offer and
acceptance, including invitation to treat in the bargaining process. In fact, it is very difficult to
determine at what point an invitation ends and an offer starts. It can be argued that the
Pharmaceutical Society case goes too far, that the judge's reasoning was flawed, and that these
goods should have been an offer, not an invitation. In any case, students should distinguish
between an invitation and an offer, clearly indicating that an invitation is simply a method of
encouraging the prospective customer to enter the bargaining process, bestowing no rights on the
parties. The offer, on the other hand, is the first stage of the process bestowing on the offeree a
legal power he or she didn't have before-that is, the right to accept and create a binding contract.
Students should indicate that they know what difference it makes if the goods on the shelf are an
invitation or an offer. This essay question is less difficult, but it does give students an opportunity
to demonstrate that they understand the essential elements of the bargaining process.
Diff: 2 Type: ES Page Ref: 72
Skill: Applied

128) What must be present in an offer before it qualifies as such?

Answer: All of the important terms of the offer must be stated. The lesser terms can be implied,
providing that there is nothing in the offer indicating that something has been left out. Usually
the important terms involve a description of the parties involved, the price involved, and the
property or item.
Diff: 2 Type: ES Page Ref: 72
Skill: Recall

129) Joe drove his car to a shopping mall and parked it there to attend a movie. The place where
he parked was designated as a one-hour parking space on a sign at the entrance where Joe drove
in. There were many similar signs around the shopping mall stating that people were parking
their cars at their own risk. But this particular sign said that the time limit for parking there was
one hour, and as a term of the contract anyone parking over this one-hour limit would have to
pay a fee of $60. When Joe got out of the movie, he found a ticket on his car (a demand for
payment of the $60). He refused to pay and was sued. What would be Joe's defence in these
circumstances?
Answer: Joe would claim either that there was no contract or that, if there was, these terms did
not bind him, as they had not been properly brought to his attention. The sign at the entrance to
that area of the parking lot was too similar to the other signs, and he had no reason to suppose
that what was set out on it was different. The owners should have known that he'd be driving past
and couldn't take the time to stop and look; therefore, he's not bound by the terms and doesn't
have to pay the $60.
Diff: 2 Type: ES Page Ref: 73
Skill: Applied
130) Joe offered to sell Harry his car and agreed to hold the offer open for one week, expiring
Saturday at noon. The following Sunday, Harry phoned Joe to tell him that he had decided to
accept the offer and purchase Joe's car. Joe said at that time that he had decided to keep the car
and was just about to phone Harry to revoke the offer. Harry said, "Too bad," and demanded
performance of the contract. Explain the legal responsibilities of the parties.
Answer: There is no contract. The offer expired at the end of a specified time (Saturday at noon)
before there was an attempt to accept it.
Diff: 2 Type: ES Page Ref: 74
Skill: Applied

131) Jones was a caterer; Smith was a florist. Jones won a contract to provide a banquet for a
convention of florists. He wanted to decorate the hall with flowers. He sent a letter to Smith
describing what he wanted and asking for a price quote. Smith responded in a letter dated
January 5, offering to supply the flowers for $5000. Jones received the letter on January 10 and
responded on the same date, saying the price was too high and that he would pay $4500. While
that letter was in the mail, but before it had been received by Smith, Jones learned that the
convention was on artificial flowers and the organizers wanted no real flowers on display. On
January 13, Jones quickly sent another letter telling Smith to ignore the letter of January 10 and
that he wouldn't need any flowers at this time. This letter of the January 13 was received on
January 18. Smith had received the letter of January 10 on January 15 and sent a letter of
acceptance on the same day, and had placed orders with his suppliers for the flowers. The letter
of acceptance was received by Jones on January 20. Is there a contract between Jones and Smith?
Explain.
Answer: Because the parties are communicating by mail, acceptance by this method is
appropriate. The revocation sent January 13 was effective only when received on January 18.
The acceptance of the counter-offer sent on January 15 was effective when mailed; hence, a
contract existed as of that time.
Diff: 2 Type: ES Page Ref: 74, 78
Skill: Applied

132) If the mail is a reasonable means for accepting an offer, is a contract formed when the
offeror drops a letter of revocation in the mailbox at the very same instant that the offeree drops a
letter of acceptance in the mailbox? Explain.
Answer: The revocation is effective only when received; however, the acceptance is effective
when mailed because of the post-box rule. Hence, this is a binding contract.
Diff: 1 Type: ES Page Ref: 74, 78
Skill: Applied
133) Joe made an offer to sell his car to Harry, promising to keep the offer open for a week.
However, he changed his mind, sold the car to someone else, and phoned Harry to inform him
that he was withdrawing the offer because he had sold the car to someone else. Harry was angry
and said that he wanted the car and was going to hold Joe to his promise to hold the offer open
for a week. He sued for breach of contract. Will he win? Explain.
Answer: No, he won't. The offer was effectively revoked before the acceptance was made. The
promise to hold the offer for a week is not binding unless there is some added consideration
making it an option.
Diff: 2 Type: ES Page Ref: 74
Skill: Applied

134) Harry saw Joe in his classic Buick at a local drive-in restaurant, and told Joe that he'd like to
buy the car. He offered Joe $1500. Joe said he had to think about it and that he'd let Harry know.
Two days later, Joe decided that he needed the money and couldn't afford to keep the car. He
wrote Harry a letter accepting the offer and mailed it that afternoon. The next day, Harry phoned
Joe, saying that he'd changed his mind and that he needed the money for something else. Joe told
Harry about the letter, and in fact Harry received the letter later that day. Joe insisted on going
through with the deal. Explain the legal liability of the parties.
Answer: This can go both ways. If it was reasonable to respond by mail in these circumstances,
then the post-box rule applies. The contract came into existence when the letter was posted, and
there is a binding contract. If it wasn't reasonable to respond by mail, then the acceptance must
be communicated, and so the acceptance would not be effective until received, which was after
the attempted revocation. Therefore, there would be no contract.
Diff: 2 Type: ES Page Ref: 74, 78
Skill: Applied

135) Harry saw Joe in his classic Buick at a local drive-in restaurant and talked about wanting to
buy the car. Joe offered to sell it to him for $1500. Harry said he needed some time to think about
it and that he would send Joe a letter. The next day, Joe changed his mind and mailed Harry a
letter of revocation. The day after that, before Harry had received the letter of revocation, he sent
a letter of acceptance to Joe. The next day, the two letters arrived at their respective destinations,
Joe receiving Harry's letter of acceptance just after Harry received Joe's letter of revocation.
Explain the legal liabilities of the parties.
Answer: There is a legally binding contract here. Although the letter of revocation was sent
before the letter of acceptance, the letter of revocation cannot be effective until received.
Because the parties understood that they'd be communicating by mail, the letter of acceptance is
effective when dropped in the mailbox, because of the post-box rule. Therefore, the contract
came into existence at that time, before any letter of revocation was received.
Diff: 2 Type: ES Page Ref: 74, 78
Skill: Applied
136) Joe offered to sell Harry his car for $500, but Harry said he needed some time to think
about it. A couple of days later, Harry phoned Joe to say that he'd give Joe $450 for the car. Joe
refused to take this. Then Harry said, "All right, I'll accept your offer for $500." Joe said that he'd
changed his mind and refused to go through with the deal. Harry sued. Explain Joe's legal
liability.
Answer: In this case, when Harry said he'd give Joe $450, that was a counter-offer, which wiped
out the original offer. It was too late for Harry to accept the original $500 offer, since it had
lapsed. At most, his supposed "acceptance" was another offer to purchase for $500, which was
not accepted by Joe.
Diff: 2 Type: ES Page Ref: 74, 75
Skill: Applied

137) Joe offered to sell Harry his car for a specific price, and Harry indicated that he needed
some time to think about it. Two days later, Joe sold the car to a third party. That afternoon,
Harry phoned Joe and told him that he had decided to accept the offer and that he'd buy the car.
Joe told Harry that it was too late; he had sold the car to someone else. Harry said that it had
been offered to him first, and he insisted that Joe go through with the contract. Explain the legal
liability of the parties.
Answer: This is a binding contract, assuming that the offer had been accepted within a
reasonable time. The fact that the car was sold to someone else does not automatically revoke the
offer. Such a revocation by conduct must still be communicated to be effective.
Diff: 2 Type: ES Page Ref: 74, 75
Skill: Applied

138) Explain what is meant by a tendering process and discuss the tender agreement.
Answer: When a company wants to undertake a project that requires the services of others, it
will often put out a request for bids on the job. This is called putting a job out to tender. When a
bid is submitted, a special contractual relationship is created called a tender agreement, which is
independent of the ultimate contract to do the job. Both the company putting the job out to tender
and the bidders must follow certain rules in the process, and both parties are bound to the
subsidiary tender agreement, which is enforceable in court.
Diff: 2 Type: ES Page Ref: 76
Skill: Recall

139) Explain typical rules associated with the tendering process.

Answer: The party requesting the bid must follow certain rules as set out in the tender, such as
disclose all relevant information affecting the project; accept only bids that are compliant with
the terms of the tender; not accept bids submitted after the specified closing date; accept the most
competitive bid (usually); and treat all parties equally and in good faith. A bidding party accepts
the subsidiary offer binding both parties to the rules set out in the bidding process. The party that
bids is also bound to not change the bid once it is submitted.
Diff: 1 Type: ES Page Ref: 76
Skill: Recall
140) Explain why standard phrases are used by lawyers to create legal documents.
Answer: Lawyers use standard phrases and clauses with known legal effects so the interpretation
of the legal agreement can be certain from the outset. Over time, such phrases have been
litigated, so lawyers on both sides know exactly what they mean and how they will be enforced
in court if it becomes necessary to go to court.
Diff: 1 Type: ES Page Ref: 76
Skill: Recall

141) Sam had been a friend of Joe for a considerable period of time and had often accompanied
him as he sailed his classic yacht. Sam had often communicated to Joe how much he would like
to have the boat. On Friday night, a friend told Sam that Joe had suffered some business reverses
and was going to have to get rid of the yacht. Sam immediately wrote Joe a letter offering to
purchase the yacht for $25 000. Unknown to Sam, Joe had written Sam a similar letter offering to
sell the yacht for $25 000. These two letters passed in the mail. Joe received Sam's letter at about
noon on Saturday, and Sam received Joe's letter at about 2:30 p.m. on Saturday. Are these people
bound in contract? Explain.
Answer: No, they are not. There must be a meeting of the minds. These letters merely indicate
that one is willing to sell and the other is willing to buy. There must be an indication that both
understand that the deal has been made. There must be an offer and an acceptance. Here there is
just an exchange of offers.
Diff: 2 Type: ES Page Ref: 77
Skill: Applied

142) Joe offered to sell Harry his car for $500. Harry responded by saying, "I accept, provided
you install a new radio in that car." Explain the legal relationship between the two parties.
Answer: This is not a contract. The acceptance was qualified or conditional; therefore, it was a
counter-offer and not an acceptance. Joe is free to accept it or reject it.
Diff: 2 Type: ES Page Ref: 77
Skill: Applied

143) Mary received a non-solicited selection of compact discs in the mail, with a letter informing
her that she was now a member of the CD of the Month Club. It also said that if she didn't want
these CDs, she could simply send them back; otherwise, she would be billed $10 for each CD at
the end of the month. She put the CDs away, and did not respond. The club continued to send her
CDs each month until she had received 100 of them over a period of 10 months. The club then
sent her a letter demanding payment; otherwise, it would take legal action. Explain Mary's legal
obligation in these circumstances.
Answer: There is no contract under these circumstances. Mary's silence was not an acceptance.
Had she already joined the CD of the Month Club, however, and then failed to send back CDs
she didn't want, she likely would have been liable because of the ongoing relation she had
established.
Diff: 2 Type: ES Page Ref: 77, 78
Skill: Applied
144) Explain the nature of the post-box rule.
Answer: When it is appropriate to respond by mail, the acceptance is effective when and where
dropped in the mailbox.
Diff: 2 Type: ES Page Ref: 78
Skill: Recall

145) Explain the post-box rule and discuss its relevancy in the modern business world.
Answer: This question requires students to demonstrate an understanding of the post-box rule,
and in the process also demonstrate a clear understanding of how the bargaining process works
and the elements of offer and acceptance. Students should demonstrate an understanding of the
rule itself: it only applies to an acceptance, and when applied, it makes the acceptance effective
when and where sent, as opposed to the normal requirement that an acceptance is effective only
where communicated to the offeror. It should also be clear that students understand that the rule
can affect not only when a contract comes into existence (especially the problem of whether the
offer was accepted before it expired) but also where the contract was made (which can determine
what law applies and whether a court has jurisdiction). Students must show an understanding that
the post-box rule is an exception, and that it likely only applies to an acceptance. In any case, it
clearly will not apply to other communication from the offeror, such as a revocation (Henthorn v.
Fraser). I would expect students to give an indication of how the rule arose-that it was simply to
facilitate the needs of business when communicating at a distance, giving certainty to their
dealing-and is not buried in some great principle of jurisprudence. Students should show that
they understand that the rule only applies when it is appropriate to respond by mail, not every
time the postal service is used. It is vital that students discuss the implications of the rule in our
modern electronic society. They should indicate an understanding that, where instantaneous
communications such as the telephone are in use, the rule will not apply. It is highly unlikely that
the post-box rule will be applied to fax and email, even though it was extended to telegrams in
the past.
Diff: 3 Type: ES Page Ref: 78, 79
Skill: Applied

146) One of the requirements in a contract is that there must be an exchange of consideration
between the parties. Explain what is meant by consideration.
Answer: Consideration is usually thought of as the price one pays for what has been bargained
for in the contract. Both sides must pay a price and both sides must receive a benefit. But
consideration is better thought of as the commitment of the parties to pay that price, whether it is
in the form of money or some other benefit.
Diff: 2 Type: ES Page Ref: 79, 80
Skill: Recall
147) Discuss the requirement of consideration and its role and value in the formation of
contracts. In your answer, make sure to deal with the issue of fairness in the bargaining process.
Answer: Here, students should deal with the nature of consideration. The essential nature of a
bargain is that parties negotiate, eventually reaching a point where they are willing to exchange
commitments that are to their mutual advantage. This is the heart of the marketplace, and
contract law and the concept of consideration are key. A free bargaining process and the role of
bargaining in the marketplace require that the courts don't try to make bargains for the parties.
The courts can't interfere, or it would disrupt that market function. The courts, as a general rule,
won't concern themselves with whether or not a bargain was fair, or worry about the adequacy of
the consideration given; that is the objective of bargaining. But if there is no consideration at all,
it is clear there has been no bargain struck, and so the courts will find no contract. Students'
answers should show an understanding of this bargaining nature of contract law and also an
understanding of why consideration is required but that it does not have to be fair. But there are
exceptions. Where a transaction is grossly one-sided, the courts will look at an allegation of fraud
or the claim of incapacity and the fairness of the consideration. But this relates to a breakdown in
the market system, where the parties bargaining are not functioning at the same level, and so
there is a consistency in the courts' approach to the need for consideration even in these
exceptions.
Diff: 2 Type: ES Page Ref: 79, 80
Skill: Recall

148) "One of the basic precepts in contract law is that any bargain struck must be fair to be
enforceable." Explain the accuracy of this statement.
Answer: It is only necessary that the consideration involved has some value. It is not necessary
that it be fair or reasonable.
Diff: 2 Type: ES Page Ref: 80
Skill: Recall

149) Joe, a university student, parked his car near Harry's garage and went to attend classes.
Harry had noticed that there was glass on the street when he came to work that morning and was
not surprised when he saw that several of the students' cars parked in that location subsequently
had flat tires. He went around to each of those cars when he had time during the day, fixed the
tires, and put a bill on each vehicle charging $15 for the service. Joe had returned to his car
during the day and had noticed the flat tire, and when he returned again that evening he was
grateful that it had been fixed. He went over to the garage to thank Harry and told him that he
would be happy to pay the $15, but he couldn't do it until next week. In fact, he failed to pay the
money, and Harry sued him for breach of contract. Explain the likely outcome.
Answer: Harry would lose. This is an example of past consideration, and past consideration is
no consideration. At the time the work was done, no bargain had been struck.
Diff: 1 Type: ES Page Ref: 81
Skill: Applied
150) Joe owed Sam $500. Two days before the money was due, Joe came to Sam and told him he
couldn't pay the $500, but if Sam would accept $300 right then, in full satisfaction of the debt, he
would pay him that amount. Sam agreed, then later sued for the other $200. Will he win?
Answer: He received payment two days early; this is sufficient consideration to support the
lower payment.
Diff: 2 Type: ES Page Ref: 82
Skill: Applied

151) Explain the principle of promissory estoppel and how it relates to the requirement of
consideration in contract law. In your answer, explain any limitations on its availability.
Answer: Here, students are expected to show an understanding of the requirement of
consideration in the law of contract. Consideration requires that commitments or promises be
made by both parties in order for there to be a binding contract. Where only one of the parties
makes a commitment, this is a gratuitous promise and is not enforceable as a contract.
Promissory estoppel provides that in some limited circumstances a person might be bound even
by his or her gratuitous promise. Usually this is best illustrated by example. The vital point to
make is that, in Canada at least, promissory estoppel can be used only as a defence, not as a
cause of action. It is difficult to come up with a situation where it can be used because it requires
that the person suing must be the person who made the promise to be enforced. This can only
happen where some prior legal obligation exists between the parties that was modified by the
gratuitous promise and then the person making the promise is ignoring that promise and trying to
sue to enforce the original right prior to the modification by the promise. Usually this is simply a
situation where a prior contractual right is being discharged or modified by the gratuitous
promise. It will take a bright student to explain this properly, but a very bright student should
also indicate that promissory estoppel can only be used where the person using it relied on the
promise in some way that they will suffer a detriment if it is not honoured. The essentials are that
the student demonstrate that this principle will only be used where there is a one-sided promise
and where it is being used as a defence, not as a cause of action.
Diff: 3 Type: ES Page Ref: 81, 82
Skill: Applied

152) Joe was a contractor and he hired subtrades to help build his houses. Sam was a framer and
had agreed to frame four houses for Joe for a set price. Joe was to supply the materials. After two
houses were completed, Joe's suppliers increased the cost of lumber, and Joe told Sam that he
could no longer pay him the amount on which they'd agreed. Sam agreed to take 15% less for the
other two jobs, which were then completed. During this time, regular payments were made from
Joe to Sam, but the total amount received was 15% lower than the originally agreed-upon price
for the last two jobs. Sam sued Joe for the original contract price, claiming that he'd received no
consideration for his agreement to take less for the last two jobs. Explain what defences may be
available to Joe under these circumstances and his likelihood of success.
Answer: Joe can use promissory estoppel. Sam agreed to take less for the services that were
performed on the last two jobs. This promise was relied on by Joe; therefore, he can use Sam's
promise as a defence.
Diff: 2 Type: ES Page Ref: 83
Skill: Applied
153) What is the age of majority in your province?
Answer: The age of majority is 18 or 19, depending on the province.
Diff: 1 Type: ES Page Ref: 84
Skill: Recall

154) Distinguish between a void contract and a voidable contract.

Answer: A void contract never was a contract and the agreement is simply of no effect. A
voidable contract is a binding contractual agreement, but one of the parties has the right to get
out of it. Until that right is exercised, it is binding. This can have a significant effect on the
position of a third party.
Diff: 2 Type: ES Page Ref: 84
Skill: Recall

155) Explain the legal position of an infant who enters into a contract with an adult.
Answer: This varies by province. In most provinces, infants are only bound to honour contracts
involving necessities or beneficial contracts of service. In B.C., all contracts with infants are
unenforceable except those made specifically enforceable by statutes (e.g., student loans).
Diff: 2 Type: ES Page Ref: 84, 85
Skill: Recall

156) Indicate what types of contracts are binding on infants.

Answer: necessaries and beneficial contracts of service (except in B.C., where all contracts with
infants are unenforceable, except those that may be enforceable by statute)
Diff: 2 Type: ES Page Ref: 84, 85
Skill: Recall

157) Distinguish between an infant's liability for torts and for contracts.
Answer: Infants are only bound by contracts for necessities and beneficial contracts of service
(note difference in B.C.), but they are responsible for any torts they commit. Note, however, that
an adult cannot get around the protection given infants in contract law by suing in tort instead.
Diff: 2 Type: ES Page Ref: 84-86
Skill: Recall

158) Joe owned a classic Buick automobile, and he agreed to trade it to Sam for a specified
amount of cocaine. Sam took the car and, three days later, before he could deliver the cocaine to
Joe, his cocaine was seized by the police and he was arrested. Joe is now bringing an action
claiming that he's entitled to the car. Indicate what arguments are available to Joe and the
likelihood of him obtaining his car.
Answer: Joe would claim either that the contract was breached and therefore he is entitled to his
automobile, or that the contract was illegal and therefore there was no contract and he's never
given up title to his Buick. It's likely, however, that the courts will consider this is an illegal
contract, since both parties knew that they were involved in an illegal act, and refuse to assist Joe
in obtaining the return of his automobile.
Diff: 2 Type: ES Page Ref: 87
Skill: Applied
159) "Some contracts are considered illegal even though the conduct involved is not prohibited
by any law." Explain the accuracy of this statement.
Answer: It is true that some types of conduct, such as prostitution, are considered to be against
public policy, even though they are not prohibited by law.
Diff: 2 Type: ES Page Ref: 87
Skill: Recall

160) Give three examples of contracts that would be considered void because of illegality.
Answer: contracts to commit a tort or crime; contracts to obstruct justice; contracts involving
immoral acts; contracts to sell government secrets or to bribe officials; some contracts that
restrain trade or restrict competition unduly
Diff: 2 Type: ES Page Ref: 87
Skill: Recall

161) Explain how an insurance contract avoids being void as a wager.

Answer: The insured must have an insurable interest in the thing insured and not obtain a
windfall when the insured-against event takes place.
Diff: 2 Type: ES Page Ref: 87
Skill: Recall

162) Joe sold Harry his barbershop, but Harry wanted a commitment on Joe's part that he would
not open another barbershop in the area after he received payment. Explain how the parties could
include a clause in their agreement, to that end, without it being void as a restraint of trade.
Answer: As long as the provision goes no farther than is necessary to protect the value of the
goodwill-that is, there is a reasonable time restriction and a reasonable geographic limitation, and
the public interest is not harmed-such a provision would be valid.
Diff: 2 Type: ES Page Ref: 88
Skill: Applied

163) "A person's intention to be bound by contracts is presumed." Discuss the accuracy of this
statement.
Answer: It is inaccurate. Where contracts involve people in domestic relationships, an intention
not to be bound is presumed.
Diff: 2 Type: ES Page Ref: 89
Skill: Recall

164) "A verbal contract is every bit as binding as a written one." Discuss the validity of this
statement.
Answer: The Statute of Frauds requires that contracts for things such as interests in land, etc.,
must be evidenced in writing. Otherwise, the statement is correct.
Diff: 2 Type: ES Page Ref: 90
Skill: Recall
165) "Contracts must be in writing to be enforceable." Discuss the accuracy of this statement.
Answer: This statement is not accurate. Verbal contracts are as binding as written ones. It is a
good idea to put them in writing, but this is not required. Having the agreement in writing will
constitute evidence of the actual terms of the agreement. Only contracts specifically required to
be evidenced in writing by statute, such as the Statute of Frauds, need be evidenced in writing.
Diff: 1 Type: ES Page Ref: 90
Skill: Recall

166) Discuss the Statute of Frauds as it relates to contract law. In your answer, consider the
justification of requiring some contracts to be evidenced in writing, and changes related to the
Statute of Frauds in several jurisdictions.
Answer: One of the mistakes made most often about contract law is the assumption that there is
only a contract if it is in writing. It should be clear that students understand conceptually that the
contract is the relationship and obligations between the parties embodied in the agreement, and
that the written document is just the evidence of that agreement. Students might examine
whether unwritten contracts ought to be required to be in writing and then discuss the Statute of
Frauds, which requires that some contracts actually must be evidenced in writing. They should
point out which types of contracts must be evidenced in writing, indicating that this varies from
province to province and that some provinces have eliminated this requirement. The main
discussion ought to centre on whether there is any justification for keeping this rule, especially
since the way the courts approach the subject is to first determine if there is a contract and then
to see if it is enforceable due to no writing. Using this approach, if they ever apply the statute, it
will be to refuse to enforce a contract that they are sure exists. This leads to more wrong than it
corrects. This discussion should do more than simply list what satisfies the requirement of
writing and what types of contracts are covered. Students should go beyond this by providing the
justification for such rules.
Diff: 2 Type: ES Page Ref: 90, 91
Skill: Applied

167) What must a person establish in order to escape contractual obligations on the basis of
insanity?
Answer: that the person was insane at the time of the contract, to the extent he or she didn't
know what he or she was doing; that the other person knew or ought to have known of that
insanity; and that the contract was repudiated quickly on regaining that person's senses
Diff: 2 Type: ES Page Ref: 86
Skill: Recall

Chapter 6 The Elements of a Contract: Consensus

and Consideration

1) Which of the following is an ingredient necessary to form a contract?

1. A) Exemption clauses
 2. B) Assignment

3. C) Capacity

4. D) Moral

5. E) Fairness

Answer: C

Diff: 1 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

2) Berman made a documentary on the life of musician Artie Shaw. Shaw’s representative was
cooperative and gave her permission to use certain songs if she received proper permission from
the copyright holders. The cost of the film was funded by her own savings, a private investor, the
Canada Council, the Ontario Arts Council, and deferred salaries and material costs. In March of
1987, the film won an Academy Award as the best feature documentary for 1986. In November
of 1987, Shaw’s lawyer contacted Berman’s lawyer: “… This letter states that Artie Shaw has a
35% profit participation in the motion picture… .” Which of the following accurately sets out the
legal position of the parties?

1. A) Shaw has a right to this share because the movie is about him.

2. B) The court will imply an agreement to this effect between the parties.

3. C) Shaw has no claim since there was no such agreement.

4. D) A public celebrity has the right to prevent this kind of exploitation if Berman refuses
this demand.

5. E) The court will award Shaw a reasonable profit because it is fair.

Answer: C

Diff: 3 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Applied

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

3) Which of the following is not an example of a contract?

1. A) A written promise to give your husband a ring for Christmas

2. B) A verbal agreement to work for someone starting next week

3. C) A verbal agreement for the sale of a car where neither the money or the car has yet
changed hands

4. D) An agreement not to sue someone for negligence in exchange for their promise to pay
you a specified amount

5. E) An implied promise to pay for a meal when you order it

Answer: A

Diff: 1 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Applied

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

4) Which of the following is an example of a unilateral contract?

1. A) Joe agrees to paint Sam’s house for $500.

2. B) Joe pays $50 for groceries at a grocery store.

3. C) C returns a lost dog and claims the $50 reward.

4. D) Joe promises to give Harry his old boat when he gets his new one.

5. E) Sam orders a meal in a restaurant.

Answer: C

Diff: 1 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Applied
Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

5) Sam placed an announcement in the newspaper as follows: “$200 reward for the return of two
lost Siamese kittens.” Joe read the ad, found the kittens, and returned them. This is an example of
which of the following?

1. A) Invitation to treat

2. B) Offer

3. C) Gratuitous promise

4. D) Bilateral contract

5. E) Unilateral contract

Answer: E

Diff: 1 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

6) Which one of the following is enforceable?

1. A) Mr. Ho promised to give his needy friend Mr. Jahn $100.

2. B) Ms. Jones promised to pay an additional $100 to Mr. Wood if Wood finished the
existing contract on time, according to the terms of the contract.

3. C) Mr. Baker was so sick of an old chair that, when Mr. Venson offered him $10 for it, he
agreed (i.e., promised to sell it to him), although the market value of the chair was $80.

4. D) Ms. Goode promised to send $10 to Mr. Paul, who kindly came and warned her when
he saw a tow truck approach her car.

5. E) An ad in the paper promises to pay $5 for the return of a lost ring, but the person who
finds and returns the ring never saw the offer in the newspaper.
Answer: C

Diff: 2 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Applied

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

7) When Mr. Adams tells the local Boys’ and Girls’ Club that he will give them $5,000 if they
promise to use the funds for their summer camping program, this is an example of which one of
the following?

1. A) Gratuitous promise

2. B) When accepted by the club, a bilateral contract

3. C) When accepted by the club, a unilateral contract

4. D) Promissory estoppel

5. E) Inadequate consideration

Answer: B

Diff: 1 Type: MC Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

8) An ad in the morning newspaper read “Absolutely the best offer anywhere in Calgary. We’ll
give you a StarSystem tablet/laptop with a Roland PR-1011 wi-fi printer for only $1299!!! Pick it
up today.” This is an example of which of the following?

1. A) Offer

2. B) Invitation to treat

3. C) Gratuitous promise

4. D) Bilateral contract
 5. E) Unilateral contract

Answer: B

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

9) The owner of a new building wanted four maple trees, 6 metres tall, planted on the north side
of the building. Lloyd Landscaper submitted his offer of four 6-metre maples planted for $800.
The owner said he would pay $600 for that. Lloyd said, for $600 he would supply four smaller,
5-metre trees. The owner said, “$600 for 5-metre trees plus a Christmas tree for my kids.” Lloyd
was disgusted and said, “Forget it. I don’t need this job.” As he was leaving the owner said, “All
right, I’ll accept your offer of $600 for the 5-metre maples planted.” Lloyd kept on walking.
Which of the following is true?

1. A) There is no contract because Lloyd’s last offer was revoked.

2. B) There is no contract because Lloyd’s last offer had been rejected by a counter-offer.

3. C) There is no contract because Lloyd’s last offer had lapsed after a reasonable time.

4. D) There is a contract because at one point in the conversation Lloyd was willing to sell
and the owner was willing to buy four trees.

5. E) There is no contract because there is a presumption in law in these circumstances that

the parties did not intend to create a legal relationship.

Answer: B

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

10) An ad in the morning paper read: “Brand new Spartan 6s smartphone $349. No payment until
January. We make your first payment.” This is an example of which of the following?
 1. A) Invitation to treat

2. B) Offer

3. C) Gratuitous promise

4. D) Bilateral contract

5. E) Unilateral contract

Answer: A

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

11) If an offeror makes an offer that states, “This offer to be open until noon tomorrow,” which
of the following does not, in law, end the offer?

1. A) An inquiry by the offeree if he can do any better

2. B) The insanity of the offeror

3. C) A counter-offer by the offeree

4. D) Revocation of the offer by the offeror before the time specified (i.e., before “noon
tomorrow”)

5. E) Lapse of the offer at the time specified

Answer: A

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

12) Jon was developing a computer program for use by owners of track clubs to aid them in
keeping records of the members, their runs, times, injuries, etc. Eager to finish the program, Jon,
in Edmonton, called his friend Sam, in Calgary, and offered him $4000 to help: five hours
working per day, for five days week, for five weeks. Sam said that he would have to think about
it. Jon told Sam that he was eager to get going, but that he would hold the offer open until Friday,
February 6, at noon. Which of the following is true? (Read each separately.)

1. A) If Sam accepts by phone within the time specified in the offer, the place of contract
would be Calgary.

2. B) If Jon goes ahead and hires Betsy from Edmonton at noon on February 3, it would be
too late for Sam to accept.

3. C) If Jon revokes his offer before Friday noon, Sam could sue him for breach of contract
because he promised to hold it open.

4. D) If the court held that acceptance by mail was reasonable in the circumstances, if Sam
accepts by mail the place of contract is Edmonton.

5. E) If Sam wants to ensure the promise to keep the offer open until noon, February 6, he
should give Jon some consideration (that is, allow him to purchase an option).

Answer: E

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

13) If you pay $1000 for a 90-day option on property offered to you at $200,000, which of the
following is true?

1. A) You have bought a 90-day period of time within which you may or may not accept the
offer of the land.

2. B) With the signing of the option agreement, you have entered into two contracts—a
contract for time and another for land.

3. C) You have agreed that you will accept the offer of land within the 90-day period.

4. D) If you do not exercise the option, you can get your $1000 back.
 5. E) The seller of the land can revoke the offer of the land any time before acceptance.

Answer: A

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

14) Which of the following is false with regard to contract law?

1. A) A counter-offer ends an offer.

2. B) A newspaper notice offering to pay a reward for the return of lost kittens is an
invitation to treat.

3. C) An important criterion for determining the place of the contract is the place where the
acceptance is effective.

4. D) An option is a contract in which one person is buying a period of time within which he
may accept the offer contained within the option.

5. E) A revocation is effective only when received.

Answer: B

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

15) Roberts has the chance to buy three adjacent city lots zoned “duplex.” The most profitable
return would be the building of four townhouses across the three lots, but that would necessitate
getting permission from the city for the replotting, which would be a time-consuming process. If
Roberts buys a 60-day option from the seller of the properties for $4000, which of the following
would be true?

1. A) The offer for the properties will expire before the end of the designated 60-day period
if another person offers a higher price.

2. B) If Roberts does not exercise the option during the option period, she can later force the
seller to sell that property to her at that price.

3. C) By buying the option, Roberts has bought a period of time during which she must
accept the land offer.

4. D) If Roberts does not exercise the option, she will get her $4000 back because she didn’t
get what she was bargaining for.

5. E) The seller is bound by contract neither to sell the property to any other party or to
revoke the offer within the option period.

Answer: E

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

16) Which of the following is an offer as opposed to an invitation to treat?

1. A) An ad in a real-estate paper: “Best offer in Vancouver! 3-bedroom home in Kitsilano

for only $850,000!”

2. B) A sweater displayed in the window of a shop with the price tag attached and showing.

3. C) A notice in the Toronto Star: “I will pay $100 to whoever finds and returns my lost
female calico cat which answers to the name Marx.”

4. D) The display of goods on the shelves of Costco.

5. E) A notice in the catalogue from the gift shop of the Edmonton Aquarium: “15% off the
price of all jewellery until January.”

Answer: C

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

17) Which of the following would best satisfy the requirements for a good legal offer?

1. A) “I’ll pay you at least $300 for your horse, Blackie, and even more if the horse is
lucky.”

2. B) “I’ll drive you to Seattle on Saturday.”

3. C) “The purchaser will pay $1000 for one of the seller’s laser printers, the exact model to
be determined at a later date.”

4. D) “I’ll give you $1 for your new green bike.”

5. E) On a flyer placed on your windshield):”We have the best offer in town! A mint 1956
Chevrolet for $20,000.”

Answer: D

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

18) Sarah wanted an antique lamp for her bedroom. While in a second-hand shop, she saw a
lamp that she really wanted marked $100. She offered the owner $75 for it. He said “I’ll take
$95.” She answered “$80!” He said, “Lady, you’re pushing me a bit, aren’t you? I’ll take $90,
that’s it.” She said “OK I’ll pay $90 if you throw in this old ‘Vote-for-Pearson’ button.” He said,
“Forget it, lady, my shop is closed,” and asked her to leave. She said, “OK, I accept your offer of
$95.” He made no response. If she sues for breach of contract, which of the following is true?

1. A) There is no contract because his offer to sell for $95 lapsed after a reasonable time.

2. B) There is a contract because at one time he offered to sell the lamp for $95 and she
accepted it.

3. C) There is a contract because he wanted to sell the lamp for $95 and she was willing to
pay that much.
 4. D) There is no contract because his offer to sell the lamp for $95 was rejected by counter-
offer, and her offer to buy it for $95 wasn’t accepted.

5. E) There is no contract because his offers to sell the lamp for $95 and $90 were revoked
and he didn’t accept her offers.

Answer: D

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

19) Mary bought a new computer and advertised her old computer for $1500. Mr. Jones offered
to pay $1000. Mary said no, she wanted $1500. Mr. Jones offered $1250. Mary rejected that and
said she wanted $1500, but then said to him, “I withdraw my offer, I’ve decided to give it to a
school and apply for the tax benefit.” Mr. Jones said, “All right, I’ll accept your offer of $1500.”
Which of the following is true?

1. A) There is a contract because at some point in time Mary was willing to sell and Mr.
Jones was willing to buy the computer system for $1500.

2. B) There is no contract because the last offer had lapsed.

3. C) There is no contract because Mary revoked the offer before Mr. Jones attempted to
accept it.

4. D) There is a contract, because once a seller makes an offer she cannot change her mind;
she is bound to receive an acceptance.

5. E) There is a contract and Mr. Jones has to pay a reasonable price for Mary’s old
computer.

Answer: C

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

20) Why is the case of Dickinson v. Dodds important?

1. A) It confirms that contracts must be in writing to be valid.

2. B) It says that property can be sold to two different purchasers.

3. C) It clarifies that when an offeror says an offer will remain open, it must remain open.

4. D) It illustrates the nature of an offer.

5. E) It determines that offers, once made, can never be revoked.

Answer: D

Diff: 2 Type: MC Page Ref: 192

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

21) In Martel Building Ltd. v. Canada, what did the Supreme Court of Canada decide?

1. A) A call to tender is an offer to contract and a binding contract may arise when a bid is
submitted.

2. B) There is no requirement that bidders be treated fairly, as caveat emptor applies.

3. C) In a call for tenders, there can be no discretion.

4. D) A call for tenders is an invitation to treat which carries with it no legal status.

5. E) In a call for tenders, standard form contracts must always be used.

Answer: A

Diff: 2 Type: MC Page Ref: 194

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

22) Four days ago, Pete was reading the newspaper and saw the following: “Best offer in town!
Zenith XX Laser Printer – $400! When he went to the store this afternoon and said he wanted
one, they replied that they didn’t have any left, nor could they get one. On these facts, which of
the following is true?

1. A) Pete could sue them for breach of contract because he was accepting the offer in the
newspaper.

2. B) The store had revoked the offer before he tried to accept.

3. C) The offer by the store had lapsed before he tried to accept.

4. D) The wording in the newspaper was merely an invitation to the public to do business,
and no contract was formed.

5. E) Pete could sue for breach of an option contract.

Answer: D

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

23) Ann was offered a job that would pay $50,000, that would provide for 18 days of vacation
after one year of employment, and that would begin one week after her graduation. She wrote
back that she would accept the job, but that she would not begin until three weeks after
graduation and needed at least 21 days of vacation after the first year of work. On these facts,
which of the following is true?

1. A) If she had not responded, there would have been a contract because silence is the
standard form of acceptance.

2. B) Since she accepted the offer, there is a contract.

3. C) There is no contract because an acceptance must be unconditional, and her

counteroffer has not been accepted.

4. D) She is still free to reconsider and take the original offer even after the prospective
employer received her letter.

5. E) There is a contract as soon as she drops her letter in the mailbox.

Answer: C

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

24) Sylvia had contracted with Produce Palace to sell her entire crop of elephant garlic (100
kilograms) and her entire crop of tomatoes (100 kilograms). On the day for delivery, Produce
Palace took the garlic but not the tomatoes. In her effort to mitigate her loss, Sylvia called the
owner of Val’s Veggies and offered her the tomatoes at a reduced price with the words, “Let me
know quickly, because they are ripe and must be moved out today.” That afternoon, Val sent
Sylvia a letter accepting the offer. On these facts, which is the most likely outcome?

1. A) There is a contract between Sylvia and Val the moment Val dropped the letter of
acceptance in the mailbox.

2. B) There is a contract between Sylvia and Val the day the letter of acceptance is received
by Sylvia.

3. C) There is no contract between Sylvia and Val because Sylvia had revoked the offer.

4. D) There is no contract between Sylvia and Val because the offer has probably lapsed
before the acceptance was received by Sylvia.

5. E) If the postbox rule does not apply, there would be a contract as soon as Val mailed the
letter unless Sylvia had sold the tomatoes to someone else.

Answer: D

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

25) Mr. Goode, a neighbour of your parents, offered to sell you his house for $400,000, a bit
below market value. You are definitely interested but would like to see if your employment
contract will be renewed and want to check about financing. Mr. Goode says that he’ll hold the
offer open for you until May 1st. On these facts, which of the following is false?

1. A) Mr. Goode will be bound to hold it open if you pay him and he accepts some money to
hold it open until that date.

2. B) Mr. Goode will be bound to hold it open if you offer and he accepts your offer to wash
his car every Saturday morning for two months in exchange for his promise to hold it
open.

3. C) Mr. Goode will be bound to hold it open until that date if his promise to do so was
written and under seal.

4. D) Mr. Goode’s promise to hold it open is sufficient; the offer is safe until May 1st, when
it will expire.

5. E) If you buy an option to buy a house, you still don’t have to buy the house.

Answer: D

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

26) The owner of a large restaurant wanted four large pots of flowers in front of the restaurant.
Laura, a landscaper, submitted her offer: four large pots with flowers for $800. The owner said
he would pay $600 for that. Laura said, “For $600, I’ll provide four smaller pots with flowers.”
The owner said, “$600 for the smaller pots with flowers plus an arrangement for the front desk.”
Laura said, “Forget it,” and started to leave. The owner said, “All right, I’ll accept your offer of
$600 for the four smaller pots with flowers.” Laura didn’t answer and got into her truck and
drove off. On these facts, which of following is true?

1. A) There is no contract because Laura’s last offer was revoked.

2. B) There is no contract because Laura’s last offer had been rejected by a counter-offer,
and the owner’s offers had been rejected or were not accepted.

3. C) There is no contract because Laura’s last offer had lapsed after a reasonable time.

4. D) There is a contract because at one point in the conversation Laura was willing to sell
and the owner was willing to buy four smaller pots with flowers for $600.

5. E) There is no contract because there is a presumption in law in these circumstances that

 the parties did not intend to create a legal relationship.

Answer: B

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

27) The ad in the Real Estate Weekly read: “Best offer in Toronto! 3-bedroom home in the Annex
for only $700,000!” This is an example of which of the following?

1. A) Invitation to treat

2. B) Legal offer

3. C) Gratuitous promise

4. D) Bilateral contract

5. E) Unilateral contract

Answer: A

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

28) An agreement for the purchase and sale of property included the following words: “Subject
to the purchaser obtaining satisfactory financing by 5 p.m. on Friday, February 22, 2016.” If the
court held that this subject-to clause was so vague that “the entire contract was void for
uncertainty,” this would mean that

1. A) the contract was in existence but could not be enforced.

 2. B) the contract was in existence but one party has the right to repudiate the contract.

3. C) the contract was never in existence.

4. D) the contract is in existence but the court will not do anything to help the parties.

5. E) the court will impose a reasonable alternative for the term in question.

Answer: C

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

29) Martin offered to buy the property for $200,000, “offer to remain open until 5:00 p.m. on
Thursday, January 21st.” Which one of the following situations will not cause the offer to end?

1. A) Insanity of the offeror before the offer is accepted

2. B) Martin sells the property to another party before the expiration of the period stipulated
and before hearing from the offeree.

3. C) A counter-offer from the offeree

4. D) Death of offeror

5. E) The offeree has not accepted and the stipulated time has expired.

Answer: B

Diff: 2 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

30) Which one of the following will not end an offer?

1. A) The offer is said to be open for 3 weeks and the 3 weeks expire.
 2. B) The offeror dies.

3. C) The offeree makes a counter offer.

4. D) The offeror communicates a revocation of the offer.

5. E) The offeror sells the goods being offered to someone else.

Answer: E

Diff: 1 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

31) Franz bought a round-trip ticket to Germany to visit relatives. Unfortunately, a week before
flight time, he broke his leg. He offered his co-worker, Joe, the ticket for 80% of the full price,
offer to remain open until 10:00 p.m. on December 15. Indicate to Joe which of the following is
true with regard to the law of offer and acceptance.

1. A) If Franz sells to someone else, it is too late for Joe to accept the original offer.

2. B) Franz could revoke the offer any time before acceptance, even before 10:00 p.m. on
December 15.

3. C) To create a contract, an offer must be in writing.

4. D) A letter of acceptance is always effective when it is dropped in the mailbox.

5. E) If Joe makes a counteroffer of 50% of the full price, and Franz rejects the counteroffer,
Joe can still accept the original offer.

Answer: B

Diff: 3 Type: MC Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

32) Jed, who lived on Cape Breton Island, needed money for a trip to France. He decided to sell
his electric guitar. On Monday, October 29, he called the owner of a music store in Halifax and
offered to sell his Fender Stratocaster guitar for $1800, the offer to be open until Friday noon,
November 2. Jed told the store owner to send a letter of acceptance since he (Jed) would be away
for a few days. The store owner examined his inventory and mailed a letter of acceptance on
Thursday, November 1. When Jed returned home on Saturday, November 3, the letter had not yet
arrived, so that afternoon he sold the guitar to a music teacher in his town. The store owner in
Halifax sued for breach of contract. Which of the following is true?

1. A) Sending a letter by mail was not a reasonable method of acceptance.

2. B) The offer lapsed before the store owner accepted.

3. C) The offer was revoked before the store owner accepted.

4. D) The letter of acceptance was effective when it was received, and by then Jed had sold
the guitar, so there was no contract.

5. E) The acceptance was effective before the offer lapsed, so there was a contract between
Jed and the store owner.

Answer: E

Diff: 2 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Applied

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

33) Carlos visited Vancouver last summer and instead of going back to Ontario he stayed and
enrolled at Simon Fraser University. He needed money but didn’t need things left in Ontario,
including his car. In mid-December, he wrote a friend and offered to sell the car for $4000 and
told him to send him a letter with his answer. His friend received the letter on January 2, checked
his financial situation, and sent a letter of acceptance January 3. Meanwhile Carlos, short of cash
and not having heard from his friend, sold the car to Mr. Reno on December 31. Carlos received
his friend’s letter January 8. On these facts, which of the following is true?

1. A) In order for there to be a binding contract, there must be an offer and receipt of the
letter.

2. B) All methods of acceptance are effective upon receipt by the offeror.

3. C) Sending an acceptance by mail was not a reasonable method of acceptance in this

 situation.

4. D) The letter of acceptance was effective when it was received, and by then Carlos had
sold the car, so there was no contract.

5. E) The acceptance was effective before it was received, so there was a contract between
Carlos and his friend.

Answer: E

Diff: 2 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Applied

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

34) What was significant about the case of R. v. Commercial Credit Corp.?

1. A) It abolished the postbox rule in Canada.

2. B) It determined that the postbox rule should be extended to letters of revocation as well
as letters of acceptance.

3. C) It confirmed that acceptance by post is always appropriate.

4. D) It determined that consideration is unnecessary in cases where consensus has been

achieved in writing.

5. E) It is one of the few cases where the postbox rule has been extended beyond
communication by mail or telegram.

Answer: E

Diff: 2 Type: MC Page Ref: 199

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

35) What did the Court decide in Entores Ltd. v. Miles Far East Corp.?
 1. A) Because the postbox rule is archaic, it should be abolished in its entirety.

2. B) Because mail is the most common form of communication, the postbox rule does not
need to be extended to telegrams.

3. C) Because of the postbox rule, there is no need to specify a method of acceptance in

contractual negotiations.

4. D) Because fax machines were becoming more popular, the Court created a new rule
known as the fax rule exception.

5. E) Because telex was instantaneous, there was no need to extend the postbox rule
exception to that form of communication.

Answer: E

Diff: 2 Type: MC Page Ref: 200

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

36) If an offer is made by mail and an acceptance by mail is requested, when does a letter
revoking the previous offer actually take effect?

1. A) At the time that it is posted

2. B) At the time that it is received, if before acceptance

3. C) At any time before actual performance of the contract has begun

4. D) At any time before a letter of acceptance is received by the offeror

5. E) Never. A revocation must be done in person.

Answer: B

Diff: 1 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

37) Bob in Burnaby called Ed in Toronto and offered to sell him 40 kilograms of smoked salmon
at $15 per kilogram. He requested that Ed phone him back by noon the next day. That way, Bob
could offer it to someone else if Ed wasn’t interested. Instead of phoning, Ed sent a letter of
acceptance, in which he said that he would have his agent pick up the fish. On these facts, which
of the following is false?

1. A) If using the mail was unreasonable, the acceptance could not be effective until it was
received.

2. B) If using the mail was unreasonable, the acceptance was effective when it was mailed.

3. C) The place of formation of the contract, if there was one, was Burnaby if the use of the
mails was unreasonable.

4. D) The place of formation of the contract, if there was one, was Toronto if the use of the
mails was reasonable.

5. E) Although a response by phone was requested, a response by mail would be effective if

received before noon the next day.

Answer: B

Diff: 2 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Applied

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

38) Which of the following is correct with respect to the operation of the postbox rule?

1. A) For the postbox rule to apply, the offer must be made by mail.

2. B) If the postbox rule applies, an acceptance must be communicated and heard by the
offeree before it is effective.

3. C) If the postbox rule applies, the acceptance is effective at the time of mailing.

4. D) If the postbox rule applies, the only way for an acceptance to be effective is if it is sent
by mail.

5. E) For the postbox rule to apply, the offeror must make that clear when the offer is made.

Answer: C
Diff: 1 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

39) Jones was a caterer and Smith was a florist. Jones won a contract to provide a banquet for a
convention of florists. He wanted to decorate the hall with flowers. He sent a letter to Smith
describing what he wanted and asked for a price quote. Smith responded by a letter dated
January 5, offering to supply the flowers for $5000. Jones received the letter on January 10 and
responded on the same date saying his price was too high and that he would pay $4500. While
that letter was in the mail but before it had been received by Smith, Jones learned that the
convention was on artificial flowers and the organizers wanted no real flowers on display. On
January 13, Jones quickly sent another letter telling Smith to ignore the letter of January 10 and
that he wouldn’t need any flowers at this time. This letter of the 13th was received on the 18th.
Smith had received the letter of January 10 on January 15 and sent his letter of acceptance on the
same day, and he had placed orders to his suppliers for the flowers. The letter of acceptance was
received by Jones on January 20. Which of the following is true?

1. A) If the postbox rule applies, there is no contract because the letter of revocation was
mailed before the letter of acceptance.

2. B) Jones’s offer in the letter of January 10 lapsed before acceptance.

3. C) If the postbox rule does not apply, there is a binding contract.

4. D) If the postbox rule does apply, there is a binding contract.

5. E) The postbox rule is irrelevant; there is no contract simply because Jones can’t use the
fresh flowers.

Answer: E

Diff: 3 Type: MC Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Applied

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

40) Which of the following statements regarding online transactions is false?

1. A) Conducting transactions online negates the need to satisfy the normal requirements of
a contract.

2. B) It is unlikely that the courts will extend the postbox rule to apply to online
transactions.

3. C) Legislation has been passed in some jurisdictions to make electronic documents

equivalent to written ones.

4. D) Reasonableness of terms can affect the enforceability of electronic contracts.

5. E) Clicking an “I Accept” button may constitute valid acceptance of the terms of an

agreement.

Answer: A

Diff: 1 Type: MC Page Ref: 201

Topic: Ch. 6 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

41) Which of the following is true with respect to the application of contract law to the Internet?

1. A) Even if the basic requirements of acceptance are met, an offer accepted by e-mail has
been deemed legally ineffective.

2. B) Clicking an “I Accept” button is used by some online vendors to make an Internet user
believe that the terms presented are binding, however “click-wrap” cases have confirmed
that this action has no legal effect.

3. C) Online communications are governed by the postbox rule.

4. D) Many jurisdictions have passed legislation making electronic communications the

equivalent of written documents for legal purposes.

5. E) Internet contracts are governed by the federal Uniform Electronic Commerce Act, in
effect throughout Canada.

Answer: D

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

42) Which of the following is true with respect to the application of contract law to the Internet?

1. A) If the basic requirements of acceptance are not met, an offer accepted by e-mail is
binding on both parties.

2. B) Clicking an “I Accept” button on a website is considered the equivalent of achieving

the consensus element of a binding contract.

3. C) Online communications are governed by the postbox rule.

4. D) No jurisdictions have passed any legislation making electronic communications the

equivalent of written documents for legal purposes.

5. E) Internet contracts are governed by the federal Uniform Electronic Commerce Act, in
effect throughout Canada.

Answer: B

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

43) Deceitful practices and fraud are ongoing concerns for those transacting business on the
Internet. Pat has recently been the victim of such a scam. He gets into a heated discussion with
his friend over the application of current consumer protection laws to online transactions. Which
of the following statements is correct?

1. A) While case law applies to online activities, statute law—such as sale of goods
legislation—does not apply to such transactions.

2. B) Although new legislation may be enacted in the future, general consumer protection
legislation has yet to be extended to online transactions in any Canadian jurisdictions.
 3. C) Provinces are adopting federal Uniform Electronic Commerce Act

4. D) Provincial consumer protection legislation has been ineffective in protecting

consumers with respect to Internet transactions.

5. E) Consumer protection law in respect of online transactions is governed by the

federal Universal Internet Transactions Act (UITA).

Answer: C

Diff: 3 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

44) Which of the following statements regarding online transactions is true?

1. A) Conducting transactions online negates the need to satisfy the normal requirements of
a contract.

2. B) The postbox rule applies to both non-instantaneous and instantaneous methods of

communication.

3. C) Common law has established the equivalency of electronic documents to written ones.

4. D) Electronic signatures are not effective in determining the capacity of the parties
entering into a contract.

5. E) Clicking an “I Accept” button may constitute valid acceptance of the terms of an

agreement.

Answer: E

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

45) The objective, in Canada, of the Uniform Electronic Commerce Act (UECA) is primarily

1. A) to define what constitutes a violation of privacy.

2. B) to restrict Internet gambling.

3. C) to make electronic documents and signatures as binding on parties as written ones.

4. D) to provide a series of remedies for Internet commerce retail abuses, primarily from
“offshore” enterprises.

5. E) to restrict Internet pornography.

Answer: C

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

46) Electronic commerce (ecommerce) legislation specifies

1. A) the laws regulating the Internet and Internet transactions.

2. B) the digital communication between government agencies.

3. C) the laws of what jurisdiction should apply to Internet transactions.

4. D) the time and place of the formation of electronic contracts.

5. E) the laws to restrict Internet gambling, pornography, and defamatory material.

Answer: D

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

47) Which of the following statements correctly illustrates a legal signature for online
commercial transactions?

1. A) Clicking an “I Reject” dialogue box.

2. B) Signing your name at the bottom of a standard form, and then not mailing it to the
business.

3. C) Opening an online shopping basket and adding several items to the basket.

4. D) Attaching an electronic signature to an electronic document.

5. E) Attaching a signature on your computer screen.

Answer: D

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

48) Joe sends Sanjay an offer via email from his Toronto office. The offer contains a provision
indicating the offer expires at 5:00 p.m. Toronto time. Sanjay, who lives in Vancouver, replies
accepting Joe’s offer at 4:00 p.m. Vancouver time. Joe received Sanjay’s email acceptance at
9:00 a.m. the next day. Which of the following statements is true? (Note the three hour time
difference between Toronto and Vancouver)

1. A) Joe and Sanjay had a binding contract, since Sanjay had accepted by 4:00 p.m.
Vancouver time.

2. B) Once Sanjay had sent his email, a binding contract had been formed, regardless of
what time Joe had received the email.

3. C) Joe’s offer had expired.

4. D) The contract became binding once Joe had made the offer.

5. E) A binding contract was formed once Joe opened Sanjay’s email acceptance the next
day.

Answer: C
Diff: 3 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

49) Which of the following statements would be true with regards to the Uniform Electronic
Commerce Act (UECA)?

1. A) A password or encryption does not authenticate an electronic document.

2. B) The use of electronic documents is not allowed with regards to online purchase of
goods.

3. C) The UECA changes the law with respect to the requirement of written documents and
signatures.

4. D) A signature equivalent may be a password or some other form of encryption.

5. E) An offer will be accepted and a contract formed only when the offer is sent and
accepted by snail mail, and not email.

Answer: D

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

50) With respect to the online contracts, which of the following statements is true?

1. A) The Uniform Electronic Commerce Act (UECA) clearly states that an invitation to
treat in all cases qualifies as an offer.

2. B) The Uniform Electronic Commerce Act (UECA) clearly states that an offer may be
made and accepted electronically.

3. C) The Uniform Electronic Commerce Act (UECA) clearly states that a contract is formed
 when the communication of an acceptance through instantaneous communication is sent.

4. D) Online contracts do not require all the essential elements of a contract such as
consensus, capacity, and legality.

5. E) The legal status of online contracts is determined by common law.

Answer: B

Diff: 2 Type: MC Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

51) Indicate the correct statement about consideration.

1. A) In a bilateral contract, the exchange of promises does not provide consideration for
both parties.

2. B) The common law holds that consideration must be adequate to insure that contracts
are fair bargains.

3. C) Consideration is “the price for which the promise (or the act) of the other is bought.”

4. D) An altered course of action, e.g., forbearance, is not good consideration.

5. E) In a unilateral contract, the performance of the promisee provides no consideration to

the promisor.

Answer: C

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

52) The postbox rule applies when which of the following means of communication is used?

1. A) Telephone
 2. B) Fax

3. C) Electronic mail

4. D) Mail

5. E) Messenger

Answer: D

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

53) X contracted with Z. X promised to pay $500 and Z promised to build a cabinet to hold X’s
fine china. The essential terms included the type and quality of the wood, the dimensions, and the
date of completion-February 13. The work went more easily than expected and Z said to X, “If
you pay me another $85, I will have this finished and be out of here by February 10.” X agreed.
If the cabinet was done to specifications by the 10th, but X refused to pay anything, Z would be
entitled in law to

1. A) nothing.

2. B) $500.

3. C) $585.

4. D) only $85.

5. E) a “fair price.”

Answer: C

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”
Bloom’s Taxonomy: Knowledge

54) Joe contracted with Sam, agreeing to pay Sam $400 if Sam would build him a table. The
essential terms included the type and quality of the wood, the dimensions, and the date of
completion-February 14. The work went more easily than expected and Sam said to Joe, “If you
pay me another $50, I will have this finished and be out of here by February 8.” Joe agreed. If
the table were done to specifications by the 8th, but Joe refused to pay anything, Sam would be
entitled in law to

1. A) nothing.

2. B) $400.

3. C) $450.

4. D) only $50.

5. E) $400 plus damages.

Answer: C

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

55) With regard only to the requirement of consideration, which one of the following would be a
binding contract?

1. A) A promise by Tom to drive a co-worker to Timmins, Ontario

2. B) A promise to give $10 in exchange for a promise to give a can of pop

3. C) A promise by Mr. Brent to pay $25 to John, who found and returned Brent’s wallet,
which Brent didn’t even know he had lost until John delivered it

4. D) An agreement between a contractor and a homeowner that the owner would pay an
additional $1000 if the contractor would complete the existing contract according to all
its terms

5. E) A written promise, but not under seal, to give John $50 on Saturday
Answer: B

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

56) In Gilbert Steel Ltd. v. University Construction Ltd., what did the Court find on the issue of
consideration?

1. A) Because the Court will not look into the adequacy of consideration, a one-sided
agreement is enforceable.

2. B) A one-sided agreement is, in law, a form of unilateral contract.

3. C) A one-sided agreement is not enforceable.

4. D) A one-sided agreement is only binding if its essential terms are reduced to writing.

5. E) Because commercial parties dealing at arm’s length were involved, a one-sided

agreement is valid.

Answer: C

Diff: 2 Type: MC Page Ref: 205

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

57) If a business promises to pay all of its employees $500 to quit smoking, such an arrangement
is a(n)

1. A) valid, binding contract.

 2. B) obligation.

3. C) commitment.

4. D) gratuitous promise.

5. E) quantum meruit.

Answer: A

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

58) Which of the following is correct with respect to consideration?

1. A) It must be specific.

2. B) It must be reasonable.

3. C) It is binding even though a duty to so act already exists.

4. D) It is to compensate for an act that happened in the past.

5. E) At least some money must be involved.

Answer: A

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

59) Read the following and indicate which agreement would not be a binding contract because of
a problem with the requirement of consideration. Assume all the other requirements for a binding
contract have been met.
 1. A) Mr. Kooner sold a farm valued at $190,000 to his nephew for only $50,000.

2. B) Peter agreed to pay Ace Computers Ltd. $50 above the contract price if the company
would have his new computer ready ten days earlier than the date specified in the original
contract.

3. C) John, late for work, found his car battery was dead. He flagged down a passing truck
and told the driver he would pay him $8 if he would agree to do him the favour of jump-
starting the car. The driver of the truck agreed.

4. D) Len agreed to sell and Karen agreed to buy four of Len’s records for “some money.”

5. E) Mary promised in writing and under seal to give Planned Parenthood a donation of
$100.

Answer: D

Diff: 3 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

60) In contract cases, the court generally

1. A) does not look to see if the bargain is fair.

2. B) attempts to punish the party in breach of the contract by imposing a sentence.

3. C) will rewrite an agreement for the parties if their existing agreement did not include all
the essential terms.

4. D) will enforce all promises.

5. E) will require the recipient of a service to pay a reasonable price where it is determined
that the agreed-upon price was too low.

Answer: A

Diff: 1 Type: MC Page Ref: 204

Topic: Ch. 6 – Adequacy of Consideration

Skill: Recall
Objective: Chapter 6: 7. Discuss the irrelevance of the adequacy of consideration.

Bloom’s Taxonomy: Knowledge

61) Which of the following is false with regard to contract law?

1. A) An exchange of promises can be consideration adequate to form a contract.

2. B) To form a contract, there must be an offer that is accepted unconditionally.

3. C) A contract for a $50,000 boat does not have to be evidenced in writing to be a valid
contract.

4. D) A contract is unenforceable if it is required to be evidenced in writing under the

Statute of Frauds and is not.

5. E) The parties to a contract can always go to court and have the court declare a contract
void if the consideration is not adequate (i.e. fair), even if there is no evidence of fraud,
duress, undue influence, or mental incapacity.

Answer: E

Diff: 2 Type: MC Page Ref: 204

Topic: Ch. 6 – Adequacy of Consideration

Skill: Recall

Objective: Chapter 6: 7. Discuss the irrelevance of the adequacy of consideration.

Bloom’s Taxonomy: Knowledge

62) Which of the following is not correct with respect to the adequacy of consideration?

1. A) Must be of some value and love and affection are not enough

2. B) Need not be present if the agreement is under seal

3. C) Need not be fair, unless there are extenuating circumstances (i.e., insanity or fraud)

4. D) Need not be legal if both parties clearly consent

5. E) Existing duty: a change in the contract requires new consideration

Answer: D

Diff: 2 Type: MC Page Ref: 204

Topic: Ch. 6 – Adequacy of Consideration

Skill: Recall

Objective: Chapter 6: 7. Discuss the irrelevance of the adequacy of consideration.

Bloom’s Taxonomy: Knowledge

63) XYZ company, a distributor of auto parts, is in debt to the bank for $35,000, due on February
25, 2017. The company is having difficulties and wants to negotiate with the bank to pay only
$33,000 as payment in full. With these facts in mind, which of the following statements is false?

1. A) If the bank agrees to accept the $33,000 as payment in full if paid early, by February
15, and the company does as requested, the bank could not later sue for the remainder
because the company gave good consideration for the bank’s forgiveness of the debt.

2. B) At common law, if the bank accepted the $33,000 as payment in full, even absent
additional consideration, it could not later sue for the remainder because such promises
are always binding.

3. C) If the company obtained from the bank the bank’s promise to forgive the $2000 under
seal, the bank could not later sue for the remainder.

4. D) In some jurisdictions, a statutory provision provides that the creditor who accepts less
than full payment as payment in full cannot later sue for the remainder.

5. E) So long as they don’t take the money, the bank can still sue for the entire amount.

Answer: B

Diff: 3 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

64) Sam owed Joe $6000 due January 12, 2017. On January 1st, Joe said he’d take $5000 in full
satisfaction of the debt if Sam paid him $5000 on January 5th instead. Sam paid on January 5th.
A week later, Joe wants to sue Sam for the $1000 he (Joe) was legally owed. Which of the
following is true?

1. A) Joe would win because his forgiveness of the loan was gratuitous, (i.e., unsupported
by consideration).

2. B) Joe would win because they cannot change the original deal.
 3. C) Joe would lose because of the doctrine of quantum meruit.

4. D) Joe would lose because of the rule that past consideration is no consideration.

5. E) Joe would lose because early repayment constituted consideration to support the new
arrangement.

Answer: E

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

65) Which of the following could not be used as consideration?

1. A) A kilogram of green beans

2. B) 50 cents

3. C) A promise to deliver three tons of steel

4. D) A promise to give up a legal right

5. E) Work that was done in the past

Answer: E

Diff: 1 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

66) If you owe Mr. Storr $900 for goods received and Mr. Storr agrees to take $800 in full
satisfaction of the debt, which of the following is true?
 1. A) At common law, such a one-sided promise is always binding and Mr. Storr could sue
for the remaining $100.

2. B) Many jurisdictions have passed legislation preventing Mr. Storr from suing you for the
difference if he actually takes the $800.

3. C) The issue of consideration is irrelevant when dealing with satisfaction of a debt.

4. D) Even if you take the $800 to him, Mr. Storr can later sue you for the $100 on the
principle of quantum meruit.

5. E) Under these circumstances, you only have to pay a reasonable price for the goods.

Answer: B

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

67) George contracted with Bob to have a racing bike modified for him and delivered on
February 20, for a race on February 22. A price of $100 for the modification was agreed on. On
February 10, George became nervous about the bike being finished on time and went to see Bob.
Bob said that he was very busy, but if he really wanted to be sure that it would be finished on
time, George would have to pay him an extra $25 so he could pay his employees overtime.
George agreed and Bob completed the modifications as requested, on time. How much does
George legally owe?

1. A) Only $100 because Bob had an existing duty to modify the bike and the price was
settled.

2. B) $125 because Bob gave consideration for George’s promise to pay the additional $25.

3. C) $25 because past consideration is no consideration.

4. D) A reasonable amount only.

5. E) $100 plus whatever it cost for the overtime.

Answer: A

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

68) You owe Mr. Store $900 for goods received and want him to take $800 in full satisfaction of
the debt. Which of the following is false?

1. A) If he agrees with you and does take the $800, even if it is paid early at his request, he
can still later sue you for the $100 forgiven. His promise not to demand the $100 from
you was a gratuitous promise and therefore not binding.

2. B) If he actually takes the $800 in full satisfaction of the debt, statute law in many
jurisdictions prohibits him from suing you for the $100.

3. C) If you pay the $800 before the actual due date in consideration for his taking this as
full payment, he cannot sue for the other $100.

4. D) If Mr. Store agreed to take the $800 as full payment in exchange for your promise to
sweep the floor of his store, he cannot sue for the $100.

5. E) If Mr. Store agreed to take the $800 as full payment, but before taking it changed his
mind, he would be entitled to the entire $900.

Answer: A

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

69) Anmool verbally agreed to build a deck for Nikki for $1000 by the 15th of September, in
time for a lavish backyard barbecue she was planning. On September 13th, Nikki became
concerned at Anmool’s lack of progress. Anmool told Nikki he would complete the deck on time,
for an additional $200. Nikki agreed and Anmool completed the deck on time. Which of the
following is correct?

1. A) Nikki owes Anmool $1000 and there is no binding obligation with respect to the
additional $200 because Anmool had an existing duty to complete the deck on time.

2. B) Nikki owes Anmool $1200, because that is what she agreed to, and such contracts are
 binding.

3. C) Problems of consideration can be raised only in the commercial context, not when the
parties involved are both individuals.

4. D) Nikki does not owe Anmool anything because his lack of professionalism vitiated the
contract.

5. E) No legal obligations arise because the agreement is not in writing.

Answer: A

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.

Bloom’s Taxonomy: Knowledge

70) “Quantum meruit” means

1. A) “a shield but not a sword.”

2. B) “a meeting of the minds.”

3. C) “as much as deserved.”

4. D) “the ultimate freedom to contract.”

5. E) “to stand on decision.”

Answer: C

Diff: 2 Type: MC Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 9. Present some examples of valid consideration.

Bloom’s Taxonomy: Knowledge

71) Which of the following shows accurate use of the doctrine of promissory (equitable)
estoppel?

1. A) Ralph told Mary that he would give her his old boat. If he doesn’t, Mary could use the
doctrine to force him to do so.

2. B) If Nancy accidentally ran her car over her neighbour’s bushes, she could use the
doctrine as a defence.

3. C) This doctrine can be used by a plaintiff to enforce a written promise signed and sealed
(i.e., a seal has been affixed next to the signature of the promisor).

4. D) A defendant can use this doctrine as a defence against a plaintiff insisting on his full
legal right when he had promised to forgive the defendant some of his obligation.

5. E) If Ho requests services from Jones and there is no mention of price, if Ho doesn’t pay
Jones, this doctrine can be used to force Ho to pay a reasonable amount.

Answer: D

Diff: 3 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Recall

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

72) Which of the following statements is correct with respect to the law of consideration?

1. A) The amount of consideration to be paid in a contract must be reasonable (that is, fair)
from the point of view of each party.

2. B) Without consideration or a seal, there can be no contract.

3. C) Consideration must have some value but need not be specific.

4. D) For a contract to be binding, something valuable must have changed hands. This
consideration may have been paid before the agreement (past consideration) or at the
time of the agreement (present consideration), but future consideration is no
consideration.

5. E) Consideration need not be specific, just so both parties get something out of the deal.

Answer: B

Diff: 1 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Recall

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

73) Although the contract called for the delivery of three manuals, the writer had put so much
effort into the first two that the buyer agreed to pay the whole contract price, $3000, for the two
instead of the three manuals. Which of the following stops the buyer from later suing the writer
for breach of contract and demanding the completion of the third manual?

1. A) Doctrine of quantum meruit

2. B) No consideration given by the writer

3. C) Promissory (equitable) estoppel

4. D) He only has to pay a reasonable price for the work done.

5. E) He doesn’t have to pay anything because the job was not completed, and so he can
even get back what he paid.

Answer: C

Diff: 2 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Applied

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

74) Indicate which of the following statements is correct about the effect of promissory estoppel
on a promisor.

1. A) Promissory estoppel has no effect on a promisor because it only relates to statements

of fact, not promises.

2. B) Promissory estoppel must be distinguished from equitable estoppel.

3. C) Promissory estoppel can be used as a defence only against a promisor who reneges on
 his promise.

4. D) Promissory estoppel is known as injurious reliance in the United States and has the
same effect in both American and Canadian law.

5. E) When a victim relies on the promise and suffers injury, he can sue the promisor for
compensation even where no consideration has been given in return for that promise.

Answer: C

Diff: 2 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Recall

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

75) Which of the following shows accurate use of the doctrine of promissory (equitable)
estoppel?

1. A) George told Hans that he would give him his printer. If he doesn’t, Hans could use the
doctrine to force him to do so.

2. B) George wants to force Elaine to honour her promise to pay him $2. After he paid for a
video they watched, she was so moved by the movie she said she would pay half the cost.

3. C) This doctrine can be used by a plaintiff to endorse a written promise signed and sealed
(i.e., a seal has been affixed next to the signature of the promisor).

4. D) Lee, a defendant, can use this doctrine as a defence against a plaintiff insisting on his
full legal right when he had promised to forgive Lee some of Lee’s legal obligation and
Lee relied on that promise.

5. E) If Lam requests services from Jones and there is no mention of price, if Lam doesn’t
pay Jones, this doctrine can be used to force Lam to pay a reasonable amount.

Answer: D

Diff: 3 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Applied
Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

76) Which of the following shows accurate use of the doctrine of promissory (equitable)
estoppel?

1. A) Val told Jim that she would give him her printer. If she doesn’t, Jim could use the
doctrine to force her to do so.

2. B) George rented a video and watched it with Elaine. She thought the movie was great
and said she’d pay half the rental price. George could use the doctrine to force her to pay
as she promised.

3. C) This doctrine can be used by a plaintiff to enforce a written promise that has been
signed and sealed (i.e., a seal has been affixed next to the signature of the promisor).

4. D) Bruce, a defendant, can use this doctrine as a defence against a plaintiff insisting on
his full legal right when he had promised to forgive Bruce some of Bruce’s legal
obligation and Bruce relied on that promise.

5. E) Lam contracted to supply Jones with steel. Before the steel was delivered, Lam’s
supplier increased the price. Lam could use the doctrine to force Jones to pay more to
Lam.

Answer: D

Diff: 3 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Applied

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

77) Which of the following statements is correct with respect to promissory estoppel (equitable
estoppel)?

1. A) Where Barbra relies on Raylene’s promise and suffers a loss, Barbra can sue Raylene
for compensation even though the promise was gratuitous.

2. B) Where Hank and Jim have a contract and Hank releases Jim from part of Jim’s
obligation, Jim can use that release, even though it was given without consideration, as a
 defence if Hank sues for breach of contract.

3. C) Promissory estoppel means that Donna cannot revoke her offer where she has
promised to hold it open for a specific period of time.

4. D) Where Able requests services from Cain, the doctrine of promissory estoppel requires
a reasonable price to be paid even where no specific amount was agreed.

5. E) Promissory estoppel refers to the principle that, where a document is in writing and
under seal, it is enforceable even where there is no consideration.

Answer: B

Diff: 2 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Applied

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

78) As property manager of a 15-unit apartment block, you receive rent payments on the first of
every month from each tenant. Mrs. Lone, in apartment 105, whose rent is $500 per month, lost
her job and was in dire financial difficulties. You agreed to take only $400 per month. For the
last ten months, she has paid only $400 a month, but you have learned that for 4 months she has
had a new and even better-paying job. You are angry that she failed to tell you this and you want
to sue her for the entire amount of back rent ($1000). Which of the following arguments could
she use most effectively against you?

1. A) Promissory estoppel

2. B) Mistake

3. C) Undue influence

4. D) Breach of contract

5. E) Duress

Answer: A

Diff: 3 Type: MC Page Ref: 209

Topic: Ch. 6 – Promissory Estoppel

Skill: Applied

Objective: Chapter 6: 10. Outline two exceptions to the general rule that consideration is
required if a promise is to be enforceable.

Bloom’s Taxonomy: Knowledge

79) A contract is a single promise, made by one person to another, enforceable in court.

Answer: FALSE

Diff: 1 Type: TF Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

80) All of the essential terms of a contract must be clearly specified.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

81) Even though a person promises to hold an offer open for a specified period of time, the
offeror can revoke that offer before that time if he feels like it.

Answer: TRUE

Diff: 3 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

82) A formal contract is one that is signed and sealed.

Answer: TRUE

Diff: 1 Type: TF Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 2. Explain consensus and the significance of a “meeting of the minds.”

Bloom’s Taxonomy: Knowledge

83) Only the person or group to whom an offer is made can accept it.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

84) An invitation to treat is an offer published in the newspaper.

Answer: FALSE

Diff: 1 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

85) Once a person has promised to hold an offer open for a specified period of time, he cannot
change his mind.

Answer: FALSE

Diff: 1 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

86) A letter of revocation takes effect when received by the offeree.

Answer: TRUE

Diff: 3 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

87) An ad in the newspaper providing for a reward for a lost dog is an example of an invitation to
treat.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

88) If a person offers to hold his offer open for a period of time, he can still revoke it before that
time if he changes his mind.
Answer: TRUE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

89) When you pay for an option, this prevents a person from revoking his offer before the
expiration of the specified time.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

90) A revocation of an offer is effective only when it has been communicated to the offeree.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

91) An offer will end when the subject matter of the offer is sold to someone else.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

92) An acceptance of an offer applies when and where it is received except when it is
communicated by telephone.

Answer: FALSE

Diff: 1 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

93) Generally, acceptance must be communicated to the offeror to be effective unless there has
been a history of similar relations between the parties.

Answer: TRUE

Diff: 3 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

94) Only the essential terms of a contract must be set out in the offer.

Answer: TRUE

Diff: 1 Type: TF Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Recall

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

95) The postbox rule makes it clear that, when people choose to communicate by mail, they take
the risk of delay or loss, and the acceptance as a result will be binding only when or if received.

Answer: FALSE

Diff: 3 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

96) For the postbox rule to apply, the offer must be made by mail.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

97) When the postbox rule applies, the place of mailing of the acceptance may determine the
place of the contract.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Recall
Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

98) Traditional contract rules only apply to written contracts but not Internet transactions.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

99) Canada’s Uniform Electronic Commerce Act creates rights and obligations with respect to
electronic commerce transactions within Canada.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Recall

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

100) A signature equivalent for electronic documents might be a password or some other form of
encryption.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied
Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

101) Whether a contract or another form of Internet communication, UECA provisions determine
that a message is sent as soon as it is committed to the system, and it is received as soon as it
arrives on the recipient’s computer, even if it is never read.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

102) With regards to Internet transactions, an offer will be accepted and a contract formed as
soon as a message is sent, and it is received as soon as it arrives on the recipient’s computer, even
if it is never read.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

103) Hitting the “I Accept” button on a website is equivalent to an acceptance of the seller’s
offer.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

104) Electronic signatures provide a digital certificate that authenticates the identity of a party to
the contract.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 201

Topic: Ch. 5 – Electronic Transactions

Skill: Applied

Objective: Chapter 6: 5. Examine electronic transactions and the formation of contracts.

Bloom’s Taxonomy: Knowledge

105) If the postbox rule applies, a letter of revocation takes effect at the time of mailing.

Answer: FALSE

Diff: 3 Type: TF Page Ref: 196

Topic: Ch. 6 – Acceptance

Skill: Applied

Objective: Chapter 6: 4. Describe an effective acceptance.

Bloom’s Taxonomy: Knowledge

106) For the requirement of consideration to be satisfied, at least one of the parties must have
performed what they promised.

Answer: FALSE

Diff: 3 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Applied

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

107) An employer’s promise to pay a bonus in recognition of good work already performed by
the employee would be binding.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

108) When a person has agreed to paint a house and, before the job is finished and payment is
due, the other party refuses to allow completion, the court will use the quantum meruit principle
to require the breaching party to pay a reasonable price for the benefit he has received.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

109) The promise to make a charitable donation is not enforceable because it is a one-sided
promise, even if the charity makes a commitment in return—such as a promise to name a
building after the donor, or to use the money in a certain way—it has made a commitment.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”
Bloom’s Taxonomy: Knowledge

110) A contract is binding if the consideration involved is a commitment not to do something, as

opposed to a promise to do something.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

111) If a person agrees to sell someone a brand new Cadillac for $100, this becomes a valid,
binding contract.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

112) Many jurisdictions have passed legislation providing that when a creditor has agreed to take
less in full satisfaction of a debt, and has actually received the lesser sum, the creditor is not
bound by the agreement and can sue for the difference.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

113) If an agreement is one-sided, and only one of the parties is getting something from the deal,
it is called a gratuitous promise and the courts will not enforce it.

Answer: TRUE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

114) Consideration is restricted to the exchange of money.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

115) Quantum meruit is a benefit or a detriment flowing between the parties to an agreement as
the result of the striking of a bargain.

Answer: FALSE

Diff: 1 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

116) When the parties agree to pay the “market value” of an item, or when some other objective
method or formula for pricing a product at some time in the future is used, the consideration is
calculable and is thus sufficiently specific to be binding.

Answer: FALSE

Diff: 2 Type: TF Page Ref: 203

Topic: Ch. 6 – Consideration

Skill: Recall

Objective: Chapter 6: 6. Define “consideration” and the significance of “the price one is willing
to pay.”

Bloom’s Taxonomy: Knowledge

117) Why is an understanding of contract law important for a business person?

Answer: Most commercial transactions have contracts at their base.

Diff: 1 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

118) Distinguish between a void and a voidable contract.

Answer: A void contract never was a contract and the agreement is simply of no effect. A
voidable contract is a binding contractual agreement, but one of the parties has the right to get
out of it. Until that right is exercised, it is binding. This can have a significant effect on the
position of a third party.

Diff: 1 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

119) Distinguish between a bilateral and a unilateral contract.

Answer: A unilateral contract is one where the acceptance is made by the performance of the
consideration requested in the offer. A bilateral contract involves a separate offer and acceptance,
independent of the actual performance of the agreement.

Diff: 2 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

120) Indicate how consumers are protected in standard form contract situations.

Answer: These contractual terms are strictly interpreted and must be extremely clear where they
bestow a benefit on the merchant at the expense of the consumer. Also, legislation has been
passed, such as the Sale of Goods Act and various forms of consumer protection legislation,
protecting the position of the consumer.

Diff: 2 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

121) List the five ingredients necessary to form a contract.

Answer: Consensus (including offer and acceptance), consideration, capacity, legality and
intention.
Diff: 1 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 1. Discuss the fundamentals of the contractual relationship.

Bloom’s Taxonomy: Knowledge

122) Distinguish between a formal and a simple contract.

Answer: A formal contract is under seal. Simple contracts are either written and not under seal
or oral agreements.

Diff: 1 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 2. Explain consensus and the significance of a “meeting of the minds.”

Bloom’s Taxonomy: Knowledge

123) “For a contract to be binding, both parties must have a clear understanding of all the terms
of that agreement.” Discuss the accuracy of that statement.

Answer: It’s only necessary that the terms of the agreement are clear and unambiguous. One
party’s failure to read or understand the clear provisions of a contract will not affect the validity
of that agreement.

Diff: 2 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Recall

Objective: Chapter 6: 2. Explain consensus and the significance of a “meeting of the minds.”

Bloom’s Taxonomy: Knowledge

124) Mo drove his car to a shopping mall and parked it there to attend a movie. The place where
he parked was designated as a one-hour parking space on a sign at the entrance where Mo drove
in. There were many similar signs around the shopping mall stating that people were parking
their cars at their own risk. This particular sign said that the time limit for parking there was one
hour, and as a term of the contract anyone parking over this one-hour limit would have to pay a
fee of $60. When Mo got out of the movie, he found a ticket on his car (a demand for payment of
the $60). He refused to pay and was sued. What would be Mo’s defence in these circumstances?

Answer: Mo would either claim that there was no contract or that, if there was, these terms did
not bind him, as they were not properly brought to his attention. The sign at the entrance to that
area of the parking lot was too similar to the other signs, and he had no reason to suppose that
what was set out on it was different. The owners should have known that he’d be driving past
and couldn’t take the time to stop and look. Therefore, he’s not bound by the terms and doesn’t
have to pay the $60.

Diff: 3 Type: ES Page Ref: 185

Topic: Ch. 6 – Elements of a Contract

Skill: Applied

Objective: Chapter 6: 2. Explain consensus and the significance of a “meeting of the minds.”

Bloom’s Taxonomy: Knowledge

125) Joe offered to sell Harry his car and agreed to hold the offer open for one week, expiring
Saturday at noon. The Sunday after the offer was said to have expired, Harry phoned Joe to tell
him that he decided to accept his offer and purchase his car. Joe said at that time that he had
decided to keep the car and was just about to phone Harry to revoke the offer. Harry said, “Too
bad,” and demanded performance of the contract. Explain the legal responsibilities of the parties.

Answer: There is no contract. The offer expired at the end of a specific time (Saturday at noon)
before there was an attempt to accept it.

Diff: 2 Type: ES Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

126) Joe offered to sell Harry his car for a specific price and Harry indicated that he needed some
time to think about it. Two days later, Joe sold the car to a third party. That afternoon Harry
phoned Joe and told Joe that he had decided to accept the offer and that he’d buy the car. Joe told
him that it was too late; he had sold it to someone else. Harry said that it was offered to him first,
and he insisted that he go through with the contract. Explain the legal liability of the parties.
Answer: This is a binding contract, assuming that the offer had been accepted within a
reasonable time. The fact that the car was sold to someone else does not automatically revoke the
offer. Such a revocation by conduct must still be communicated to be effective.

Diff: 3 Type: ES Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

127) Joe offered to sell Harry his car for $500, but Harry said he needed some time to think
about it. A couple of days later, Harry phoned back saying that he’d give Joe $450 for the car. Joe
refused to take this. Then Harry said, “All right, I’ll accept your offer for $500.” Joe said that
he’d changed his mind and refused to go through with the deal. Harry sued. Explain Joe’s legal
liability.

Answer: In this case, when Harry said he’d give Joe $450 it was a counter-offer, which wiped
out the original offer. It was too late for Harry to accept the original $500 offer, since it had
lapsed. At most, his supposed “acceptance” was another offer to purchase for $500, which was
not accepted by Joe.

Diff: 2 Type: ES Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge

128) Distinguish between an offer and an invitation to treat.

Answer: An invitation to treat is an advertisement or other form of inducement to encourage

someone to come and deal or negotiate and has no legal significance. An offer is a clear
indication by one of the parties that they are willing to be bound by certain terms if the other
party accepts. The offer is the first stage of the creation of the contract, whereas the invitation to
treat is merely the communication process that takes place to bring the parties to the point where
one makes the offer.

Diff: 2 Type: ES Page Ref: 188

Topic: Ch. 6 – Offer

Skill: Applied

Objective: Chapter 6: 3. Describe a valid offer.

Bloom’s Taxonomy: Knowledge