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Yates ch06 - test bank
Business Law (The University of Western Ontario)
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Business Law in Canada, 11e (Yates)
Chapter 6 The Elements of a Contract: Consensus and Consideration
1) Which of the following is an ingredient necessary to form a contract?
A) Exemption clauses
B) Assignment
C) Capacity
D) Moral
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?
A) Shaw has a right to this share because the movie is about him.
B) The court will imply an agreement to this effect between the parties.
C) Shaw has no claim since there was no such agreement.
D) A public celebrity has the right to prevent this kind of exploitation if Berman refuses this
demand.
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
1
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3) Which of the following is not an example of a contract?
A) A written promise to give your husband a ring for Christmas
B) A verbal agreement to work for someone starting next week
C) A verbal agreement for the sale of a car where neither the money or the car has yet changed
hands
D) An agreement not to sue someone for negligence in exchange for their promise to pay you a
specified amount
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?
A) Joe agrees to paint Sam's house for $500.
B) Joe pays $50 for groceries at a grocery store.
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) 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?
A) Invitation to treat
B) Offer
C) Gratuitous promise
D) Bilateral contract
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
2
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6) Which one of the following is enforceable?
A) Mr. Ho promised to give his needy friend Mr. Jahn $100.
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.
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.
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.
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?
A) Gratuitous promise
B) When accepted by the club, a bilateral contract
C) When accepted by the club, a unilateral contract
D) Promissory estoppel
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?
A) Offer
B) Invitation to treat
C) Gratuitous promise
D) Bilateral contract
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
3
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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?
A) There is no contract because Lloyd's last offer was revoked.
B) There is no contract because Lloyd's last offer had been rejected by a counter-offer.
C) There is no contract because Lloyd's last offer had lapsed after a reasonable time.
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.
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?
A) Invitation to treat
B) Offer
C) Gratuitous promise
D) Bilateral contract
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
4
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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?
A) An inquiry by the offeree if he can do any better
B) The insanity of the offeror
C) A counter-offer by the offeree
D) Revocation of the offer by the offeror before the time specified (i.e., before "noon tomorrow")
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.)
A) If Sam accepts by phone within the time specified in the offer, the place of contract would be
Calgary.
B) If Jon goes ahead and hires Betsy from Edmonton at noon on February 3, it would be too late
for Sam to accept.
C) If Jon revokes his offer before Friday noon, Sam could sue him for breach of contract because
he promised to hold it open.
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.
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
5
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13) If you pay $1000 for a 90-day option on property offered to you at $200,000, which of the
following is true?
A) You have bought a 90-day period of time within which you may or may not accept the offer
of the land.
B) With the signing of the option agreement, you have entered into two contracts—a contract for
time and another for land.
C) You have agreed that you will accept the offer of land within the 90-day period.
D) If you do not exercise the option, you can get your $1000 back.
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?
A) A counter-offer ends an offer.
B) A newspaper notice offering to pay a reward for the return of lost kittens is an invitation to
treat.
C) An important criterion for determining the place of the contract is the place where the
acceptance is effective.
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.
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
6
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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?
A) The offer for the properties will expire before the end of the designated 60-day period if
another person offers a higher price.
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) By buying the option, Roberts has bought a period of time during which she must accept the
land offer.
D) If Roberts does not exercise the option, she will get her $4000 back because she didn't get
what she was bargaining for.
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?
A) An ad in a real-estate paper: "Best offer in Vancouver! 3-bedroom home in Kitsilano for only
$850,000!"
B) A sweater displayed in the window of a shop with the price tag attached and showing.
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."
D) The display of goods on the shelves of Costco.
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
7
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17) Which of the following would best satisfy the requirements for a good legal offer?
A) "I'll pay you at least $300 for your horse, Blackie, and even more if the horse is lucky."
B) "I'll drive you to Seattle on Saturday."
C) "The purchaser will pay $1000 for one of the seller's laser printers, the exact model to be
determined at a later date."
D) "I'll give you $1 for your new green bike."
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?
A) There is no contract because his offer to sell for $95 lapsed after a reasonable time.
B) There is a contract because at one time he offered to sell the lamp for $95 and she accepted it.
C) There is a contract because he wanted to sell the lamp for $95 and she was willing to pay that
much.
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.
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
8
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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?
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.
B) There is no contract because the last offer had lapsed.
C) There is no contract because Mary revoked the offer before Mr. Jones attempted to accept it.
D) There is a contract, because once a seller makes an offer she cannot change her mind; she is
bound to receive an acceptance.
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?
A) It confirms that contracts must be in writing to be valid.
B) It says that property can be sold to two different purchasers.
C) It clarifies that when an offeror says an offer will remain open, it must remain open.
D) It illustrates the nature of an offer.
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?
A) A call to tender is an offer to contract and a binding contract may arise when a bid is
submitted.
B) There is no requirement that bidders be treated fairly, as caveat emptor applies.
C) In a call for tenders, there can be no discretion.
D) A call for tenders is an invitation to treat which carries with it no legal status.
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
9
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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?
A) Pete could sue them for breach of contract because he was accepting the offer in the
newspaper.
B) The store had revoked the offer before he tried to accept.
C) The offer by the store had lapsed before he tried to accept.
D) The wording in the newspaper was merely an invitation to the public to do business, and no
contract was formed.
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?
A) If she had not responded, there would have been a contract because silence is the standard
form of acceptance.
B) Since she accepted the offer, there is a contract.
C) There is no contract because an acceptance must be unconditional, and her counteroffer has
not been accepted.
D) She is still free to reconsider and take the original offer even after the prospective employer
received her letter.
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
10
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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?
A) There is a contract between Sylvia and Val the moment Val dropped the letter of acceptance in
the mailbox.
B) There is a contract between Sylvia and Val the day the letter of acceptance is received by
Sylvia.
C) There is no contract between Sylvia and Val because Sylvia had revoked the offer.
D) There is no contract between Sylvia and Val because the offer has probably lapsed before the
acceptance was received by Sylvia.
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?
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.
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.
C) Mr. Goode will be bound to hold it open until that date if his promise to do so was written and
under seal.
D) Mr. Goode's promise to hold it open is sufficient; the offer is safe until May 1st, when it will
expire.
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
11
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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?
A) There is no contract because Laura's last offer was revoked.
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.
C) There is no contract because Laura's last offer had lapsed after a reasonable time.
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.
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?
A) Invitation to treat
B) Legal offer
C) Gratuitous promise
D) Bilateral contract
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
12
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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
A) the contract was in existence but could not be enforced.
B) the contract was in existence but one party has the right to repudiate the contract.
C) the contract was never in existence.
D) the contract is in existence but the court will not do anything to help the parties.
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?
A) Insanity of the offeror before the offer is accepted
B) Martin sells the property to another party before the expiration of the period stipulated and
before hearing from the offeree.
C) A counter-offer from the offeree
D) Death of offeror
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?
A) The offer is said to be open for 3 weeks and the 3 weeks expire.
B) The offeror dies.
C) The offeree makes a counter offer.
D) The offeror communicates a revocation of the offer.
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
13
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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.
A) If Franz sells to someone else, it is too late for Joe to accept the original offer.
B) Franz could revoke the offer any time before acceptance, even before 10:00 p.m. on
December 15.
C) To create a contract, an offer must be in writing.
D) A letter of acceptance is always effective when it is dropped in the mailbox.
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?
A) Sending a letter by mail was not a reasonable method of acceptance.
B) The offer lapsed before the store owner accepted.
C) The offer was revoked before the store owner accepted.
D) The letter of acceptance was effective when it was received, and by then Jed had sold the
guitar, so there was no contract.
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
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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?
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) Sending an acceptance by mail was not a reasonable method of acceptance in this situation.
D) The letter of acceptance was effective when it was received, and by then Carlos had sold the
car, so there was no contract.
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.?
A) It abolished the postbox rule in Canada.
B) It determined that the postbox rule should be extended to letters of revocation as well as
letters of acceptance.
C) It confirmed that acceptance by post is always appropriate.
D) It determined that consideration is unnecessary in cases where consensus has been achieved
in writing.
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
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35) What did the Court decide in Entores Ltd. v. Miles Far East Corp.?
A) Because the postbox rule is archaic, it should be abolished in its entirety.
B) Because mail is the most common form of communication, the postbox rule does not need to
be extended to telegrams.
C) Because of the postbox rule, there is no need to specify a method of acceptance in contractual
negotiations.
D) Because fax machines were becoming more popular, the Court created a new rule known as
the fax rule exception.
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?
A) At the time that it is posted
B) At the time that it is received, if before acceptance
C) At any time before actual performance of the contract has begun
D) At any time before a letter of acceptance is received by the offeror
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
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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?
A) If using the mail was unreasonable, the acceptance could not be effective until it was
received.
B) If using the mail was unreasonable, the acceptance was effective when it was mailed.
C) The place of formation of the contract, if there was one, was Burnaby if the use of the mails
was unreasonable.
D) The place of formation of the contract, if there was one, was Toronto if the use of the mails
was reasonable.
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?
A) For the postbox rule to apply, the offer must be made by mail.
B) If the postbox rule applies, an acceptance must be communicated and heard by the offeree
before it is effective.
C) If the postbox rule applies, the acceptance is effective at the time of mailing.
D) If the postbox rule applies, the only way for an acceptance to be effective is if it is sent by
mail.
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
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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?
A) If the postbox rule applies, there is no contract because the letter of revocation was mailed
before the letter of acceptance.
B) Jones's offer in the letter of January 10 lapsed before acceptance.
C) If the postbox rule does not apply, there is a binding contract.
D) If the postbox rule does apply, there is a binding contract.
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?
A) Conducting transactions online negates the need to satisfy the normal requirements of a
contract.
B) It is unlikely that the courts will extend the postbox rule to apply to online transactions.
C) Legislation has been passed in some jurisdictions to make electronic documents equivalent to
written ones.
D) Reasonableness of terms can affect the enforceability of electronic contracts.
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
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41) Which of the following is true with respect to the application of contract law to the Internet?
A) Even if the basic requirements of acceptance are met, an offer accepted by e-mail has been
deemed legally ineffective.
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.
C) Online communications are governed by the postbox rule.
D) Many jurisdictions have passed legislation making electronic communications the equivalent
of written documents for legal purposes.
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?
A) If the basic requirements of acceptance are not met, an offer accepted by e-mail is binding on
both parties.
B) Clicking an "I Accept" button on a website is considered the equivalent of achieving the
consensus element of a binding contract.
C) Online communications are governed by the postbox rule.
D) No jurisdictions have passed any legislation making electronic communications the
equivalent of written documents for legal purposes.
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
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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?
A) While case law applies to online activities, statute law—such as sale of goods legislation—
does not apply to such transactions.
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.
C) Provinces are adopting federal Uniform Electronic Commerce Act guidelines.
D) Provincial consumer protection legislation has been ineffective in protecting consumers with
respect to Internet transactions.
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?
A) Conducting transactions online negates the need to satisfy the normal requirements of a
contract.
B) The postbox rule applies to both non-instantaneous and instantaneous methods of
communication.
C) Common law has established the equivalency of electronic documents to written ones.
D) Electronic signatures are not effective in determining the capacity of the parties entering into
a contract.
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
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45) The objective, in Canada, of the Uniform Electronic Commerce Act (UECA) is primarily
A) to define what constitutes a violation of privacy.
B) to restrict Internet gambling.
C) to make electronic documents and signatures as binding on parties as written ones.
D) to provide a series of remedies for Internet commerce retail abuses, primarily from "offshore"
enterprises.
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
A) the laws regulating the Internet and Internet transactions.
B) the digital communication between government agencies.
C) the laws of what jurisdiction should apply to Internet transactions.
D) the time and place of the formation of electronic contracts.
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?
A) Clicking an "I Reject" dialogue box.
B) Signing your name at the bottom of a standard form, and then not mailing it to the business.
C) Opening an online shopping basket and adding several items to the basket.
D) Attaching an electronic signature to an electronic document.
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
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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)
A) Joe and Sanjay had a binding contract, since Sanjay had accepted by 4:00 p.m. Vancouver
time.
B) Once Sanjay had sent his email, a binding contract had been formed, regardless of what time
Joe had received the email.
C) Joe's offer had expired.
D) The contract became binding once Joe had made the offer.
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)?
A) A password or encryption does not authenticate an electronic document.
B) The use of electronic documents is not allowed with regards to online purchase of goods.
C) The UECA changes the law with respect to the requirement of written documents and
signatures.
D) A signature equivalent may be a password or some other form of encryption.
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
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50) With respect to the online contracts, which of the following statements is true?
A) The Uniform Electronic Commerce Act (UECA) clearly states that an invitation to treat in all
cases qualifies as an offer.
B) The Uniform Electronic Commerce Act (UECA) clearly states that an offer may be made and
accepted electronically.
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.
D) Online contracts do not require all the essential elements of a contract such as consensus,
capacity, and legality.
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.
A) In a bilateral contract, the exchange of promises does not provide consideration for both
parties.
B) The common law holds that consideration must be adequate to insure that contracts are fair
bargains.
C) Consideration is "the price for which the promise (or the act) of the other is bought."
D) An altered course of action, e.g., forbearance, is not good consideration.
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?
A) Telephone
B) Fax
C) Electronic mail
D) Mail
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
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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
A) nothing.
B) $500.
C) $585.
D) only $85.
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
A) nothing.
B) $400.
C) $450.
D) only $50.
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
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55) With regard only to the requirement of consideration, which one of the following would be a
binding contract?
A) A promise by Tom to drive a co-worker to Timmins, Ontario
B) A promise to give $10 in exchange for a promise to give a can of pop
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
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
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?
A) Because the Court will not look into the adequacy of consideration, a one-sided agreement is
enforceable.
B) A one-sided agreement is, in law, a form of unilateral contract.
C) A one-sided agreement is not enforceable.
D) A one-sided agreement is only binding if its essential terms are reduced to writing.
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
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57) If a business promises to pay all of its employees $500 to quit smoking, such an arrangement
is a(n)
A) valid, binding contract.
B) obligation.
C) commitment.
D) gratuitous promise.
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?
A) It must be specific.
B) It must be reasonable.
C) It is binding even though a duty to so act already exists.
D) It is to compensate for an act that happened in the past.
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.
A) Mr. Kooner sold a farm valued at $190,000 to his nephew for only $50,000.
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.
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.
D) Len agreed to sell and Karen agreed to buy four of Len's records for "some money."
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
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60) In contract cases, the court generally
A) does not look to see if the bargain is fair.
B) attempts to punish the party in breach of the contract by imposing a sentence.
C) will rewrite an agreement for the parties if their existing agreement did not include all the
essential terms.
D) will enforce all promises.
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?
A) An exchange of promises can be consideration adequate to form a contract.
B) To form a contract, there must be an offer that is accepted unconditionally.
C) A contract for a $50,000 boat does not have to be evidenced in writing to be a valid contract.
D) A contract is unenforceable if it is required to be evidenced in writing under the Statute of
Frauds and is not.
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?
A) Must be of some value and love and affection are not enough
B) Need not be present if the agreement is under seal
C) Need not be fair, unless there are extenuating circumstances (i.e., insanity or fraud)
D) Need not be legal if both parties clearly consent
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
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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?
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.
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.
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.
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.
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?
A) Joe would win because his forgiveness of the loan was gratuitous, (i.e., unsupported by
consideration).
B) Joe would win because they cannot change the original deal.
C) Joe would lose because of the doctrine of quantum meruit.
D) Joe would lose because of the rule that past consideration is no consideration.
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
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65) Which of the following could not be used as consideration?
A) A kilogram of green beans
B) 50 cents
C) A promise to deliver three tons of steel
D) A promise to give up a legal right
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?
A) At common law, such a one-sided promise is always binding and Mr. Storr could sue for the
remaining $100.
B) Many jurisdictions have passed legislation preventing Mr. Storr from suing you for the
difference if he actually takes the $800.
C) The issue of consideration is irrelevant when dealing with satisfaction of a debt.
D) Even if you take the $800 to him, Mr. Storr can later sue you for the $100 on the principle of
quantum meruit.
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
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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?
A) Only $100 because Bob had an existing duty to modify the bike and the price was settled.
B) $125 because Bob gave consideration for George's promise to pay the additional $25.
C) $25 because past consideration is no consideration.
D) A reasonable amount only.
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?
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.
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.
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.
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.
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
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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?
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.
B) Nikki owes Anmool $1200, because that is what she agreed to, and such contracts are
binding.
C) Problems of consideration can be raised only in the commercial context, not when the parties
involved are both individuals.
D) Nikki does not owe Anmool anything because his lack of professionalism vitiated the
contract.
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
A) "a shield but not a sword."
B) "a meeting of the minds."
C) "as much as deserved."
D) "the ultimate freedom to contract."
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
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71) Which of the following shows accurate use of the doctrine of promissory (equitable)
estoppel?
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.
B) If Nancy accidentally ran her car over her neighbour's bushes, she could use the doctrine as a
defence.
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).
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.
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?
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.
B) Without consideration or a seal, there can be no contract.
C) Consideration must have some value but need not be specific.
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.
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
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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?
A) Doctrine of quantum meruit
B) No consideration given by the writer
C) Promissory (equitable) estoppel
D) He only has to pay a reasonable price for the work done.
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.
A) Promissory estoppel has no effect on a promisor because it only relates to statements of fact,
not promises.
B) Promissory estoppel must be distinguished from equitable estoppel.
C) Promissory estoppel can be used as a defence only against a promisor who reneges on his
promise.
D) Promissory estoppel is known as injurious reliance in the United States and has the same
effect in both American and Canadian law.
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
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75) Which of the following shows accurate use of the doctrine of promissory (equitable)
estoppel?
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.
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.
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).
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.
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?
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.
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.
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) 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.
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
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77) Which of the following statements is correct with respect to promissory estoppel (equitable
estoppel)?
A) Where Barbra relies on Raylene's promise and suffers a loss, Barbra can sue Raylene for
compensation even though the promise was gratuitous.
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.
C) Promissory estoppel means that Donna cannot revoke her offer where she has promised to
hold it open for a specific period of time.
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.
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?
A) Promissory estoppel
B) Mistake
C) Undue influence
D) Breach of contract
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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
129) 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 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 purpose
or property.
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
130) "A good example of an offer is goods placed on the shelves in a self-service merchandising
situation, so long as they are clearly marked in price." Explain the accuracy of that statement.
Answer: This is inaccurate according to the case The Pharmaceutical Society of Great Britain
vs. Boots Cash Chemists. Goods displayed in such a manner are invitations to treat, not offers.
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
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131) Sam had been a friend of Joe's 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 yacht. 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 $125,000. Unknown to Sam, Joe had written Sam a similar
letter offering to sell the yacht for $125,000. These two letters passed in the mail. Sam received
Joe's letter at about 12 noon on Saturday, and Joe received Sam'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 meeting of the minds. These letters merely indicate
that one is willing to sell and the other 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 it's just
an exchange of offers.
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
132) If the mail is a reasonable means for accepting an offer, is there 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 postbox rule. Therefore there would be a binding contract.
Diff: 1 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
133) Joe offered to sell Harry his car for $500. Harry responded by saying, "I accept, providing
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 and 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: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
134) Is an "agreement to agree" binding?
Answer: No. An offer must include all of the important terms and be accepted before a binding
agreement will result.
Diff: 1 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
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135) What are the ways in which an offer can come to an end prior to acceptance?
Answer: (1) end of a specified time, (2) end of a reasonable time, (3) death or insanity of the
offeror, (4) revocation of the offer, (5) rejection or counteroffer
Diff: 3 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
136) When is an offer incapable of being revoked?
Answer: Where an option exists, where a subsidiary contract is implied, or where performance
has begun in a situation involving a unilateral offer.
Diff: 2 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
137) To what does a "standard form contract" refer?
Answer: To a contract with fixed terms prepared by a business.
Diff: 1 Type: ES
Page Ref: 185
Topic: Ch. 6 - Elements of a Contract
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
138) What is an interim agreement?
Answer: A binding contract that will subsequently be put into a more formal document.
Diff: 2 Type: ES
Page Ref: 185
Topic: Ch. 6 - Elements of a Contract
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
139) A contract with fixed terms prepared by a business is known as ________.
Answer: a standard form contract
Diff: 1 Type: ES
Page Ref: 185
Topic: Ch. 6 - Elements of a Contract
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
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140) A binding contract that will subsequently be put into a more formal document is known as
________.
Answer: an interim agreement
Diff: 2 Type: ES
Page Ref: 185
Topic: Ch. 6 - Elements of a Contract
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
141) A term making a contract conditional on future events is known as ________.
Answer: a subject-to clause
Diff: 2 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Recall
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
142) On Friday, Harlan offers to sell Lily his motorcycle for $1000. When Lily hesitates, Harlan
tells her to take her time deciding, promising her he will give her the weekend to make up her
mind. On Saturday, Harlan runs into Lily at the mall and informs her he has sold the bike to
Angie instead. What recourse does Lily have?
Answer: Lily is out of luck. Harlan's promise to keep the offer open could be revoked and was
not binding. If Lily had wanted Harlan to be legally bound to keep the offer open, she would
have needed to give him something in return.
Diff: 1 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
143) What is a "subject-to clause"?
Answer: A term making a contract conditional on future events.
Diff: 1 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Recall
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
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144) Mary received an unsolicited selection of CDs 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 simply put them away, and did not respond. They continued to send her
more 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 or they would take legal action. Explain her legal
obligation in these circumstances.
Answer: There is no contract under these circumstances. Her silence was not an acceptance so
long as she did not use the CDs. Had she already joined the CD of the Month Club, however, and
then failed to send back CDs she didn't want, she would have likely been liable because of the
ongoing relation she had established.
Diff: 3 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Applied
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
145) Explain the nature of the postbox 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: 196
Topic: Ch. 6 - Acceptance
Skill: Recall
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
146) 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 him $15,000. 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 his offer and mailed it that afternoon. The next day, Harry
phoned and told Joe he'd changed his mind and that he needed the money for something else. Joe
told him about the letter, and in fact Harry received the letter that day after his phone
conversation with Joe. Joe insisted on going through with the deal. Explain the legal liability of
the parties.
Answer: This could really go either way. If it was reasonable to respond by mail in these
circumstances, then the postbox 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 revocation. Therefore, there would be no contract.
Diff: 3 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Applied
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
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147) 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 him 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 various 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 postbox rule. Therefore, the contract came
into existence at that time, before any letter of revocation was received.
Diff: 3 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Applied
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
148) 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 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 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. Smith sent his letter of acceptance on
the same day and placed orders to 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 and a contract
existed as of that time.
Diff: 3 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Applied
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
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149) Acceptance of an offer by email or web-based communication can create certain difficulties.
What can be done to minimize the impact of such problems?
Answer: Certain problems can be avoided by the businessperson specifying in a website
advertisement or offer that acceptance is not effective until received, and also specifying which
jurisdiction's laws will apply.
Diff: 2 Type: ES
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
150) Discuss the elements of a contract required for electronic commerce transactions.
Answer: The legal status of an electronic commerce transaction is determined by contract law.
Contract law specifies there must be five elements satisfied in order to form a binding contract.
The elements include consensus, consideration, capacity, legality, and intention. Written evidence
of a contract, while not generally required, is a sensible thing to have. In some cases, under the
Statute of Frauds, writing and signatures are required for the transaction to be legally
enforceable.
Diff: 2 Type: ES
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
151) Discuss the federal Uniform Electronic Commerce Act (UECA).
Answer: The UECA has no legal standing but it serves as a model for the design of provincial
legislation throughout Canada. The object is to make electronic documents and signatures as
binding on parties as written ones. In general, the UECA recognizes electronic or digitally stored
documents and signatures as satisfying those requirements. A signature equivalent may be a
password or some other form of encryption that is controlled by the author of the document. The
password or encryption would authenticate the document and give it the same status as one that
was written and signed.
Diff: 2 Type: ES
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
152) Describe electronic signatures with respect to capacity.
Answer: Electronic signatures are most effective in identifying people if used in conjunction
with trusted third parties who provide a digital certificate that authenticates the identity of a party
to the contract. It assists in determining a person's age or mental capacity.
Diff: 2 Type: ES
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
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153) What would be the result if a police officer arrived at the scene of crime in progress and
demanded money from the victim to arrest the offender?
Answer: Such a contract would be against public policy and void.
Diff: 2 Type: ES
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
154) From the point of view of consideration, would there be an issue if an off-duty police
officer were hired to provide security services?
Answer: Such a contract would likely be valid, as the officer is on his or her own time and not
otherwise obligated to provide such services.
Diff: 3 Type: ES
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
155) The courts may enforce an unfair bargain.
Answer: TRUE
Diff: 1 Type: TF
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
156) A person is required to honour a gratuitous promise if made under seal.
Answer: TRUE
Diff: 2 Type: TF
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
157) The promise of "love and affection" can constitute adequate consideration to support a
contract.
Answer: FALSE
Diff: 2 Type: TF
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
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158) What is a "gratuitous promise"?
Answer: A one-sided agreement the courts will not enforce.
Diff: 1 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
159) The requirement of consideration is satisfied if "some money" is promised in exchange for
an act.
Answer: FALSE
Diff: 2 Type: TF
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
160) There is a principle that says when a gratuitous promise to do something in the future
causes someone to incur an expense, the promisor may be liable for failing to live up to that
promise. What is this principle known as?
Answer: Promissory estoppel
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
161) A one-sided promise the courts will not enforce is known as ________.
Answer: a gratuitous promise
Diff: 1 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
162) Discuss the implications of a creditor agreeing to take less in full satisfaction of a debt.
Answer: Under the common law, a gratuitous debt reduction is not enforceable; even if the
partial payment is made, a creditor can still sue for the remainder. Many jurisdictions have
passed legislation overruling this common law position if there is actual payment of the lesser
sum.
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
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163) A reasonable price paid for requested services is referred to in law as ________.
Answer: quantum meruit
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 9. Present some examples of valid consideration.
Bloom's Taxonomy: Knowledge
164) What is "quantum meruit"?
Answer: The term means "as much as is deserved." It is a reasonable price paid for requested
services.
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Recall
Objective: Chapter 6: 9. Present some examples of valid consideration.
Bloom's Taxonomy: Knowledge
165) What is promissory estoppel?
Answer: A principle that when a gratuitous promise to do something in the future causes
someone to incur an expense, the promisor may be liable for failing to live up to that promise.
Diff: 2 Type: ES
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
166) The existence of a seal eliminates the need for the elements of a valid contract.
Answer: FALSE
Diff: 2 Type: TF
Page Ref: 203
Topic: Ch. 6 - Consideration
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
167) The courts will use quantum meruit to determine what should be paid when a person
providing services is not allowed to finish by a breaching party.
Answer: TRUE
Diff: 2 Type: TF
Page Ref: 203
Topic: Ch. 6 - Consideration
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
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168) 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 postbox 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.
Students can also deal with the problems of mistake if they have read the relevant chapter. 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, and will apply whichever version is more reasonable. When
both are equally reasonable, consensus is destroyed and there is no contract.
Diff: 1 Type: ES
Page Ref: 187
Topic: Ch. 6 - Consensus
Skill: Applied
Objective: Chapter 6: 2. Explain consensus and the significance of a "meeting of the minds."
Bloom's Taxonomy: Knowledge
169) In the Pharmaceutical case, it was decided that goods displayed on the shelf in a selfservice merchandising situation were an invitation to treat rather than an offer. Discuss.
Answer: This question gives students the opportunity to deal with the whole 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 case goes too far 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 just 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 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: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
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170) 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 his 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 him 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: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
171) Discuss the "freedom of contract," explaining what the implications and limitations are in
the context of contract law.
Answer: Here students should first identify that what parties agree to in terms of contract law is
generally unrestricted. It is important to note that this has implications in that the Courts do not
look into the overall fairness or wisdom in a particular contract, but there are limits. As long as
certain basic common law and statutory requirements have been met, parties are free to enter into
whatever contractual arrangement suits them. The bargain struck does not need to be inherently
"fair," as long as it meets the fundamental requirements of consensus, consideration, capacity,
legality and intent. It is also important to raise that the freedom of contract is restricted somewhat
by legislation. Good students will note that sale of goods, consumer protection, employment, and
other legislation do place limits on this freedom.
Diff: 1 Type: ES
Page Ref: 188
Topic: Ch. 6 - Offer
Skill: Applied
Objective: Chapter 6: 3. Describe a valid offer.
Bloom's Taxonomy: Knowledge
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172) Discuss the requirements for a valid offer, explaining both how an offer is to be
communicated and how such an offer can be brought to an end.
Answer: A valid offer must contain all of the essential terms to be included in the contract
(although some insignificant terms can be implied). Offers must be distinguished from
invitations to treat (which are part of the pre-negotiation process and without legal effect). An
offer may be implied by conduct. Offers, however, must be communicated and can only be
accepted by someone to whom the offer was made. Important terms, especially exemption
clauses, must be disclosed. For an offer to be accepted, it must be in force at the time of
acceptance. An offer can come to an end in a number of ways: end of a specified time, expiration
of a reasonable time, death or insanity of the offeror, revocation of the offer, or rejection or
counteroffer. Other factors can affect the existence of an offer as well, such as if an activity
contemplated by the contract becomes illegal or if the subject matter of the contract is destroyed.
Some offers cannot be revoked, such as where an option exists, where a subsidiary contract may
be implied, or if performance has begun in respect of a unilateral 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
173) Explain the postbox rule and discuss its relevancy in the modern business world.
Answer: This question requires students to demonstrate an understanding of the postbox 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 they 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). They must show an understanding that the
postbox 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. Students
should 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 of the principle developed in the Entores case. That is, where
instantaneous communications such as the telephone are in use, the rule will not apply. It is
highly unlikely that the postbox rule will be applied to fax and email, even though it was
extended to telegrams in the past.
Diff: 3 Type: ES
Page Ref: 196
Topic: Ch. 6 - Acceptance
Skill: Applied
Objective: Chapter 6: 4. Describe an effective acceptance.
Bloom's Taxonomy: Knowledge
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174) Discuss the validity of online transactions and the related issues that arise in transacting
business over the Internet.
Answer: Students should point out that online transactions often involve contracts and that the
online environment does not undermine their validity. The elements required for a valid contract
remain, although certain additional issues are raised. Offers accepted by email or through a
website will be effective as long as the usual requirements are present. Good students will
discuss "click-wrap" agreements. In particular, they will note that an Internet ad combined with
"click-wrap" may constitute an offer, and that clicking "I Accept" (or the equivalent) can
constitute valid acceptance. Buyers are well-advised to ensure that they carefully review license
terms (and other provisions) prior to acceptance (as with any contract). Case law suggests that
the form of the assent and the reasonableness of the terms will affect the enforceability of
electronic contracts. It does not appear that the postbox rule will apply to online transactions,
although this is not yet certain. Students should also point out that capacity issues are heightened
in an online environment, as it difficult to know whether the person engaging in an online
transaction is sufficiently old enough and possesses the mental faculties to enter into the
transaction. Further issues arise when there is a requirement of writing. Many jurisdictions have
passed legislation making electronic communication the equivalent to written documents.
Provisions of the Uniform Electronic Commerce Act, for example, contain provisions validating
electronic documents and signatures. Sale of goods law and consumer protection law remain
relevant to this area.
Diff: 2 Type: ES
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
175) One of the requirements in a contract is that there 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 be
in the form of money or some other benefit.
Diff: 2 Type: ES
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
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176) Discuss the requirement of consideration and its role and value in the formation of
contracts. In your answer, be 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 a bargain was fair or not, 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 does not have to be fair. Students should also
note that there are exceptions. Where there have been unconscionable contracts, the courts will
look at the fairness of the bargain. Where there is a question of undue influence, insanity, or
misrepresentation, the courts will look at the fairness of the consideration. But all of these relate
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: 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
177) "One of the basic precepts in contract law is that any bargain struck must be fair to be
enforceable." Explain the accuracy of that statement.
Answer: It's only necessary that the consideration involved has some value. It's not necessary
that it be fair or reasonable.
Diff: 2 Type: ES
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
178) Joe owed Sam $500. Two days after the money was due, he came to Sam saying he couldn't
pay the $500, but if Sam would accept $300 as full payment, Joe would pay him right then and
there. Sam agreed and the money was paid. Sam then sued for the other $200. Will he win?
Answer: Probably not (depends on the jurisdiction). Most provinces have a statute in place
which says that, if you agree to take less in full satisfaction of a debt and in fact take the money,
you can't sue for the difference.
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 7. Discuss the irrelevance of the adequacy of consideration.
Bloom's Taxonomy: Knowledge
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179) Joe, a university student, parked his car near Harry's garage and went away 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 when he had time during the day, to each of those
cars, fixed the tires and put a bill on each vehicle charging $15 for the service. Joe had come
back during the day and noticed his flat tire, and when he came back that evening 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: 3 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
180) Joe owed Sam $500. Two days before the money was due, he 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: Sam would lose. He received payment two days early and this is sufficient
consideration to support the lower payment.
Diff: 2 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 8. Consider why gratuitous promises are not consideration.
Bloom's Taxonomy: Knowledge
181) Joe drove his car into Sam's garage to have some repair work done. He told Sam to fix the
carburetor. Sam worked on it most of the afternoon and found he had to rebuild the carburetor.
He presented Joe with a bill for $250 when he returned. Joe refused to pay, saying that he had
taken a law course and knew that, because they didn't agree to a specific consideration ahead of
time, he was not bound in contract. Was he correct? Explain.
Answer: This is an example of a request for services, and in such circumstances, there is an
obligation to pay a reasonable amount (quantum meruit). He could challenge the reasonableness
of the charge, but he must pay a reasonable amount for the services requested and rendered.
Diff: 3 Type: ES
Page Ref: 203
Topic: Ch. 6 - Consideration
Skill: Applied
Objective: Chapter 6: 9. Present some examples of valid consideration.
Bloom's Taxonomy: Knowledge
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182) Explain any limitations on the availability of promissory estoppel.
Answer: It can be used only as a defence, not as a cause of action ("as a shield but not a sword").
Diff: 2 Type: ES
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
183) Joe was a contractor and 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 that 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 on 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 could use promissory estoppel as his defence. Sam agreed to take less for the
services that were performed on the last two jobs. This promise was relied on by Joe and
therefore he can use Sam's promise as a defence.
Diff: 3 Type: ES
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
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184) 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 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, which is an equitable principle developed in the courts of England, provides that in
some limited circumstances a person might be bound even by his 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 be the person who made
the promise to be enforced. This can only happen where there is some prior legal obligation
existing between the parties that was modified by the gratuitous promise and then the person
making the promise ignores that promise and tries 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: 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
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