Contemporary Canadian Business Law Principles And Cases 10th Edition by John A. Willes - Test Bank
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Contemporary Canadian Business Law Principles And Cases 10th Edition by John A. Willes - Test Bank

Contemporary Canadian Business Law Principles And Cases 10th Edition by John A. Willes - Test Bank   Instant Download - Complete Test Bank With Answers     Sample Questions Are Posted Below   20. Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi'sgravel pit to a building …

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Contemporary Canadian Business Law Principles And Cases 10th Edition by John A. Willes – Test Bank

 

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Sample Questions Are Posted Below

 

20. Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi’s
gravel pit to a building site some five kilometres distant, at $60 per load. Before Kirk was to begin
performance, his truck was destroyed in a serious traffic accident. Because Kirk is bound in contract,
Yemmi can require Kirk to purchase a new truck to perform the agreement.
FALSE
Difficulty: Easy
Willes – Chapter 13 #20
21. Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi’s
gravel pit to a building site some five kilometres distant, at $60 per load. Before Kirk was to begin
performance, his truck was destroyed in a serious traffic accident. Kirk need not perform the contract,
as the contract was frustrated by the destruction of the truck.
TRUE
Difficulty: Easy
Willes – Chapter 13 #21
22. Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi’s
gravel pit to a building site some five kilometres distant, at $60 per load. Before Kirk was to begin
performance, his truck was destroyed in a serious traffic accident. If Kirk deliberately destroyed his
truck, Yemmi can insist that he perform the agreement or compensate Yemmi for any loss that might
result from Kirk’s nonperformance.
TRUE
Difficulty: Moderate
Willes – Chapter 13 #22
23. Kirk entered into a contract with Yemmi to haul gravel in his large tandem truck from Yemmi’s
gravel pit to a building site some five kilometres distant, at $60 per load. Before Kirk was to begin
performance, his truck was destroyed in a serious traffic accident. If Kirk owned a fleet of trucks, and
Kirk had a number of spare trucks, the doctrine of frustration would not apply to the case, and Kirk
would be obliged to perform the contract.
TRUE
Difficulty: Easy
Willes – Chapter 13 #23
24. Lucas offered to purchase Baker’s snowmobile if he could arrange a loan with the bank for the funds.
Lucas and Baker signed a written purchase agreement which did not mention the fact that Lucas
did not have the necessary funds in his possession. If the bank refused to lend Lucas the money, the
contract would be enforceable against Lucas.
FALSE
Difficulty: Easy
Willes – Chapter 13 #24
25. Lucas offered to purchase Baker’s snowmobile if he could arrange a loan with the bank for the funds.
Lucas and Baker signed a written purchase agreement which did not mention the fact that Lucas
did not have the necessary funds in his possession. If Baker claimed against Lucas for breach of
the contract, Lucas could raise the agreement concerning the need for a bank loan as a collateral
agreement, allowing him to avoid the contract.
FALSE
Difficulty: Moderate
Willes – Chapter 13 #25
26. Lucas offered to purchase Baker’s snowmobile if he could arrange a loan with the bank for the funds.
Lucas and Baker signed a written purchase agreement which did not mention the fact that Lucas did
not have the necessary funds in his possession. The proviso “if he could arrange a loan with the bank
for the funds” would be a condition precedent.
TRUE
Difficulty: Easy
Willes – Chapter 13 #26
27. The effect of a condition precedent is that the contract does not come into effect unless the condition
is satisfied.
TRUE
Difficulty: Easy
Willes – Chapter 13 #27
28. Ms. Sherbourne bought a candy bar costing 80 cents. She paid for it by presenting the storekeeper
with a $5 bill. While this is not a legal tender, it is so customary to give change that the storekeeper
would have to warn customers if he was only prepared to accept exact tender of the price of the
goods.
TRUE
Difficulty: Easy
Willes – Chapter 13 #28
29. Julian decides that he would like the house being built for him, under contract with Porter Developers,
to have a blue tile roof instead of a red tile roof. The two kinds of tile are equally available and are
the same price, and no roofing of the house has yet been done. Porter alleges that this is a material
alteration of the terms of the contract, since the roof is one-tenth of the value of the house, and that,
therefore, it cannot be done without their agreement to the change, which they will only give for a
further payment of $5,000. They are right.
FALSE
Difficulty: Moderate
Willes – Chapter 13 #29
30. A judgment by Mr. Justice Exx for the plaintiff Wy, in his suit against Zedd for breach of a condition
of a contract, has the effect of discharging the contract, so that Wy has no further obligations under
it, and substitutes the terms of the judgment for the terms of the contract, which Zedd must then
perform.
TRUE
Difficulty: Easy
Willes – Chapter 13 #30
31. Sangster and Williams enter into a verbal contract with each other. They later decide to put it in
writing. This is a substituted agreement.
FALSE
Difficulty: Moderate
Willes – Chapter 13 #31
32. Damian and Raja agree in writing that Raja will buy Damian’s cottage. On the date set for closing the
sale, it is up to Raja to come to Damian to make payment of the purchase price, unless the contract
says otherwise.
TRUE
Difficulty: Easy
Willes – Chapter 13 #32
33. Damian and Raja agree in writing that Raja will buy Damian’s cottage. If Raja changes her mind and
refuses to buy the cottage, Damian can get specific performance provided he can prove that he tried to
transfer the title deed to the property on the closing date and Raja would not accept it.
TRUE
Difficulty: Moderate
Willes – Chapter 13 #33
34. Joe sold a barn full of hay to Sheila but, before Sheila could transfer it to her own barn, a hurricane
blew the roof off Joe’s barn, and that part of the hay that did not blow away was ruined by the
torrential rains. The contract is frustrated.
TRUE
Difficulty: Easy
Willes – Chapter 13 #34
35. Cecilia agreed to buy an antique Japanese sword from Andrew. After the contract is formed but before
Andrew delivers the sword or Cecilia pays any money to him, the government passes a law that makes
it a crime to buy a sword other than a fencing foil. Since the contract was made before the law was
passed, it is not frustrated.
FALSE
Difficulty: Moderate
Willes – Chapter 13 #35
36. Bronson signs up to join the army because the advertisements make it look like summer camp. Later,
he changes his mind and shoots himself in the foot so he won’t have to go. This does not frustrate the
contract, though the contract may be avoidable on other grounds.
TRUE
Difficulty: Moderate
Willes – Chapter 13 #36
37. The case of Turney et al. v. Zhilka accurately describes the state of the law in Canada with respect to
the effect of conditions precedent.
TRUE
Difficulty: Challenging
Willes – Chapter 13 #37
38. The vast majority of contracts are discharged by operation of law.
FALSE
Difficulty: Easy
Willes – Chapter 13 #38
39. Gavin is in the business of local transport of goods, as well as running a rural bus service. He
contracts for a delivery van from his local truck dealer, but before the dealer places the order with the
manufacturer, Gavin amends the order to request the minibus model of the delivery van. Gavin and
the dealer have created a new contract that replaces the prior one.
TRUE
Difficulty: Moderate
Willes – Chapter 13 #39
40. Imperfect tender, also referred to as imperfect performance, does not represent a breach of
contract.
FALSE
Difficulty: Moderate
Willes – Chapter 13 #40
41. Shortly after entering into a contract with Prentice Co. to provide consultation on integrating their
office systems, Antonio discovers he is the victim of a neurological disease that will kill him very
rapidly. Because of his situation and the excellent service he has provided them in the past, Prentice’s
president decides to write off the whole of the $30 000 they had advanced him, which was to cover the
investigatory and recommendation stages of his work for them, even though failure to perform was
cause for rescission of the contract.
a. Prentice’s action is either a waiver or a release. Which is it and what is the difference between them?
b. What danger does Antonio face if the president now leaves Prentice Co. and the new president
reviews the matter?
c. What should be done to protect Antonio from that problem, at the time the promise is made?
a. This is a release. Once rights to sue have materialized, the plaintiff’s relinquishment of his rights is
called a release. If the plaintiff-to-be has not yet suffered any injury, an agreement not to sue, if any
injury should be done at a future time, is called a waiver of that future right to sue.
b. Since Prentice has been given no consideration by Antonio for its promise not to take back the
advance, the promise is gratuitous and could be revoked by the new president (unless Antonio could
demonstrate grounds for a defence of promissory estoppel).
c. If Antonio gives Prentice something in consideration of its promise—and, since the court would not
consider the adequacy of the consideration in this case, its value can be minimal—or if the promise is
made under seal, then it will be enforceable and Prentice’s new president could not revoke it.
Difficulty: Moderate
Willes – Chapter 13 #41
42. Morton, a famous entertainer, agreed to host a telethon for the Society of Feathered Friends at half
his usual $50 000 fee. A week before the telethon, the $25,000 was paid into his account. Morton had
spent many hours working up jokes about the Society of Feathered Friends, since his normal materials
were not really suitable for the expected audience. On the morning of the telethon he awoke with
laryngitis and no voice, and the doctor says he cannot perform.
a. Describe how this will affect the contract between Morton and the Society of Feathered Friends.
b. If Morton had done some promotional ads for the telethon, would that change your answer to a?
a. The contract is frustrated by Morton’s inability to perform, since his laryngitis is something beyond
the control of either party. Since the money was paid on the basis that Morton would perform but he
did not, there was a total lack of consideration on his part and he must return the money to the Society.
While he had done much preparatory work, this had not benefited the Society at all and so, even in
those provinces which have Frustrated Contracts Acts, he will not be entitled to keep anything.
b. In a province in which there is a Frustrated Contracts Act, Morton could argue that he conferred a
benefit on the Society by doing the ads. He might then be entitled to retain some money equal to the
benefit obtained by the Society from the ads.
Difficulty: Moderate
Willes – Chapter 13 #42
43. Jamil, a prospective purchaser of real estate, visited his lawyer with three completely executed
agreements of purchase and sale, each for a different piece of real estate. Each offer was conditional
upon “the purchaser being able to obtain $50 000 financing to his satisfaction within ten days at a
rate of interest not exceeding 10%, failing which this offer is void.” Financing of this type was easily
available, over the counter, from any local bank for a person of Jamil’s financial circumstances.
Discuss the position that Jamil has found himself in, particularly if he should obtain such financing,
informing one purchaser of his intention to proceed, and the other two that he could not obtain
funds.
Each agreement is separate and is only conditional upon Jamil obtaining financing. Jamil is expected
to act in good faith and endeavour to obtain the financing. Assuming Jamil could obtain financing on
all three agreements, he would be bound to do so, otherwise he would be in breach of any contracts for
which he failed to seek financing.
Difficulty: Moderate
Willes – Chapter 13 #43
44. On April 13, the Barclays signed an agreement to purchase certain property owned by the Taylors
for the sum of $15,500. The purchase and sale agreement did not specify a form of payment except
that the purchasers were to pay a deposit of $500 in cash and the balance on closing. The date
of closing was set out in the agreement as July 1st. The agreement also contained the following
provision: “This sale is conditional for a period of 15 days from the date of acceptance upon the
Purchaser being able to obtain a first mortgage in the amount of ten thousand dollars ($10,000),
otherwise, this agreement shall be null and void and all deposit monies shall be returned to the
Purchaser without interest or penalty. This sale is also conditional for a period of 15 days from the
date of acceptance upon the Purchaser being able to secure a second mortgage in the amount of $2,500
for a period of five (5) years, otherwise, this agreement shall be null and void and all deposit monies
shall be returned to the Purchaser without interest or penalty.”
The Barclays were able to arrange for a first mortgage of $12,000 and, on April 28th, a notice in the
following form was delivered to the Taylors: “This is to notify you that the condition specified
in the agreement of purchase and sale between the Vendors and Purchasers has been met. The
transaction will therefore close as per the agreement.”
On July 1st the Barclays presented a certified cheque to the Taylors in the amount of $15,000. The
Taylors, however, refused to deliver the deed to the Barclays on the grounds that the condition in the
purchase and sale agreement had not been complied with. The Barclays then instituted legal action
against the Taylors.
Discuss the nature of this action and the defences, if any, which may be raised. Render a decision.
Based on Beauchamp v. Beauchamp (1971), 32 D.L.R. (3d) 693, this case explores the issues of
tender, condition precedent, specific performance and, tangentially, waiver.
The purchasers will attempt to succeed in an action for specific performance. Having offered
payment in the full amount of the contract and exhibiting their readiness and willingness to complete
the transaction they will argue that the vendors must deliver the land. Also, the conditions in the
agreement for the benefit of the purchasers were met to their satisfaction. Having notified the vendors
to this effect, the purchasers argue that performance is now essential to discharge their agreement.
The vendors are entitled to raise defences with respect to the tender of payment and the condition
precedent. The form of payment was not specified in the agreement with the exception of the deposit
in cash. The implied form is, then, cash in the exact amount. The purchasers, by tendering a certified
cheque, albeit in the exact amount, have failed to properly tender payment and the vendors may
properly refuse to accept the payment and deliver up the land.
Moreover, the agreement set out a sequence of events in the form of conditions precedent that must
be met prior to the agreement becoming enforceable. The conditions stipulated the occurrence of
two specific events, but failed to state that either party has the right to waive the condition in order to
establish the contractual rights and to enforce the agreement on the other party. Essentially, waiver
or the right to waiver, must be mutually agreed upon by the parties in order to establish consideration
for the promise. Therefore, one party alone may not waive the condition upon which the right to
enforcement of the contract rests. On the grounds that the conditions were not waived, the vendors
argue that they cannot be forced to deliver up land under a contract which has not come into effect.
The condition as specified in the agreement was never met and, thus, both parties are discharged from
performance.
The Ontario Court of Appeal found for the purchasers on the basis of facts concerning the nature of
the condition precedent which are beyond the scope of the text discussion.
Difficulty: Challenging
Willes – Chapter 13 #44
45. In 1969, XYZ Co. Ltd., a manufacturer of small appliances, entered into a 20-year contract with ABC
Smelters Inc. who agreed to process molten aluminum for XYZ’s manufacturing needs. The parties
undertook lengthy negotiations to determine the terms of the complex agreement which governed
their relationship. In particular, the pricing clause was quite complicated based upon various factors.
The price to be paid by XYZ was to vary in accordance with two of those factors. After a base price
was agreed upon, 20 percent of that price would vary with changes in the Wholesale Price Index for
Industrial Commodities (WPI). This portion was referred to as the “production charge.” An additional
20 percent of the price would vary with changes in the hourly wage rates of ABC Smelter employees.
A major component of the production charge for the smelting of aluminum was the cost of electricity.
The parties performed under the contract for several years applying the pricing formula appropriately
to the basic price. However, in 1973, the Arab oil producing nations imposed an oil embargo that
severely affected most of the world’s economies causing rapid inflation, particularly in sectors which
were substitutes for oil based energy. The cost of electricity rose at a rate greatly in excess of the rate
of increase in WPI, of which electricity was only one of many factors. At this point, ABC Smelters
realized that continuing with the contract as it stood to the end of its term would result in a loss of over
$60 million to the company and would likely result in its bankruptcy. ABC then ceased performing
under the contract and instituted legal action to attempt to relieve its onerous obligations under the
agreement.
a. Discuss the nature of the action and the arguments which may be used by ABC.
b. Whether ABC is successful or not, what further steps may the parties take to revive their contractual
relationship?
Based on Aluminum Company of America v. Essex Group, Inc. (1980), 499 F. Supp. 53, this situation
examines the doctrines of frustration and the principles of substituted agreement. a. The legal action
brought by ABC is based in frustration in order to bring the contract to an end and relieve the parties
from further performance. The external event of an oil embargo causing huge increases in the cost of
electricity was neither foreseeable nor caused by any fault of the parties. Its effect was to change the
circumstances and conditions under which the agreement was to be performed such that performance
becomes virtually impossible for ABC without risking the company’s demise. Furthermore, given
the long-term nature of the contract, it was an event for which the parties would likely have provided
for discharge of the agreement had it been foreseeable and the changes in conditions apparent. The
defendants may raise an argument that ABC is attempting to have the contract declared frustrated
simply because performance became more expensive than contemplated at the outset. However, the
courts, recognizing the difficulty in predicting future conditions in long-term contracts, especially
those of an unexpected nature, would likely treat the contract as frustrated. This is particularly true in
light of the great care and thorough negotiations which the parties undertook at the outset. Thus, the
frustrated contract is brought to an end and the parties would be relieved of further performance.
b. The parties may agree to substitute their original contract with a new agreement with material
alterations to the terms. The new substitute agreement will discharge the existing agreement if it
has not already been discharged as frustrated by the courts. The alteration in the pricing terms of the
agreement would be sufficiently material to effectively discharge the original agreement.
Difficulty: Challenging
Willes – Chapter 13 #45
46. Joe’s Jazz Quintet contracted with Larry’s Lounge to provide music in the lounge each evening for
a two-week period. The terms of the contract provided for payment of a weekly fee of $5,000.00
for Joe’s services. During the course of the first week Larry sold the lounge to a group of investors
who decided to convert it to a country and western line dancing bar. The new owners immediately
terminated Joe’s contract, but paid the quintet the full weekly fee for one week even though only three
performances had taken place.
Joe’s group had the opportunity to move on to its next booking early and did so, commencing
performances the next evening. At the end of their touring season, some ten months later, Joe and his
musicians reflected on business matters that had transpired over the season. They realized that they
had had to forgo one week’s pay of $5,000 at Larry’s Lounge and, even though they started their next
job early, it had only paid $3,000 for the week. Moreover, Joe felt that it did not help the reputation
of the band to essentially be “fired” from a job. Joe and his friends decided to get some advice about
taking legal action against Larry or the new owners of the lounge for the damages they had suffered as
a result of the termination of their contract. Identify the issues that their legal counsel would discuss
with them about their claim. What argument(s), if any, would Larry or the investors raise in response
to Joe’s action?
Answers will vary.
Difficulty: Challenging
Willes – Chapter 13 #46
Ch13 Summary
Category # of Questions
Difficulty: Challenging 5
Difficulty: Easy 21
Difficulty: Moderate 20
Willes – Chapter 13 46

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