Law and Business Administration in

Canada 11th Edition Smyth Test Bank

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Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The law recognizes two kinds of mistakes. These are ________. 1)

A) mistake about the terms of a contract and mistakes in assumptions about important facts
related to the contract
B) errors of judgment and recklessness in tort
C) errors of judgment in tort and innocent criminal errors
D) forgetfulness and recklessness
E) unknowing errors and knowing errors
Answer: A

2) In executing its discretion to grant relief when a party makes a mistake about terms, 2)
A) the court will determine each party's interpretation of the terms.
B) the court will adopt the position of the plaintiff.
C) the court will correct the document.
D) the court will consider the hardship that will be suffered by each party.
E) the court will determine the burden of proof.
Answer: D

3) Where a party claims that an agreement is improperly recorded, that party may ask the court 3)
A) to set aside the contract.
B) interpret the provisions of the contract.
C) to re-write the contract.
D) to compensate it for any loss suffered.
E) for rectification of the contract.
Answer: E

4) Which of the following is not a condition that must be met by a plaintiff who request rectification of 4)
a contract?
A) The plaintiff must satisfy the court that all attempts to reach some understanding between the
parties has failed.
B) The plaintiff must satisfy the court that there was a complete agreement between the parties,
free from ambiguity.
C) The plaintiff must establish that the change in the written document appears to be an error in
the recording of the document and is easily explained as such.
D) The plaintiff must satisfy the court that the agreement is not subject to, or conditional on any
further adjustments.
E) The plaintiff must establish that the parties did not engage in further negotiations to amend
the contract.
Answer: A

5) Mistake about terms DOES NOT include 5)

A) the error of judgment that a party makes when he or she enters into a bad contract.
B) misunderstandings about the meanings of words used in a contract.
C) words used inadvertently in stating the terms of a contract.
D) the attribution by the parties of different meanings to words used in a contract.
E) errors that are made in the recording of an agreement between parties.
Answer: A

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 6) James says to Jack. I am selling my "Toyoda" for $500. Would you like to buy it. Jack, believing that 6)
James was referred to his automobile, replies, "yes I'll buy your Toyota for $500." Jack pays $500
and James presents him with a Japanese doll called Toyoda. Jack asks for his money back because
he misunderstood James. Should this matter go to court, the court will most likely find that
A) there is a binding contract for the sale of the Toyota car because James should have made it
clear what he was selling.
B) there is a binding contract for the sale of the Toyoda because that is what James meant when
he made the offer.
C) no contract arose because a reasonable person would not believe that James would offer to
sell his car for $500.
D) Jack's refusal to pay is a breach of contract.
E) there is a binding contract for the sale of the Toyota because that is the offer Jack believed he
was accepting.
Answer: C

7) In contract law a mistake is 7)

A) an error about the terms of the contract, or the assumptions regarding important facts related
to the contract.
B) a false statement made by one party that causes someone to enter a contract.
C) unfair manipulation that compromises someone's free will.
D) an error of judgment about the benefits of a contract.
E) the threat of physical or economic harm that results in a contract.
Answer: A

8) A mistake in contract law can lead to a reversal of a contract if 8)

A) it is in regard to a minor characteristic of the subject matter.
B) it causes the mistaken party to believe that the subject matter is fundamentally different from
what it truly is.
C) it is in regard to a major characteristic of the subject matter.
D) A & B
E) B & C
Answer: E

9) A mistake in contract law that leads to a reversal of a contract can be one that is made by 9)
A) one party without the other's knowledge of the mistake.
B) both parties.
C) both parties with the knowledge of third parties.
D) one party with the other's knowledge of the mistake.
E) one party with the knowledge of third party.
Answer: A

10) A court will not enforce a contract if: 10)

A) the meanings of the words are not clear
B) one party was unreasonable in using certain words.
C) there are two reasonable interpretations of words in the contract and no indication which is
correct
D) a party is mistaken as to what the subject-matter of the contract was
E) the parties disagree as to the interpretation of important terms
Answer: C

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11) In a legal sense, mistake is 11)
A) an error of judgment.
B) narrowly defined and limited in scope.
C) a misrepresentation.
D) a mistake of fact.
E) a misunderstanding.
Answer: B

12) Rectification will be ordered where 12)

A) the parties wish to change certain terms in the contract.
B) the offeror misrepresented certain facts.
C) one of the parties to the contract lacks legal capacity.
D) the wrong party performs the contract.
E) there is a complete unambiguous agreement that was recorded incorrectly.
Answer: E

13) When a Court grants rectification of a contract it 13)

A) declares a contract to be unenforceable.
B) it interprets the contract for the parties.
C) changes the part of the document that was incorrect in the written document.
D) it declares the contract to be voidable.
E) its sets aside the contract.
Answer: C

14) Cal contracts to sell 1,000 logs to Doris at a price of $250 per log. Cal believes that the logs are 14)
worth only $150 per log. When Doris finds out the true value of the logs, she refuses to buy them.
Cal’s contract with Doris is:
A) unenforceable
B) enforceable
C) voidable
D) void
E) illegal
Answer: B

15) A pleas of non est factum 15)

A) means the contract is not correct.
B) is not a good defence against third parties.
C) can only be raised if there is a misrepresentation.
D) is applicable only where both parties have made a mistake.
E) means it is not my doing.
Answer: E

16) Joe buys two tickets for a baseball game. Two days after he purchases the tickets the game is 16)
cancelled. Joe, wanting to get his money back, sells the second ticket to Mary. Which of the
following is NOT true?
A) Joe made an offer and Mary accepted the offer.
B) A contract did not arise between Joe and Mary regarding the sale of the ticket.
C) Mary can set aside the contract because of frustration.
D) Mary may sue Jack for breach of contract.
E) Mary can have the contract set aside because of mistake.
Answer: C

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17) When a court declares a contract to be void, 17)
A) the contract that arose is ended by the court.
B) the offeree obtains title to the goods and is obliged to pay for them.
C) the contract is frustrated.
D) it is as if the contract never arose or existed.
E) the offeror is required to enter into a new contract with the offeree.
Answer: D

18) McKenzie purchases goods from Dormond. Later McKenzie goes to court and the court declares 18)
that the contract between McKenzie and Dormand is void. This means that
A) McKenzie can keep the goods and demand his money back from Dormond.
B) The court has declared that there was a valid contract between Dormond and McKenzie from
the date of the purchase, until the date of the Court ruling.
C) Dormond has to return all money received from McKenzie, but McKenzie does not have to
return the goods.
D) The court has declared that Dormond breached the contract.
E) McKensie can return all or the remainder of the goods to Dormond in exchange for
reimbursement of payment.
Answer: E

19) Jonathan sells crates of tomatoes on board the SS Apapa to Margaret. At the time of the sale, both 19)
parties are unaware that the crates were washed overboard. What is the status of the contract
between Jonathan and Margaret.
A) Margaret may sue Jonathan for the tort of deceit.
B) Margaret is the new owner of the tomatoes and has to bear the loss.
C) Jonathan is still the owner of the shipment. Jonathan bears the loss and will have to refund
Margaret's money.
D) The ownership passed to Margaret, but Jonathan is still in possession and so he is liable.
E) Margaret has to pay the agreed price and recover from her insurance.
Answer: C

20) A voidable contract 20)

A) is one that a court may set aside in an attempt to restore the parties to their original positions.
B) is a contract that is void.
C) is a contract that has been frustrated.
D) is a contract in which the offeree failed to undertake the proper investigations.
E) is a contract in which the parties have engaged in conduct that is illegal.
Answer: A

21) Where a mistake is made in a contract, and the contract contemplates some level of risk, then 21)
A) the court will grant relief to the party adversely affected by the change in accordance with the
degree of the effect of the change.
B) the court will not grant relief to the party adversely affected by the change.
C) each party is required to act to mitigate its loss.
D) the court will apply the principles of equity, allocate the risk and apportion the loss.
E) the change that takes place becomes a legal mistake.
Answer: B

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22) Non est factum is most likely available 22)
A) where the offeror's statements are misunderstood by the offeree.
B) where there has been a misrepresentation.
C) where a party claiming the remedy has been deliberately tricked into entering into a contract.
D) where both parties are mistaken as to the terms of a contract.
E) where the party seeks rectification.
Answer: C

23) James purchases an antique chair at a garage sale for $150.00. Later he sells it to Jacqueline for $300 23)
and makes a nice profit. A few months later the Antiques Road Show comes to town and Jacqueline
takes the chair to the show to be valued. She is advised that the chair dates as far back as 1866 and
is worth approximately $5,000. Which of the following is true?
A) James did not make a legal mistake because he was careless in determining the right price.
B) James can plead non est factum.
C) If Jacqueline sells the chair, the court will order that Jacqueline pay a portion of the proceeds
of sale to James because James made a mistake.
D) James made a mistake about the value of the chair and so the contract will be set aside by a
court.
E) James did not make a mistake about the value of the chair because the radically different price
is one of the risks expected in the contract.
Answer: E

24) Rectification is where a written contract is changed to reflect a previously agreed upon oral 24)
agreement. The courts will grant rectification if
A) both parties claim that the agreement was incorrectly recorded.
B) the oral agreement was somewhat ambiguous.
C) the written document appears to have an error in its recording.
D) further negotiations had discussed the proposed change.
E) the written contract contains the whole of the agreement.
Answer: C

25) Michael obtained rectification in a court settlement. Now he can 25)

A) abandon his claims on the original contract.
B) resume the contract negotiations.
C) require that the other party perform its contract.
D) exercise choices under the concept of voidability.
E) collect any damages requested.
Answer: C

26) If at the time of entering into a contract unbeknown to the purchaser or the seller, the subject matter 26)
did not exists, the contract is
A) voidable at the option of the court.
B) void, according to the Sale of Goods Act as well as under the Common Law.
C) a mistake in terms of fact and not assumption.
D) subject to the tort of deceit.
E) valid, the purchaser stands the loss.
Answer: B

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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

27) Frustrating events are the same as mistakes. 27)

Answer: True False

28) A quasi-contract is an obligation that may arise because one party has received an unfair benefit 28)
and not because of direct contractual relationship.
Answer: True False

29) Jack, a sales agent, approaches Edmund and tells Edmund about a product he is selling. Jack 29)
convinces Edmund to purchase the product and Edmund is asked to sign a document. Later
Edmund realizes that the document is very different from what he was told. Edmund may plead
non est factum.
Answer: True False

30) A plea of non est factum cannot be used against a third party who has been tricked. 30)
Answer: True False

31) Where a contract involves a level of risk, a court will most likely not grant relief to the party 31)
adversely affected by a mistake.
Answer: True False

32) In a contract involving risk a court will not grant relief to a party adversely affected by a mistake 32)
because the party knew of the risk.
Answer: True False

33) Mistake takes place after the formation of the contract, and frustration occurs at the time of the 33)
formation of the contract.
Answer: True False

34) A legal mistake is an error in judgment. 34)

Answer: True False

35) Mistake about terms includes the inadvertent use of wrong words. 35)
Answer: True False

36) Where the wrong words are inadvertently used by a party in stating the terms of a contract, 36)
resulting in a mistake, the contract will be binding on the party if it was reasonable for the other
party to rely on the words used.
Answer: True False

37) Where a party inadvertently uses the wrong words in stating the terms of a contract, and another 37)
party enters into the contract, the court may set aside the contract if a reasonable bystander would
conclude that the party made a mistake.
Answer: True False

38) Builder and owner enter into a contract to have a building built. At the time they entered into the 38)
contract they were unaware that there was an underground stream below the site that would make
the construction impossible. The contract has been discharged due to frustration.
Answer: True False

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 39) The most fundamental mistake that radically changes the nature of the bargain of the parties is a 39)
mistake about the existence of the subject matter of the contract.
Answer: True False

40) If the parties disagree over what the words in a contract mean, the court will declare the contract 40)
void.
Answer: True False

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.

41) Explain the meaning of rescission. 41)

Answer: Rescission is an order of the court that rescinds a contract or revokes a contract. The
effect of a rescission is that the parties are, as near as possible, returned their
original positions.

42) What are the two main types of mistake in contract law? 42)
Answer: The two main types of mistake in contract law are mistake about terms of a
contract,and mistake in assumptions about important facts related to the contract.

43) What is rectification? Explain its use by courts in situations involving mistake in law. 43)
Answer: Rectification is the correction of a written document so that it accurately reflects the
contract made by the parties. When parties to a contract reach an agreement, the
written version of the contract may not reflect the original agreement. The party
who claims that the written version of the agreement does not properly record the
original agreement may ask the court for rectification.

44) Explain the concept of rescission as it relates to mistake in contract law. 44)
Answer: Rescission is an order of the court that rescinds a contract, that is it revokes the
contract so that the parties are, as far as possible, returned to their original positions.
In contract law, when a party makes a mistake, either a mistake about terms, or a
mistake in assumptions related to the contract, a court may set aside or rescind the
contract. When a contract is rescinded by the court, the parties are placed in their
original positions.

45) What is a “snapped up offer” and what are the consequences? 45)
Answer: An offeree accepts an offer knowing that it has been made by mistake. The contract
is voidable at the option of the offeror, if to enforce the contract would impose
undue hardship on the offeror.

46) What is unjust enrichment? What remedy will the courts grant if unjust enrichment is 46)
established by a plaintiff?
Answer: Unjust enrichment is an unfair benefit. When the plaintiff establishes that a party
has received an unfair benefit, or a benefit to which he or she is not entitled, the
court will grant the remedy of restitution. The remedy of restitution requires the
defendant to repay the unfair benefit it has received.

47) What is the difference between a void and a voidable contract? 47)
Answer: A void contract is one that is nullity from its inception, it is as if the contract was
never formed or never existed. A voidable contract is one which exists until one of
the parties takes steps to bring the contract to an end.

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ESSAY. Write your answer in the space provided or on a separate sheet of paper.

48) Frustrating events are different from mistakes. Explain.

Answer: A legal mistake, or mistake in law is a mistake that one makes either about the terms of the contract, or
regarding assumptions about facts relating to a contract. Mistake about terms include such mistakes as
the inadvertent use of wrong words by a party in stating the terms of a contract, errors in recording an
agreement, and misunderstanding between parties regarding the meanings of words used in a contract.
Mistake in assumptions regarding facts relating to the contract include mistakes about the existence of
the subject matter of a contract. Where a mistake is proven, a court will set aside or rescind the contract.
Mistake thus regards the actual state of affairs at the time that the contract if formed. A frustrating event,
however, is an event that renders a contract impossible to perform after its formation. For example, if Jack
sells goods to Jill, and before the goods are delivered, the goods are stolen, the contract between Jack and
Jill is terminated and Jill will not have to pay for the goods.

49) A party who seeks rectification of a document must satisfy the conditions for rectification. Explain.
Answer: Rectification is the correction of a written document by a court so that it accurately reflects the contract
made by the parties. Where a party claims that the written document does not reflect the original
agreement reached by the parties, it may ask the court for rectification. A court will not rectify a contract
unless certain conditions are met. A court will rectify a contract if (a) it is satisfied that there was a
complete agreement between the parties and that this agreement was free from any ambiguity and was
not conditional on any further adjustments, (b) the parties did not engage in any further negotiations to
amend the contract, and (c) the change in the written document appears to be an error in the recording of
the document and can be easily explained as such.

50) Explain the concept of non est factum and how this concept has evolved over the years.
Answer: Non est factum means "it is not my doing." The concept or plea of non est factum originated in medieval
times when a majority of the population could neither read nor write. A person who could not read or
write who had to enter into a contract, had to rely on the honesty of the other party. Such a person could
be fraudulently induced into signing a contract. Such an innocent party was permitted to raise the plea or
defence of non est factum if the other party attempted to enforce the fraudulently obtained contract.
Currently, the use of the plea has been extended to cover those situations in which literate persons have
been duped into entering a contract.

51) What is rescission. Explain how rescission relates to mistake in contract law.
Answer: Rescission is an order of the court that rescinds a contract, that is it revokes the contract so that the parties
are, as far as possible, returned to their original positions. In contract law, when a party makes a mistake,
either a mistake about terms, or a mistake in assumptions related to the contract, a court may set aside or
rescind the contract. When a contract is rescinded by the court, the parties are placed in their original
positions.

52) What is rectification? How is it used by courts in situations involving mistake in law.
Answer: Rectification is the correction of a written document so that it accurately reflects the contract made by the
parties. When parties to a contract reach an agreement, the written version of the contract may not reflect
the original agreement. The party who claims that the written version of the agreement does not
properly record the original agreement may ask the court for rectification.