Law and Business Administration in Canada Canadian 14th Edition By Smyth – Test Bank

1) The effect of the doctrine of privity of contract is that
a. a person who is not a party to a contract cannot obtain benefits or rights under it.
b. a unilateral contract is unenforceable against parties who have privity.
c. parties to a contract are protected by the law.
d. a bilateral contract is unenforceable against a promisee.
e. a person can obtain rights under a contract to which he or she is not a party.

Answer: a
Diff: 1
Type: MC
Topic: Privity of Contract
Skill: Applied

2) H owes C $700.00. By agreement between H and R, R promises to pay this debt in return for H’s undertaking to convey a house to him. C now sues R on his promise. In this situation,
a. there is no contract between H and C.
b. there is a contract between H and R.
c. privity of contract prevents C from succeeding.
d. there is no contract between R and C.
e. all of the above

Answer: e
Diff: 3
Type: MC
Topic: Privity of Contract
Skill: Applied

3) A enters into a contract with B whereby in consideration of the intended marriage of A’s daughter to B’s son, each of A and B will pay B’s son a sum of money. A fails to pay the money and now B’s son sues A. In this situation,
a. B’s son will succeed because he is a party to the contract between A and B.
b. B’s son will not succeed because there is no privity between B’s son and A.
c. B’s son will not succeed because an intended marriage is no consideration at all.
d. B’s son will succeed because a trust relationship was created.
e. B’s son will succeed because the consideration was the marriage of B’s son to A’s daughter.

Answer: b
Diff: 2
Type: MC
Topic: Privity of Contract
Skill: Applied

4) Dunlop sold a number of their tires to Dew & Co. on the terms that Dew & Co. would not resell them below certain listed prices and that, in the event of a sale to trade customers, Dew & Co. would get a similar undertaking not to sell below the listed prices. Dew & Co. sold the tires to Selfridge, who agreed to observe the restrictions and to pay Dunlop the sum of $5.00 for each tire sold in breach of this agreement. Selfridge in fact supplied tires to two of their own customers below the listed price. Dunlop now sues Selfridge to recover the two sums of $5.00 as liquidated damages and asks for an injunction to restrain further breaches of the agreement. In this situation,
a. there is a no contract between Dew & Co. and Dunlop.
b. Dunlop has no contractual connection to the contract between Selfridge and Dew & Co.
c. Selfridge is not in breach of the contract between Dew & Co. and Dunlop.
d. Selfridge has a contract with Dunlop.
e. there is a contract between Dunlop and Selfridge.

Answer: b
Diff: 3
Type: MC
Topic: Privity of Contract
Skill: Applied

5) Parker owes money to both Gregory and Williams. He agrees with Williams to assign to him the whole of his property if Williams will pay the debt due to Gregory. The property is duly assigned, but Williams fails to pay Gregory. Gregory and Parker sue in equity to compel performance of William’s promise. In this situation,
a. the lawsuit by Parker and Gregory will succeed.
b. Gregory acquired an equitable right through the mediation of Parker’s agreement.
c. Parker will be regarded as trustee for Gregory.
d. Parker need not have joined Gregory in the law suit.
e. all of the above

Answer: e
Diff: 3
Type: MC
Topic: Equitable Assignments
Skill: Applied

6) A policy of life insurance provided that the insurers would pay to the insured or his assignees the sum of $1000.00 if he died before July 31, 1926. The insured assigned the benefit of the policy to his wife and gave written notice of the assignment to the insurers. The policy was later extended, on the payment of an additional premium, for a further three months, but the benefit of the extension was not assigned to the wife. The insured died within the three-month extension period and the matter went to court on the issue of whether or not the wife benefited from the extension of the policy so as to be entitled to the insurance money. In this case,
a. the rule regarding notice of an assignment was not followed.
b. the extension of the policy was for the benefit of the wife and a trust had been created in her favour so as to entitle her to the insurance money.
c. the intention of the insured was not to benefit his wife, so she gets nothing.
d. the normal rule of privity applies and the wife gets nothing.
e. none of the above

Answer: b
Diff: 3
Type: MC
Topic: Exceptions to the Privity of Contract Rules
Skill: Applied

7) Peter was a coal merchant. In March 1962, he contracted to sell the business to his nephew John in consideration (1) that for the rest of Peter’s life John should pay him $20.00 a week and (2) that if Peter’s wife survived him, John should pay her an annual annuity of $15.00 a week. John took over the business and paid Peter the agreed sum until Peter died in November 1963. He then paid Peter’s widow $15.00 for one week and refused to pay any more. The widow in both her personal capacity and as administratrix of Peter’s estate brought an action against John in which she claimed all arrears under the annuity not paid her and asked for specific performance of the contract regarding the annuity. In this case,
a. the widow will succeed, but in her capacity as administratrix of Peter’s estate only.
b. the widow will succeed, but in her personal capacity only.
c. the widow will not succeed because only Peter could enforce the contract with John.
d. the widow will not succeed because there is no privity between her and John.
e. none of the above

Answer: a
Diff: 3
Type: MC
Topic: Assignments by Operation of Law
Skill: Applied

8) Where an assignment of a debt is equitable only,
a. the assignee alone can sue the debtor to enforce payment.
b. both the assignor and assignee must sue together to enforce the payment.
c. the assignor alone can sue the debtor to enforce payment.
d. none of the above
e. all of the above

Answer: b
Diff: 2
Type: MC
Topic: Equitable Assignments
Skill: Applied

9) Which of the following best demonstrates the concept of vicarious liability?
a. Jack is employed by Jim as a trainee mechanic. Jack goes to a party on the weekend and is asked by a friend, Mary, to check her car that won’t start. Jack checks the car. A few minutes after Mary drives away, the car’s ignition explodes injuring Mary.
b. A man’s dog runs out of the house and mauls a letter carrier.
c. A cow leaves its pasture, walks into the garden of another farmer and destroys all the farmer’s crops.
d. Jack is employed by Jim as a trainee mechanic. Jim’s sister, Maggie, brings her car to the shop. It has an engine problem. Jack has never worked on a car’s engine before. Jim asks Jack to work on the engine. Jack works on the engine. Later when Maggie drives off in the car, the engine explodes injuring Maggie.
e. Jack is injured on the job as a result of slipping on oil in the shop.

Answer: d
Diff: 3
Type: MC
Topic: Privity of Contract
Skill: Applied

10) A Company contracts to build a house for B, and the contract expressly states that the contractor may from time to time use the services of subcontractors. In the course of performing the contract, one of the subcontractors negligently builds a wall, which falls over, destroying B’s car. In this situation,
a. the damage to the car is too remote and neither A Company nor the subcontractor can be sued.
b. only the subcontractor can be sued.
c. only the contractor, A Company, can be sued.
d. both the subcontractor and A Company can be sued.
e. none of the above

Answer: d
Diff: 2
Type: MC
Topic: Privity of Contract
Skill: Applied