Assignment 7 Flashcards
Question 4
Angela was talking to Moira in a cafe and offered to sell her two year old car to Moira for the very low price of $7,000. Moira said that she wasn’t certain whether she wanted to buy the car and that she would think about it. Hector, who was eavesdropping on
the women’s conversation, spoke up to say, “You’ve got a deal! I’ll buy your car for that price”. Angela replied that she did not want to sell the car to Hector. Hector insisted that they had a contract. Angela felt that she was obligated to sell the car to Moira, if
she did decide she wanted to purchase it.
Which of the following statements is TRUE?
- Angela is not required to agree to sell her car to Hector for $7,000.
- At this point Moira and Angela have made a contract for the sale of the car.
- If Angela accepts Hector’s offer she will be liable to Moira for damages for breach of contract.
- Angela is not free to sell the car to anyone else unless she actually receives Moira’s rejection of her offer.
Correct Answer: 1
There is no contract between Angela and Hector. Hector cannot accept the offer because Angela did not offer to sell to Hector. Moira did not accept Angela’s offer and there is no contract between them; therefore, Angela is free to accept Hector’s offer, and,
provided she revokes her offer to Moira before acceptance, she will not be liable for damages to Moira. Angela does not need Moira’s rejection of the offer, because Angela can simply revoke the offer.
Question 5
On Monday, Peter mailed an offer to Beth to buy her horse for a price of $400. The offer was stated to be open for acceptance until 9:00 a.m. on Friday. It also stated, “Reply by telephone”. Beth considered the offer, and decided to accept. However, she
wanted all dealings to be in writing, so she wrote a letter of acceptance and mailed it on Thursday morning at 10:00 a.m. On Thursday afternoon, Peter found a better horse and telephoned Beth and told her that he was revoking his offer. Beth’s letter of
acceptance arrived at 8:00 a.m. Friday morning.
A. Since Beth mailed her acceptance prior to Friday morning at 9:00 a.m., she has a valid contract with Peter.
B. Since Beth’s letter of acceptance was received by 9:00 a.m. on Friday, she has a valid contract with Peter.
C. Since Peter revoked his offer prior to Beth communicating her acceptance there is no contract.
D. Since Peter’s offer was sent by mail, he was not legally entitled to require Beth to reply by telephone.
Which statement(s) is/are TRUE?
1. A and D only
2. B only
3. C only
4. None of the above
Correct Answer: 3
Peter has the right to impose the method by which acceptance is to be made. By choosing to mail her acceptance, Beth has accepted the risk that it will not be received on time. The postal acceptance rule does not apply on these facts, because the mails
were not the appropriate mode for accepting Peter’s offer. In this case, although the acceptance was received prior to the time set for expiration of the offer, it was after the offer was revoked and Peter was free to revoke the offer anytime prior to acceptance.
Beth should have telephoned Peter and then confirmed by mail if writing was important to her.
Question 6
Ranjit and Ab enter into a contract with Ivan, under which Ranjit and Ab agree to paint the exterior of Ivan’s house by October 31 for a price of $5,000. Which one of the following incidents would terminate the contract?
- After seeing the completed job, Ivan thinks the colour of the paint he agreed to looks too bright in such large quantities on his house.
- On October 13, Ranjit and Ab ask Ivan if they can have an extension of 2 days beyond the completion date, which would enable them to enter into another contract with one of Ivan’s neighbours.
- Ranjit and Ab complete the job on October 20, and Ivan pays them the agreed price.
- On October 18, Ivan sells his house to Juan, agreeing to complete the sale on December 11.
Correct Answer: 3
Only Option (3), where the terms of the contract have been met by both sides, would terminate the contract.
Option (1) would not terminate the contract C Ivan is stuck with his choice of colour.
Option (2) would not terminate the contract because Ranjit and Ab merely asked for an extension C they did not advise they would not or could not complete on the date agreed.
In Option (4), the sale of the house will take place after Ranjit and Ab have finished their contract. Even if one of the parties, either Ivan or Ranjit and Ab, were to breach the contract in some way, breach does not terminate the contract unless the party not in breach accepts
the breach as terminating the contract
Question 8
Which of the following statements regarding conditions in a contract of purchase and sale are TRUE?
A. A condition is a promise which is not fundamental to the contract.
B. In most cases, the breach of a condition permits the innocent party to terminate the contract.
C. A “time is of the essence” clause indicates that timely performance is a condition of the contract.
D. If a term is not a condition, then a breach of that term will not result in any remedies for the innocent party.
- A and C only
- A and D only
- C and D only
- B and C only
Correct Answer: 4
The terms of a contract will be either conditions or warranties. A condition is a term which goes to the very heart or root of the contract. A warranty is merely a promise which is not fundamental to the contract. A breach of a condition permits the innocent party to terminate the contract and sue for damages, or to continue the contract and sue for specific performance. When a clause includes the phrase “time is of the essence”, this indicates that timely performance is a condition of the contract.
Question 9
In which of the following situations would quantum meruit apply? (Consider only the common law and disregard any applicable
provision of the Real Estate Services Act or Rules).
- John is a trading services licensee. His neighbour, Bill, asks John to sell his house. While they enter into a formal listing
contract, the actual amount of commission which is to be paid is not inserted into the written agreement. John sells Bill’s
home but Bill will not pay any commission. - Carey and Brett entered into a contract where Brett agreed to build a home for Carey on the vacant lot she just
purchased. Brett’s full price for building the home was $40,000. Brett did approximately $12,000 worth of work, but
Carey refused to pay any instalments which were required under the contract. Brett is now suing Carey for breach of
contract. - George performs $300 worth of services under a contract entered into by Shelagh and himself, which is later
discovered to be void because of the omission of an essential term from their written agreement. - Quantum meruit would apply in all of the above situations.
Correct Answer: 4
In Option (1), because Bill asked John to sell his home, and John is a trading services licensee, the common law will imply an
obligation to pay a reasonable sum for the services rendered. In
Option (2), Brett has partially performed his part of the contract,
which Carey has breached. Brett may therefore claim the value of his work completed.
In Option (3), George provided services under a contract thinking it was valid, when it was in fact, void. All three of these examples involve circumstances in which the common law doctrine of quantum merit would provide a basis for recovery of a reasonable amount for the goods and services supplied. (Note that in BC, the Real Estate Rules, Part 5 Division 1 states that a brokerage providing trading services in relation
to the offering of real estate for sale, must have a written service agreement, unless specifically waived by the client. The
agreement must state the remuneration to be paid and the circumstances in which it will be payable.)
Question 11
Diana agrees to sell Allan her lakeside property in the Kootenays. The agreed price is $200,000, which is also the fair market
value of the land. It turns out that Allan was mentally incapacitated at the time that he agreed to purchase the property.
A. This contract is void.
B. This is a case of “common mistake”.
C. If Allan wants to rescind the contract he will have to prove that Diana knew that he was mentally incapacitated at the time
the contract was made.
D. Allan can repudiate the contract at any time.
Which of the above statements is/are TRUE?
- B and D only
- A and C only
- C only
- None of the above
Correct Answer: 3
Contracts with people who are mentally incapacitated are voidable at his or her option and not void. The option to repudiate must be exercised within a reasonable time after regaining the mental capacity or sobriety.
The person must prove that they were incapable of making a rational decision at the time and that the other party was aware of the incapacity at the time. Common mistake is where both parties to a contract have made the same mistake about a fundamental term of the contract
Question 12
Lance and Gwen entered into a contract of purchase and sale for Gwen’s house in the country. It had a wonderful unique
conservatory wing that Lance thought ideal for opening a restaurant. Lance knew the restaurant would prosper because it was very near a racecourse and all the punters would come for dinner on their way home after the races. Prior to the completion date Gwen told Lance she did not intend to go ahead with the sale. The next day Lance learned she intended to demolish the
conservatory because it was too expensive to heat. Which of the following remedies could Lance seek?
A. Lance could bring an action for specific performance of his contract with Gwen.
B. Lance’s only remedy is to seek damages for breach of contract if Gwen refuses to complete on the required date.
C. Lance could seek an injunction prohibiting Gwen from demolishing the conservatory.
D. Lance is entitled to sue Gwen for misrepresentation and rescind the contract.
- B only
- B and D only
- A and C only
- D only
Correct Answer: 3
Certain parcels of land may have unique features, and for that reason damages cannot always be a satisfactory remedy. On
these facts, given the special features and location and the particular purpose for which Lance wished to use the house, Lance’s argument in support of specific performance would be especially strong. Damages for breach of contract would not be adequate.
Lance can also go to court and get an injunction restraining the demolition until the specific performance lawsuit is determined.
Gwen has made no misrepresentation that would entitle Lance to ask for the contract to be rescinded.
Question 14
Which of the following statements regarding the remedy of specific performance is TRUE?
- Whenever a condition of a contract is breached, the innocent party has a right to specific performance.
- Specific performance is a statutory remedy granted at the discretion of the court.
- Specific performance is often an appropriate remedy when a contract respecting land is breached, if the land is unique.
- Judges choose the remedy of specific performance rather than damages in order to punish the party who is in breach of
the contract.
Correct Answer: 3
Specific performance is an equitable remedy that will be awarded at the court’s discretion in circumstances where the legal
remedy of damages would be inadequate. Specific performance is intended to enforce a contract rather than to punish persons in
breach.
Specific performance is often an appropriate remedy when a contract respecting land is breached if the subject property
is unique, and a reasonable substitute for it is not readily available.
Question 15
Fred offered to buy Doctor Bindley’s horse for $6,000 but Bindley refused this offer, saying that he wanted $8,000 for the horse.
Fred later wrote to Bindley offering to split the difference in price and included a cheque for $7,000 as payment for the horse. In
his letter, Fred said, “If I hear no more from you, I consider the horse mine”. Bindley did not cash Fred’s cheque and subsequently sold his horse at auction for $8,000. One or more of the following statements are FALSE.
A. Fred’s letter is an “invitation to treat” and is not binding on Bindley.
B. This is a valid contract because Fred, the offeror, indicated that silence by Bindley would be an acceptable method of
accepting his offer.
C. Bindley can ask the court to void this contract because Fred used the $7,000 cheque as an inducement, which is an
example of undue influence.
D. This is a classic example of frustration of a contract, by reason of which Bindley is relieved of any obligations under the
contract.
Which of the above statements are FALSE?
1. A and B only
2. A and C only
3. B, C, and D only
4. All of the above
Correct Answer: 4
Fred’s letter is not an invitation to treat by Fred but a counter-offer to Bindley’s counter-offer to sell the horse at $8,000. Silence by Bindley in this situation does not constitute acceptance. Acceptance must be a positive act by Bindley which, at least, implies acceptance.
For example, performance of the contract by Bindley (such as delivery of the horse to Fred) would probably
constitute acceptance.
This is not an example of either frustration or inducement (undue influence) because there is no contract
in existence to be frustrated or that was obtained in circumstances that negate consent.
Question 16
Hoping to become rich before the age of 45, Hersche hatched a plan to finance and build houses for resale. He was convinced
that the way to make a good profit was to purchase a large lot in the neighbourhood surrounding Swan Lake on which he could
build very large houses. Manjeet, who owned the only existing large vacant and wooded lot in the Swan Lake area, entered into a contract of purchase and sale with Hersche for $250,000. Soon after the parties entered into the contract, the Swan Lake area is
rezoned to allow for multi-family residential housing. A number of developers approach Manjeet to purchase his lot, offering more than twice what Hersche will pay according to the contract of purchase and sale. Manjeet would like to terminate the contract with Hersche in order to sell the property to one of the developers who approached him. Hersche still wants to purchase the lot to build his house.
Which of the following statements is TRUE?
- Manjeet’s lot is unique; therefore, the courts will likely grant Hersche an order for specific performance.
- Hersche should sue Manjeet to recover damages on the grounds that Manjeet’s breach of contract is unconscionable.
- Manjeet can frustrate the contract with Hersche by cutting down all of the trees on the lot and beginning construction of
his own house, as this will change the essential character of the contract with Hersche. - This is an example of common mistake because at the time of entering into the contract, neither Hersche nor Manjeet
were aware that the owner of the Swan Lake property could build multi-family housing on it; therefore, the contract is
void and Hersche cannot recover the property.
Correct Answer: 1
There is no mistake in this situation because the rezoning occurred after the contract between Hersche and Manjeet was entered into. Frustration will not be found if the requisite fundamental change in the subject matter is brought about through one of the parties’ own actions.
Manjeet cannot frustrate the contract through his own actions. In law, unconscionability is found where parties of unequal bargaining power enter into an unfair bargain. On the facts, there is no evidence that Hersche and Manjeet were of unequal bargaining power.
Specific performance is an equitable remedy which allows the court to order the contract to be carried out instead of awarding damages.
The court uses this remedy to enforce contracts for the sale of land where a parcel of land is unique and cannot be replaced. Since the contract of purchase and sale concerned the only large vacant lot surrounding Swan Lake, such a property is likely to be seen as unique.
Question 17
Hugh submitted by mail an offer to buy Oswald’s house. The offer did not set out an expiry time, but required acceptance by mail. The next day, Oswald executed a formal acceptance letter but forgot to mail it. One week later Hugh decided to revoke his offer. In the meantime Oswald had discovered the acceptance letter on his desk. Oswald walked over to the post office. Just before Oswald placed the acceptance letter in the mailbox his cellular telephone rang – it was Hugh. “Hello”, said Oswald, “I’m just about to mail my letter of acceptance of your offer”. Hugh responded, “Oswald I am calling to revoke my offer”. Oswald then placed the acceptance letter in the mailbox. Which of the following statements is TRUE?
- Oswald properly communicated his acceptance to Hugh before Hugh revoked his offer. A binding contract formed.
- The proper method of acceptance was by mail. The offer was properly cancelled because Hugh revoked the offer
before Oswald mailed the acceptance. No contract was formed. - The proper method of acceptance was by mail. Hugh’s revocation was not effective because it was not in writing. A
binding contract formed. - None of the above
Correct Answer: 2
In general, if an offer requires a particular method of acceptance, that method must be used. The postal acceptance rule holds
that acceptance by mail occurs at the time the acceptance is placed in the mailbox. An offer is released, however, when the
person who made the offer communicates revocation prior to acceptance of the offer. The revocation of a written offer does not
need to be in writing
