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Chapter 8 Factors Affecting the Contractual Relationship
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Chapter 8 Factors Affecting the Contractual Relationship Business Law In canada 11th Edition By Yates -Test Bank
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Business Law in Canada, 11e (Yates)Chapter 8 Factors Affecting the Contractual Relationship
1) With regard to the law concerning misrepresentation, which of the following is true?
A) The case law provides a remedy for a wildly exaggerated claim, such as "This is the best car
ever built."
B) A statement of opinion can be a one-sided mistake.
C) A misrepresentation can be a false assertion of fact that induces (persuades) the party to
contract, and need not be an assertion about a term of the contract.
D) For fraudulent misrepresentation, the buyer could ask only for the equitable remedy of
rescission.
E) A buyer could not be awarded the equitable remedy of rescission if the seller honestly
believed that the misrepresentation was true.
Answer: C
Diff: 2 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Applied
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
2) A fraudulent misrepresentation which induces another person to enter into a contract can
result in which of the following remedies?
A) Rescission and/or damages
B) Rescission only
C) Damages only
D) Rectification
E) There is no remedy available for fraudulent misrepresentation.
Answer: A
Diff: 1 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Recall
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
1
Copyright © 2017 Pearson Canada, Inc.
,3) Damages as a remedy will not be available in which of the following situations?
A) Jones, although being careful, makes an innocent misrepresentation persuading Smith to enter
a contract with him.
B) Jones makes a fraudulent misrepresentation, persuading Smith to enter a contract with him.
C) Jones makes a negligent misstatement, persuading Smith to enter a contract with him.
D) A false statement made by Jones becomes a term of the contract.
E) Jones makes an intentional misrepresentation of fact in order to get Smith to sign the
agreement.
Answer: A
Diff: 1 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Recall
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
4) Often a party to a contract wants to avoid his obligations by arguing that the contract was
entered into because of a mistake, misrepresentation, undue influence, or duress. Which of the
following is false with regard to these areas of the law?
A) A buyer could not be awarded the equitable remedy of rescission if the seller honestly
believed that his misrepresentation, which persuaded the buyer to buy, was true.
B) If a seller persuades a person to buy something by a fraudulent misrepresentation, the buyer
could ask for rescission and/or damages for the tort of deceit.
C) A person can successfully argue non est factum and avoid his obligations under a contract
only if he was misled about the very nature of the document and was not careless.
D) Independent legal advice given to a person who wants to give a gift to a dominant person
(e.g., his doctor) is good evidence to rebut a presumption of undue influence.
E) Where, because of a mistake, a written document does not embody the unchanged term of the
original oral agreement, a party to the contract could ask the court for the equitable remedy of
rectification.
Answer: A
Diff: 3 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Recall
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
2
Copyright © 2017 Pearson Canada, Inc.
,5) The office manager of a real estate agency was at an office supply store to replace a filing
cabinet when he saw a demonstration of a new Xerox copier. Undoubtedly, the agency would
benefit from the copier, especially since it had the capability of enlarging the original—a good
feature when dealing with the small print of contracts. The next day, he called the manager of the
store to discuss the machine further. The seller said that it was "ten years ahead of the
competition," that it "was rated as maintenance-free by an independent consumer research
group," and that he had "sold five to other real estate agencies in this area" and "had only one
left." The agency, relying on these statements, asked to have it delivered. When it arrived, the
office manager had learned that every statement made by the seller had been false. Furthermore,
the seller did not send out the machine discussed, but the old model. Which of the following is
true?
A) The agency would have to keep the machine, but could sue the seller for damages for the tort
of deceit.
B) This is a "buyer beware" situation and the buyer has no remedy.
C) The agency would have a remedy for breach of contract, but no remedy for other statements
that merely persuaded it to enter the contract.
D) The agency could have returned the machine even if it had been sent the right model, since
the remedy of rescission was available to it for misrepresentations made.
E) Had the office supply store sent the right machine, the agency would have had no remedy.
Answer: D
Diff: 2 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Applied
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
6) Jenny went to the store and asked to see a Bluetooth headset. The salesman brought out a set
that he said had all the features that she wanted. After looking at the price tag and little else, she
said she would think about it. The salesman said that this was the most popular model sold, that
they sold 1000 of them during the World Series alone, that it had the highest rating in Consumer
Reports, and that he only had that one left. Jenny bought it. Later she found out that all the
statements made to her by the salesman were false, including the statement that the headset had
all the features that she wanted, because it did not have noise suppression. Which of the
following is true?
A) Jenny could obtain the remedy of rescission only if the statements made to induce her to
contract were fraudulent.
B) The statements of the salesman are fraudulent only if the salesman knew they were false.
C) Jenny would only have a remedy for breach of contract.
D) The equitable remedy of rescission is available only if Jenny were able to restore the headset
to the seller.
E) Jenny could return this headset to the seller only if she could prove undue influence.
Answer: D
Diff: 2 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Applied
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
3
Copyright © 2017 Pearson Canada, Inc.
, 7) A salesman innocently misrepresented a fact to a customer about a new printer. He honestly
believed his statement was true and was not careless. Although this fact was not about a term of
the contract, it did induce the customer to buy that printer. The next day, the customer learned
the true facts and wanted to return the printer. If the store refused to take it back and the
customer sued, which of the following would be the most likely result?
A) An award of damages
B) The buyer's case dismissed
C) An order of specific performance
D) An order of rescission
E) An injunction
Answer: D
Diff: 2 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Applied
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
8) When Gary went into Computer Heaven, Ltd. to get a better manual for the program he was
trying to master, he was caught by a demonstration of a computer created by StarSystem Inc. He
was fascinated by its performance. The salesman, Ross, told Gary that he should have this
machine; that "it was the last computer, no other will ever be better"; that "UBC, Simon Fraser
University, and BCIT just ordered over 1000 of them"; that he only had "a few left and the
demand is so great it will take almost a year for the next shipment to arrive." When Gary said he
needed a computer with at least 1 terabyte of hard drive space, Ross said this model had 2.5
terabytes. Gary was persuaded and contracted for it. Later Gary learned that every statement
made by the salesman Ross was untrue, including the statement about the memory capacity. The
model only had 400 gigabytes. On these facts, which of the following is true?
A) Gary could be awarded the equitable remedy of rescission even if Ross, the salesman,
honestly believed everything he said was true.
B) Only if Ross, the salesman, knew that all the statements he made were false could Gary get a
remedy.
C) Merely the exaggerated claim "it was the last computer, no other will ever be better" is
enough, according to the case law, to allow Gary to get out of the contract.
D) Statements that induced Gary to contract, but that are not the terms of the contract, are not
significant enough for the courts to award a remedy by case law or by statute.
E) Such misrepresentations could only result in contractual remedies, legal or equitable, but not
in tort remedies.
Answer: A
Diff: 3 Type: MC Page Ref: 247
Topic: Ch. 8 - Misrepresentation
Skill: Applied
Objective: Chapter 8: 1. Distinguish innocent, fraudulent, and negligent misrepresentation.
Bloom's Taxonomy: Knowledge
4
Copyright © 2017 Pearson Canada, Inc.
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