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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
True/False Questions
1) Pre-contractual representations are always part of the terms of all contracts.
a. True
b. False
2) A contractual representation relied upon to induce a contract, cannot be made
deliberately false.
a. True
b. False
3) A misstatement of the law is identical to a misstatement about the existing factual
consequences of the application of that law.
a. True
b. False
4) Cavell is selling his CD burner to an acquaintance. Cavell knows that the CD burner has
a defect, generating CDs that skip. The acquaintance asks Cavell for his opinion of the
machine just before the purchase is to take place. All Cavell says is “I personally like it, but
I am not too picky about quality. You should try the machine out before you buy it.” Cavell
has made a misrepresentation about the quality of the machine.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
5) Steve, Sheryl’s doctor, is selling some of the artwork from his office. Sheryl says she has
always been interested in his Thomson piece and asks how much he wants for it. Although
the painting is not actually a Thomson original, Steve knows which one she means and tells
her that he paid $3000 but will take $1000. (That much is true, but he doesn’t say anything
at all to indicate that it is NOT a Thomson original). By his silence, Steve has engaged in
actionable misrepresentation.
a. True
b. False
6) Damages for actionable misrepresentation are available in the contract law depending on
the type of misrepresentation that was made.
a. True
b. False
7) A person who investigates a condition or state of facts for themselves, rather than relying
on a pre-contractual statement of the other side, will usually succeed in an action for
misrepresentation whenever the investigation that they made turns out to be untrue.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
8) If Vasaliki is induced to enter into a contract as a consequence of a statement made by
Lampros with reckless indifference as to its truth, Vasaliki has an automatic right to
rescission and may also get damages if the statement is fraudulent.
a. True
b. False
9) Restitution requires both sides to be returned to their pre-contractual positions.
a. True
b. False
10) Restitution is always possible for any misrepresentation regardless of the
circumstances.
a. True
b. False
11) Negligent misrepresentation occurs when a person deliberately lies about a material fact
inducing a contract.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
12) Parol evidence cannot be used to resolve ambiguous terms of a written contract.
a. True
b. False
13) The proof of a collateral contract not in contradiction to the written contract is an
exception to the parol evidence rule.
a. True
b. False
14) The golden rule always requires an adoption of the contextual approach to contractual
interpretation.
a. True
b. False
15) Someone who signs a document in a hurry is never bound by his signature.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
Multiple Choice Questions
1) A contractual term
a. is made with the intention to induce a contract.
b. is a promissory statement.
c. does not impose a contractual obligation.
d. is a form of misrepresentation.
2) A pre-contractual representation
a. creates a legally enforceable obligation.
b. is a promissory statement.
c. will always induce a contract.
d. is a voluntary agreement to do something in the future.
e. can be made by words or conduct.
3) A misrepresentation is
a. a kind of mistake.
b. an opinion that turns out to be untrue.
c. actionable whenever it turns out to be false.
d. actionable if it induces a contract by falsely characterizing the factual consequences of a
past legal action.
e. actionable if it induces a contract by misdescribing another’s future action.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
4) Reeni was interested in purchasing a car. After searching the classified ads, she found a
car in which she was interested, being sold by Ethan, whom she had never met. Ethan knew
that his car was in need of new tires, a new muffler, and would soon need a new clutch and
a brake job. Consequently, he was hoping that, when they met, Reeni wouldn’t ask too
many questions. When she wanted to go for a test drive, Ethan gave her the keys and said
that he trusted her to go alone and that doing so would allow her to test it in a less inhibited
fashion. Really, he just didn’t want her to ask about any of the car’s problems. Reeni took
the car by herself and, on the basis of its performance, bought it at Ethan’s listed price, no
questions asked. Which of the following statements is most likely TRUE?
a. Ethan is not required to disclose the car’s problems during pre-contractual negotiations if
Reeni does not ask about them.
b. Silence can never amount to a misrepresentation.
c. Ethan owed Reeni a special duty to disclose the problems with his car.
d. By failing to accompany Reeni in the test drive, Ethan breached a duty of utmost good
faith.
e. Reeni would succeed in an action against Ethan for misrepresentation.
5) When will silence distort a previous assertion?
a. whenever a change in circumstances occurs
b. whenever a change in circumstances does not affect the accuracy of a representation
c. when a contract requires a duty of utmost good faith
d. when a change in circumstances affects the accuracy of an earlier pre-contractual
representation
e. when a statutory provision requires disclosure
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
6) The possible consequences of actionable misrepresentation include
a. a damage award for breach of contract.
b. the remedy of rescission.
c. the remedy of an injunction.
d. the remedy of an incision.
e. a fine for breach of contract.
7) In order to get Susannah to buy his cottage, Paul tells her that he has recently spent $100
000 in repairs that make its foundations flawless. In love with the cottage and in reliance on
Paul’s representation, Susannah impulsively trades her condo in the city for the cottage
without asking for a home inspection. Two months after she moves into the cottage,
Susannah hears a creaking noise during a windy evening. The next morning, she has a
home inspector over to take a look. He tells her that there have been no repairs on the house
in the last 20 years and that the foundation is in a dangerous state of disrepair. She calls
Paul to try to get her condo back but finds out that he has sold the unit and has moved to
Bermuda with all of his assets. In seeking orders for rescission and restitution,
a. Susannah will most likely succeed in obtaining rescission and restitution, as Paul’s
misrepresentation is clearly actionable and the parties can be put back their same position
by evicting the person to whom Paul sold the condo.
b. Susannah will likely succeed, and the court will therefore award damages for breach of
contract, which is the usual award granted when a party seeks rescission.
c. Susannah will most likely fail, as Paul’s misrepresentation is clearly not actionable.
d. Susannah will most likely fail because her living in the cottage for two months is an
affirmation of Paul’s misrepresentation.
e. Susannah will most likely fail because courts are unlikely to grant rescission when the
rights of third parties are affected.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
8) Which of the following cannot result in a damage award?
a. innocent misrepresentation
b. negligent misrepresentation
c. fraudulent misrepresentation
d. breach of contract
e. silence that distorts a previous assertion
9) Samuel and Ben are negotiating the sale of a sailboat. Samuel expresses an interest in the
boat but emails Ben a list of five questions that he wants answered before agreeing to
purchase it. Ben responds with full answers to four of the questions. Samuel emails back
and says he will buy the boat on Saturday as long as his remaining question (about the state
of its hull) checks out okay. Ben promises to check with his boat mechanic and respond
before they are scheduled to meet on Saturday. Both men get busy. Ben checks with his
mechanic but innocently forgets to report back to Samuel that there is a crack in the hull.
Samuel forgets that there was one question outstanding. Saturday comes and the transaction
takes place. If it turns out that there is a significant problem with the hull of the boat, which
of the following is TRUE?
a. If he sues, Samuel will likely obtain a damage award.
b. If he sues, Samuel will likely succeed in a tort action.
c. Samuel is stuck with the boat.
d. Ben may have to take the boat back and return Samuel’s money.
e. Ben may seek to get his boat back even if Samuel wants to keep it.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
10) Diamond Dave decides to sell his donut franchise to Fast Freddie. Freddie has a number
of questions about the receivables. Diamond Dave says that all of the answers to his
questions can be found in the corporate ledger. Instead of inspecting the ledger, Fast
Freddie hires an accounting firm to do a forensic audit of the business. Relying on the audit,
Freddie buys the business. Which of the following explains why Freddie would fail to
obtain rescission if he later decided he did not like the transaction?
a. Freddie affirmed Dave’s misrepresentation.
b. Freddie did not rely on the fraudulent misrepresentation that Dave made.
c. Diamond Dave was not careless with his ledger, but by not conducting his own forensic
audit Diamond Dave misled Freddie into thinking he needed to conduct a forensic audit;
however, this was not the cause of Freddie’s damages.
d. Diamond Dave made an innocent misrepresentation, but it is impossible to restore the
parties to their previous positions.
e. Diamond Dave did not make any misrepresentation in any way, and Freddie relied
entirely upon his own investigations.
11) Contracts of utmost good faith
a. arise when one party is uniquely situated to know the material facts such as an insurance
contract.
b. are the only contracts that do not require any kind of disclosure.
c. do not require notification of any changes to previously supplied information.
d. have no bearing on the law of misrepresentation.
e. allow parties to lie to each other prior to entering into a contract without any legal
consequence attaching to those lies.
12) Which of the following is NOT an example of a disclosure required by statute?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
a. disclosure of a serious medical condition when obtaining life insurance
b. disclosure of material facts by a financial officer of a publically traded corporation
c. disclosure of significant liabilities that exist when making a domestic (family law)
contract
d. disclosure of material facts pertaining to the sale of securities
e. disclosure of material facts by an accountant when she sells her car to one of her clients
13) Suppose that a term is not the result of a statement expressed by either of two
negotiating parties. Which of the following is TRUE?
a. It could never be a term of any contract between them.
b. It could only be a term of a contract between them if it is implied by a court.
c. It could only be a term of a contract between them if it is an implied term.
d. It could only be a term of a contract between them if one party subsequently affirms the
term.
e. It could only be a term of a contract between them if both parties subsequently affirm the
term.
14) An express term
a. is only enforceable if one of the parties agrees to it in writing.
b. is a statement made by one of the parties to the other party of a contract that a reasonable
person would believe was intended to create an enforceable obligation.
c. is a statement made by one party to induce the other party to enter into an agreement.
d. sometimes arises as a result of an operation of law.
e. is a term made by the court ascertaining the industry custom when interpreting the
contract.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
15) Business people often sign written agreements on the oral assurance that some of the
terms of the written agreement will not be enforced. To sign under written agreements in
these circumstances is imprudent because of
a. the golden rule.
b. the parol evidence rule.
c. the contra proferentum rule.
d. the absurdity rule.
e. the fact that oral terms of contracts are never enforceable.
16) Ejay wants a court to consider oral evidence about a written contract in order to resolve
a dispute about an ambiguous term in one of her client’s contracts. She decides that she will
characterize the facts as giving rise to a collateral contract. Which of the following is
TRUE?
a. Ejay is doing this because the collateral contract doctrine is the only way to have her oral
evidence heard.
b. Ejay is a doing this because a collateral contract can never circumvent the rule
preventing oral evidence from being used to prove the terms of a written contract.
c. Ejay is doing this because the collateral contract doctrine was overturned years ago.
d. Ejay is likely mistaken because there is a more direct method of having the court
consider her oral evidence under the circumstances as oral evidence is often admissible to
interpret written but ambiguous terms of a contract, without a collateral contract being
proved.
e. Once a contract is in writing, oral evidence is never admitted to interpret the contract.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
17) An ambiguous contractual term
a. always results in litigation.
b. never results in litigation.
c. will have more than one plausible meaning.
d. will always have only one plausible meaning.
e. will always have six possible meanings.
18) Which of the following approaches to contractual interpretation will ONLY
SOMETIMES give words their plain, ordinary meaning?
a. the literal approach
b. the contextual approach
c. the golden rule
d. the contra proferentum rule
e. the parol evidence rule
19) Which of the following is NOT true of the contra proferentum rule?
a. It is a rule of contractual interpretation.
b. It is always the best means of resolving an ambiguous term.
c. It attributes to a term the meaning least favourable to its author.
d. It provides an incentive for the author of a term to draft it in clear and unambiguous
language.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
e. It applies to contracts where the other side did not draft the contract nor have any
meaningful input into the contractual terms.
20) Which of the following best describes an implied term?
a. It is a statement expressed by one of the parties.
b. It is sometimes inserted into a contract by a court.
c. It cannot create an enforceable legal obligation.
d. It can be used to rectify a mistake in a contractual document.
e. It is always based on the standard in the industry that the parties are engaged in.
21) Even if a lease does not expressly say that the item leased must come back in the same
condition in which it went out (subject to reasonable wear and tear), a court will imply such
a term. Courts will do so on the basis that such a term
a. was clearly intended by both parties.
b. was clearly desirable.
c. would improve the contract.
d. is in accordance with the usual industry standard practice in the industry the parties are
engaged in, if that implied term is proved by admissible evidence at trial.
e. is found in some leases.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
22) A court will find an implied term
a. when it is necessary to bring the contract in accordance with the objectively reasonable
intentions of the parties.
b. in order to rewrite the contract so that it is a better deal.
c. only if the parties had expressed it but forgot to write it down.
d. only if a statute tells it to do so.
e. whenever it wants and whatever term the court thinks would be useful.
23) Denise is a farmer in Prince Edward Island. Recently she purchased a new tractor from
her local dealer. Although her contract of sale contained a large number of standard terms
and conditions, it did not guarantee that the tractor would function properly. Assume that
the tractor malfunctions and Denise tries to sue for breach of contract. Which of the
following is most likely TRUE?
a. Denise would fail because no term in the contract was breached.
b. Denise would fail unless the court was willing to imply a term.
c. Denise would fail unless she was able to prove a collateral contract.
d. Denise would fail no matter what.
e. If a term was implied into the contract by statute or by common law, that the tractor
would function properly then Denise may succeed in her lawsuit for breach of contract.
24) Consumer protection laws in several jurisdictions including Manitoba, Northwest
Territories, and the Yukon
a. make it a crime to sell used goods.
b. make it a tort to sell used goods.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
c. imply a term in consumer transactions that goods being sold are new unless otherwise
described.
d. imply a term that goods being sold are used unless otherwise described.
e. have been repealed.
25) Standard form agreements
a. always balance the interests of both parties.
b. are rarely offered on a take-it-or-leave-it basis.
c. often are more time-consuming than negotiating the terms of a new contract.
d. often contain language that has been refined and tested over the years.
e. are not binding if the party signing them does not bother to read them.
26) Asha sells bottled spring water. Unlike other water vendors who purify their water,
Asha is marketing her product to those who want to drink spring water in its natural state.
Although her water source is pure and clean, she is concerned that some consumers might
have allergic reactions to trace elements in the unpurified water, so she designs a clause to
exclude her company from liability. The clause indicates that, by opening and drinking the
water, consumers are indicating that they have read and understood the warning that the
water has not been purified and, as such, waive all liability claims against the company for
any allergic reactions resulting from drinking the water. Which of the following is most
likely TRUE of Asha’s strategy?
a. It will fail because it is never possible to exclude tort liability by way of contract.
b. It will only succeed if the distributor personally points out to the consumer that by
drinking the water they are waiving their right to sue.
c. It will succeed as long as the label on the bottle constitutes reasonable notice of the
exclusion clause.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
d. The exclusion clause must be written in reasonably clear language that makes it relevant
to the liability to be excluded in order for the exclusion clause to be effective.
e. Exclusion clauses are not enforceable in a court of law.
27) A standard form business contract requires independent legal advice to the party
agreeing to the terms in order to be contractually binding
a. whenever a signature is required.
b. only when its terms are onerous or unusual.
c. only when its terms are on the back of a ticket.
d. only in the case of exclusion clauses.
e. not in any circumstances.
28) A ticket contract is
a. never enforceable.
b. enforceable only if the terms on the back of the ticket have actually been read by the
customer.
c. enforceable only if the customer knew about the terms on the back of the ticket.
d. enforceable only if the terms on the back of the ticket are initialed by the customer.
e. enforceable only if reasonable notice of the terms was given when the contract was
made.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 9: Representations and Terms
29) Molly decides to sell her house by way of a private sale. After advertising and showing
the house, she receives a written offer from an interested purchaser using a standard form
document assembled from a do-it-yourself legal kit. Molly studied the offer and wished to
change two of its terms. The interested purchaser agreed to the changes and reflected those
changes in the document. Molly signed the document and cashed the down payment
cheque. Two days later, Molly spotted an extremely onerous and somewhat unusual term
that was not brought to her attention when reading the document. As a result, Molly wishes
to cancel the contract. Which of the following is most likely TRUE?
a. Molly will fail because she is bound by her signature to the written agreement.
b. Molly will fail but only because she cashed the cheque.
c. Molly will succeed because the term was onerous and unusual.
d. Molly will succeed because she was not given reasonable notice of the onerous and
unusual term.
30) Which of the following statements is FALSE? The use of plain language instead of
legalese
a. can reduce the amount of time a company spends answering questions from customers
about confusing terminology.
b. is required by the official Communications Policy of the Government of Canada.
c. can be mandated by law.
d. makes it more difficult for businesses to enforce contracts.
e. was strategically avoided in the past.
31) The BEST way for a company to manage the risk associated with standard form
agreements is to
