LSO Barrister Business Law & Contracts 2 — Questions and Answers
Question 1: Under the Ontario Sale of Goods Act, what implied condition is included in every sale of goods by description?
- The goods are of merchantable quality
- The goods will correspond with the description (Correct answer)
- The goods are fit for the buyer's purpose
- The seller has a right to sell the goods
Correct answer: The goods will correspond with the description
Section 14 of the Sale of Goods Act implies a condition that goods sold by description will correspond with the description given by the seller.
Question 2: Under the Ontario Consumer Protection Act, 2002, what right does a consumer have to cancel certain contracts?
- A 7-day cooling-off period for all purchases
- A 10-day cooling-off period for direct agreements and internet agreements entered into in certain circumstances (Correct answer)
- A 30-day cancellation right for any unsatisfactory goods
- No cancellation right once a contract is signed
Correct answer: A 10-day cooling-off period for direct agreements and internet agreements entered into in certain circumstances
The CPA provides a 10-day cooling-off period for direct agreements (door-to-door sales) and internet agreements, during which the consumer can cancel without penalty.
Question 3: What is the concept of 'frustration of contract' in Ontario?
- One party's dissatisfaction with the contract's terms
- The automatic termination of a contract due to a supervening event that makes performance impossible or radically different from what was agreed (Correct answer)
- Delay in contractual performance
- A party's difficulty in performing due to economic hardship
Correct answer: The automatic termination of a contract due to a supervening event that makes performance impossible or radically different from what was agreed
Frustration discharges both parties from their obligations when an unforeseen event makes performance impossible, illegal, or radically different from what was contemplated.
Question 4: Under the Ontario Personal Property Security Act (PPSA), what is the purpose of 'registration'?
- To create a security interest
- To perfect a security interest and establish priority against other creditors and a trustee in bankruptcy (Correct answer)
- To transfer ownership of personal property
- To register a lien against real property
Correct answer: To perfect a security interest and establish priority against other creditors and a trustee in bankruptcy
Registration of a financing statement under the PPSA perfects a security interest and gives the secured party priority over subsequent secured parties and unsecured creditors.
Question 5: In Ontario, what is a 'non-solicitation clause' in an employment contract?
- A clause preventing the employee from starting a competing business
- A clause preventing an employee from soliciting the employer's clients or employees after termination (Correct answer)
- A clause preventing the employer from soliciting other employees
- A clause prohibiting recruitment of new staff
Correct answer: A clause preventing an employee from soliciting the employer's clients or employees after termination
A non-solicitation clause restricts a departing employee from soliciting their former employer's clients or staff for a defined period and geographic area after employment ends.
Question 6: Under the Canada Business Corporations Act (CBCA), what is the duty of directors to act in the best interests of the corporation?
- To maximize short-term shareholder profit
- To act honestly and in good faith with a view to the best interests of the corporation (Correct answer)
- To follow shareholder instructions at all times
- To prioritize the interests of creditors over shareholders
Correct answer: To act honestly and in good faith with a view to the best interests of the corporation
Section 122(1)(a) of the CBCA requires directors to act honestly and in good faith with a view to the best interests of the corporation, not merely its shareholders.
LSO Barrister Business Law & Contracts 2
Under the Ontario Sale of Goods Act, what implied condition is included in every sale of goods by description?