LSO Barrister Business Law & Contracts 1 — Questions and Answers
Question 1: Under the Ontario Business Corporations Act (OBCA), what is the minimum number of directors required for a private company?
- None
- One (Correct answer)
- Two
- Three
Correct answer: One
Section 115 of the OBCA requires a corporation to have at least one director, though most private corporations have one or more for governance purposes.
Question 2: Under Canadian contract law, what are the essential elements for a valid and enforceable contract?
- Offer, acceptance, consideration, and intention to create legal relations (Correct answer)
- Offer, acceptance, and writing
- Offer, acceptance, and witness signatures
- Offer, good faith negotiations, and consideration
Correct answer: Offer, acceptance, consideration, and intention to create legal relations
A binding contract requires offer, acceptance, consideration (mutual exchange of value), capacity, and intention to create legal relations.
Question 3: What is the legal concept of 'privity of contract' in Ontario?
- The confidentiality of contract terms
- Only parties to a contract can sue or be sued under it (Correct answer)
- The requirement that contracts be in private writing
- The priority of one contract over another
Correct answer: Only parties to a contract can sue or be sued under it
Privity of contract is the common law rule that only the parties to a contract have rights and obligations under it; third parties generally cannot enforce contract terms.
Question 4: Under the Ontario Partnerships Act, what is the liability of a general partner for the debts of the partnership?
- Limited to their capital contribution
- Joint and several liability for all partnership debts and obligations (Correct answer)
- No personal liability if they were not involved in the transaction
- Limited liability as determined by the partnership agreement
Correct answer: Joint and several liability for all partnership debts and obligations
General partners have unlimited joint and several liability for the debts and obligations of the partnership, meaning personal assets can be seized to satisfy partnership debts.
Question 5: Under the OBCA, what is a 'unanimous shareholder agreement' (USA)?
- An agreement requiring all shareholders to vote the same way
- An agreement among all shareholders that restricts or transfers directors' powers to shareholders (Correct answer)
- An agreement that all shares must be sold at the same price
- An agreement preventing new shareholders from joining
Correct answer: An agreement among all shareholders that restricts or transfers directors' powers to shareholders
A USA under section 108 of the OBCA allows shareholders to restrict or assume directors' powers, giving shareholders direct control over management decisions.
Question 6: In Ontario, what is the doctrine of 'unconscionability' in contract law?
- A rule that contracts must be read narrowly against the drafter
- A doctrine allowing courts to set aside contracts where there is inequality of bargaining power and exploitation of the weaker party (Correct answer)
- A rule requiring good faith in all commercial contracts
- A doctrine about unfair surprise in contract terms
Correct answer: A doctrine allowing courts to set aside contracts where there is inequality of bargaining power and exploitation of the weaker party
Unconscionability allows courts to refuse enforcement of a contract where one party exploited a significant power imbalance to impose grossly unfair terms on the other.
LSO Barrister Business Law & Contracts 1
Under the Ontario Business Corporations Act (OBCA), what is the minimum number of directors required for a private company?