NCA Canadian Common Law Foundations 1 — Questions and Answers
Question 1: In Canadian contract law, which element must be present to distinguish a binding contract from a mere gift promise?
- Written form
- Consideration (Correct answer)
- Notarization
- Registration
Correct answer: Consideration
Consideration—a bargained-for exchange of value—is essential to a binding contract at common law. A promise to make a gift is unenforceable without consideration unless made under seal. This applies across all common law provinces.
Question 2: Under Canadian common law, the parol evidence rule provides that:
- Oral agreements can never be enforced
- Extrinsic evidence cannot be admitted to add to, vary, or contradict a fully integrated written contract (Correct answer)
- All contracts must be reduced to writing to be valid
- Oral modifications of written contracts are automatically void
Correct answer: Extrinsic evidence cannot be admitted to add to, vary, or contradict a fully integrated written contract
The parol evidence rule bars extrinsic evidence to vary or contradict a final integrated written contract. However, exceptions exist for: collateral contracts, custom and trade usage, ambiguity, rectification, and conditions precedent.
Question 3: The doctrine of promissory estoppel in Canadian common law operates as:
- A cause of action allowing a party to sue on a gratuitous promise
- A shield preventing a party from going back on a clear and unequivocal promise where the other party has relied on it to their detriment (Correct answer)
- A rule requiring promissory notes to be in writing
- An equitable remedy that converts a promise into a binding contract
Correct answer: A shield preventing a party from going back on a clear and unequivocal promise where the other party has relied on it to their detriment
Following Central London Property Trust v. High Trees [1947] (adopted in Canada), promissory estoppel prevents a promisor from retracting a clear promise that the promisee has relied on—but in Canada (unlike Australia) it is generally a shield, not a sword creating new causes of action.
Question 4: A contract is formed between a seller and a buyer. The buyer claims the seller made a misrepresentation inducing the contract. For rescission, which elements must the buyer establish?
- A false statement of fact, made to the buyer, that induced the buyer to enter the contract (Correct answer)
- That the seller knew the statement was false and intended to deceive
- That the buyer suffered a financial loss exceeding $10,000
- That the statement was made in writing
Correct answer: A false statement of fact, made to the buyer, that induced the buyer to enter the contract
To rescind a contract for misrepresentation, the claimant must establish: (1) a false statement of fact (not opinion or law, though the law/opinion distinction has been eroded); (2) made to the claimant; (3) that induced the claimant to enter the contract. Fraudulent intent is required only for the tort of deceit, not for equitable rescission.
Question 5: In Canada, which statute in most common law provinces codifies the law relating to the sale of goods and implies terms such as fitness for purpose and merchantable quality?
- The Consumer Protection Act
- The Sale of Goods Act (Correct answer)
- The Business Corporations Act
- The Occupiers' Liability Act
Correct answer: The Sale of Goods Act
Provincial Sale of Goods Acts (modelled on the UK Sale of Goods Act 1893) imply conditions as to title, description, fitness for purpose, and merchantable quality into contracts for the sale of goods. Consumer protection legislation may add additional rights.
Question 6: Under Canadian contract law, the test for remoteness of damages in breach of contract cases derives from which English case adopted across Canadian common law provinces?
- Donoghue v. Stevenson [1932]
- Hadley v. Baxendale (1854) (Correct answer)
- Carlill v. Carbolic Smoke Ball Co. [1893]
- Pinnel's Case (1602)
Correct answer: Hadley v. Baxendale (1854)
Hadley v. Baxendale established the two limbs of contractual remoteness: damages recoverable are those arising naturally from the breach (first limb), or those in the reasonable contemplation of both parties at the time of contracting (second limb). Canadian courts consistently apply this test.
NCA Canadian Common Law Foundations 1
In Canadian contract law, which element must be present to distinguish a binding contract from a mere gift promise?