NPPE Contract Law Fundamentals 2

Question 1

What is the legal effect of a counter-offer in the formation of a contract?

Accepted Answer

It terminates the original offer and substitutes a new offer

Answer

A counter-offer rejects the original offer and substitutes a new offer. The original offeror then becomes the offeree with the power to accept or reject. The original offer is no longer available.

Question 2

Which type of contractual term, if breached, entitles the innocent party to terminate the contract and claim damages?

Accepted Answer

Condition

Answer

A condition is a fundamental contractual term. Breach of a condition entitles the innocent party to treat the contract as repudiated (terminated) and claim damages. Breach of a warranty only gives rise to a damages claim, not termination.

Question 3

An engineer signs a contract that includes an exclusion clause in fine print, not drawn to their attention. Under Canadian contract law, what is the most likely effect of this clause?

Accepted Answer

It may be unenforceable if the party seeking to rely on it did not bring it to the other party's attention at or before contract formation

Answer

Canadian courts require that unusual or onerous clauses in standard form contracts be specifically brought to the other party's attention. Failure to do so may render the clause unenforceable.

Question 4

Under the doctrine of frustration in Canadian contract law, a contract is frustrated when:

Accepted Answer

An unforeseen supervening event makes performance impossible or radically different from what was agreed

Answer

Frustration discharges a contract when an unforeseen event, outside the parties' control, makes performance impossible or radically different from what was contemplated. Mere increased cost or difficulty is not sufficient.

Question 5

What distinguishes liquidated damages from a penalty clause in Canadian contract law?

Accepted Answer

Liquidated damages are a genuine pre-estimate of loss enforceable in Canadian courts; a penalty clause intended to punish is unenforceable

Answer

Liquidated damages clauses are enforceable as a genuine pre-estimate of anticipated loss. A clause that is a penalty (designed to punish rather than compensate) is unenforceable in Canadian common law.

NPPE - National Professional Practice Examination Practice Test

NPPE - National Professional Practice Examination Practice Test

NPPE Contract Law Fundamentals 2