LGST 369 Commercial Law Final Examination Version A actual exam tips questions and answers, Exams of Commercial Law

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LGST 369 Commercial Law Final Examination Version A actual exam tips questions and answers Athabasca University

LGST 369 Commercial Law Final Examination Version A actual exam tips questions and answers Athabasca University Instructions to the student:

1. You will be allowed three (3) hours to complete the examination.
2. This is a closed-book examination. Only materials distributed with this examination may be used by the student to answer examination questions. You are NOT allowed to use textbooks, workbooks, notes, tapes, cell phones, hand-held computers or laptop computers, other electronic/digital devices, or to consult with other people while writing this examination.
3. This Examination consists of four (4) Parts as follows:
   • Part A has 25 Multiple choice or True/False questions worth 2 marks each ( 50 marks )
   • Part B has 6 short answer questions worth 5 marks each ( 30 marks )
   • Part C has 1 essay question ( 10 marks )
   • Part D has 1 case study question ( 10 marks ) - Total possible marks: 100
4. The passing grade for credit on this examination is 50%.
5. Type your answers into this document without changing the document name. Use as much space as you need.
6. Save the document regularly on your computer to avoid losing your work.

LGST 369

Commercial Law Final Examination Version A PART A MULTIPLE CHOICE or TRUE/FALSE (2 marks each) Choose the BEST answer for each question

1. Sabeka Inc has discovered that one of its products may cause consumers to suffer a certain form of property damage. In response to that risk, the company has written an exclusion clause into its sales contracts. In doing so, it has adopted a form of risk management known as risk shifting. True or False? Answer: True
2. A contractual dispute has arisen between Jyoti and Arlen. She believes that he owes her money, but he disagrees. The parties do, however, agree that it would be desirable to resolve the dispute as quickly and as amicably as possible. For that reason they should use litigation, rather than negotiation. Negotiation tends to take much longer, and is much more likely to generate hostility, because it requires the parties to discuss the matter between themselves, rather than through their lawyers. True or False? Answer: False
3. Darius, a security professional, agreed to guard Myrna's house. That contract contained a number of terms. One clause required Darius to "take every precaution possible to ensure that no personal belongings are improperly removed from the house." In fact, Darius himself stole several objects of art from Myrna's house. Darius has committed A) a crime, a tort, and a breach of contract. B) a crime and a breach of contract but not a tort. C) a crime and a tort but not a breach of contract. D) a tort and a breach of contract but not a crime.

E) a breach of contract, but neither a tort nor a crime. Answer: A

4. During a recent incident at a shopping centre, Munier grabbed hold of Ishtla and held her until a police officer arrived. Which of the following statements is TRUE? A) If Munier is a security guard, he cannot be held liable for false arrest as long as he reasonably believed that Ishtla had committed a crime, even if Ishtla had not done so.

B) If Munier is a police officer, he will be held liable for a false arrest unless Ishtla actually committed a crime. C) If Munier was another shopper, he cannot be held liable for false arrest, even if Ishtla had not committed a crime, as long as he reasonably believed that she had committed a crime and she was being pursued by a police officer. D) If Munier owned a store, and he reasonably believed that Ishtla had stolen some of his merchandise, he cannot be held liable for false arrest, even if Ishtla had not committed a crime. E) Munier will be held liable for malicious prosecution as long as a court decides, after a full trial, that Ishtla did nothing wrong. Answer: C

5. Alejandro and Chloe were involved in negotiations for the purchase and sale of her business. She may be held liable for the tort of deceit if A) Alejandro decided to create the contract after Chloe had told him that income tax returns proved that the business would be profitable in the future, even though she knew that those records contained false information that concealed the fact that the business was destined to lose money. B) she offered an opinion about the profitability of the business that was based on information that he provided to her. C) she refused to make a prediction about the profitability of the business even though she had sufficient information with which to do so. D) she provided accurate information to his lawyer, which the lawyer misinterpreted before advising Alejandro on the sale. E) she misled Alejandro, even if she did not intend to do so, by making an innocent mistake about some of the information concerning the business. Answer: A
6. Which of the following statements is TRUE with respect to the standard of care that is applied to professionals? A) The standard of care is raised with respect to experienced professionals and lowered with respect to beginners. B) A professional may be held liable despite acting in compliance with an approved practice. C) An error of judgment always constitutes a breach of the standard of care.

D) A judge will always hold that the defendant acted carelessly if the defendant injured the plaintiff while committing a breach of a statute. E) Because there is no separate tort of breach of a statutory duty, a court cannot consider the effect of a statute when it formulates the standard of care. Answer: A

7. As a general rule, liability cannot be imposed under the tort of negligence if the defendant carelessly made a statement that caused the plaintiff to suffer a physical injury. True or False?

Answer: False

8. Cindy calls David to accept his offer to trim her hedges in exchange for a haircut. Cindy is described as the A) invitee. B) contracting party. C) offeree. D) offeror. E) propos er. Answer: C
9. Wessam offers to sell Ivan a bicycle for $100. Ivan asks to think about it for a couple days. The next day, Wessam tells him that she has increased the price to $150. Wessam has A) lost her capacity to enter into a contract. B) rejected the offer. C) allowed a reasonable time to lapse. D) revoked her original offer. E) made a counter offer. Answer: D 10.Dunlop sold tires to Mew. The parties' contract prohibited Mew from reselling the tires unless its sub-buyer agreed to abide by Dunlop's list price for the tires. Mew resold the tires to Selfridge. Under its contract with Mew, Selfridge agreed to (1) abide by Dunlop's list price, and (2) pay $50 to Dunlop for each tire that it sold in violation of that list price. Selfridge resold 10 of the tires to its own customers for less than Dunlop's list price. Which of the following statements is most likely to be TRUE? A) Selfridge is required to pay $500 to Dunlop only if Selfridge's contract with Mew is under seal. B) Selfridge is required to pay $500 to Mew. C) Selfridge is required to pay $500 to Dunlop. D) As a result of the contract between Mew and Selfridge, privity of contract exists between Dunlop and Selfridge. E) Dunlop is not entitled to any payment from Selfridge because Dunlop was not privy to the agreement between Selfridge and Mew. Answer: E

11.Pre-contractual representations are always part of the terms of all contracts. True or False? Answer: False

12.Having recently made a fortune by inventing and selling a new piece of software, Matt heard that his friend, Lois, was having a hard time obtaining a bank loan. Matt therefore generously promised the bank that he would be responsible for the debt if Lois failed to repay a loan. That promise will be enforceable against Matt if A) he provides a notarized copy to the bank. B) Lois repeats Matt's promise in a document that she signed. C) he provides it to the bank in a signed document. D) the promise is contained in a document that Lois and the bank signed. E) either Lois or the bank provides some positive benefit to Matt personally. Answer: C 13.As part of a larger business plan, Ronald and Margaret devised an arrangement that would involve the shipment of widgets to the Abuc Islands in the Caribbean. They are concerned, however, that their plan might violate the Trading with Enemy Islands Act , which prohibits the export of goods to certain Caribbean nations. Ronald and Margaret nevertheless want to immediately draft a document that sets up a structure for the shipment of widgets to the Abuc Islands, but that will not expose them to liability if, after seeking government approval for their plan, they learn that widgets cannot legally be sent to Abuc. As a matter of risk management, which of the following statements provides the best advice? Ronald and Margaret should insert A) a condition precedent to performance into their agreement. B) a true condition precedent into their agreement. C) a condition subsequent into their agreement. D) an option to terminate into their agreement. E) an exclusion clause into their agreement. Answer: B 14.In the context of contractual damages, there is only one measure of relief. True or False? Answer: False 15.Helene operates a beauty salon. She cut Bentley's hair in exchange for the

payment of $25. She also gave him a small bottle of shampoo as a gift sampler. The parties' transaction is not governed by the Sale of Goods Act. True or False? Answer: False 16.Chinthaka, Karissa, and Dora are "joint tenants" of a piece of land called Blackacre. As explained in the text, that must mean that A) they each pay an equal amount of rent to their landlord.

B) they have a right of survivorship. C) if Karissa dies first, her interest will be acquired by either Chinthaka or Dora, depending upon which party is named in Karissa's will. D) they are all related. E) each person has the right to exclude the other two from at least one section of Blackacre. Answer: B 17.A registry system and a land titles system are different because A) a mortgage creates a charge under a registry system, but a conveyance of title under a land titles system. B) after the terms of a mortgage have been fulfilled, the mortgagee enjoys the benefit of a re-conveyance of title under a registry system, but a cessation of charge under a land titles system. C) the remedy of judicial sale is available under a registry system but not under a land titles system. D) the mirror principle applies under a land titles system but not under a registry system. E) unregistered interests may exist in a land titles system but not a registry system. Answer: B 18.Boyd lost a diamond ring in the lobby of a hotel. Carmel, a guest at the hotel, found it. Both Carmel and the hotel claim the right to possess the ring. If Boyd cannot be located, a court would probably favour Carmel over the hotel. True or False? Answer: True 19.BrainFood is a brand used to promote a concoction of natural ingredients sold in natural health stores as a supplement to help with memory retention. Recently, MindFood has come onto the market and has begun selling supplements that, although composed of different ingredients, are also meant to help with memory loss. The packaging is similar, and the two products are sold in the same stores. Customers are often confused as to which product is which is made by which company. Which of the following is most likely to be TRUE? A) MindFood is infringing BrainFood's patent.

B) MindFood is infringing BrainFood's copyright. C) MindFood is infringing Brainfood's trademark. D) MindFood is immune from suit because it is composed of ingredients not found in BrainFood. E) This is fair dealing and free competition—not the subject of intellectual property law. Answer: C 20.Minnie and Maximum Realty Inc have entered into a real estate agency agreement. In this situation, it is almost certain that

A) Minnie is legally known as the agent. B) Minnie is legally known as the beneficiary. C) the company has complete authority to purchase or sell a house on behalf of Minnie. D) the company owes a fiduciary duty to Minnie. E) Minnie owes a duty of care to the company. Answer: E 21.If two people share profits from a business, they are necessarily in a partnership. True or False? Answer: False 22.Athalone incorporated a corporation under the Canada Business Corporations Act. As the sole shareholder, he has limited liability. Which of the following statements is TRUE? A) Athalone is personally responsible for liabilities arising out of the business the corporation carries on, but only up to the amount he has invested in return for his shares. B) Athalone can never be personally liable for any liability of the corporation. C) In most situations, Athalone will not be personally liable for the obligations of the corporation. D) Athalone's personal liability for the liabilities of the corporation is limited to the total of his personal assets. E) Athalone will never have to assume personal liability to creditors of the corporation. Answer: E 23.Which of the following statements best describes the "business judgment rule"? A) The courts will never find that a business decision by a director or officer is a breach of the duty of care. B) Business decisions are presumed not to be a breach of duty, unless the court does not understand the business rationale for the decision. C) Directors and officers should sometimes exercise their best business judgment in making decisions relating to the corporation. D) The courts will substitute their business judgment for that of directors and officers if doing so makes sense to them.

E) Business decisions are presumed not to be a breach of duty so long as they fall within the range of reasonable business alternatives that were available and the process for making the business decision was reasonable. Answer: E 24.Banks take collateral to secure the obligations of people who owe them money as a way to reduce the risks associated with non-payment. Having a security interest in collateral will not

prevent a debtor from defaulting but will reduce the risk that the bank will be unable to recover what it is owed. True or False? Answer: True 25.Summary dismissal A) is the same thing as wrongful dismissal. B) means that the employee is dismissed without notice. C) means that the employer had just cause. D) means that the employee is dismissed with notice. E) means that the employee is dismissed with reasonable notice. Answer: A PART B SHORT ANSWER QUESTIONS (5 marks each)

Write a paragraph in response to each question. 26.Explain the similarities and differences between torts and crimes. The differences are that tort is under private law and criminal is public law. Defendants in tort law owe an obligation to the plaintiff and in criminal law it’s an obligation to society. In torts the plaintiff sues the defendant where in criminal law the government prosecutes the accused. Compensatory damages are related to torts whereas punishment such as imprisonment is criminal law. Both are used to identify wrongdoers 27.Outline the elements of the tort of deceit. The defendant makes a false statement and knows it to be untrue. The defendant makes makes the statement with the intention to mislead the plaintiff and the plaintiff reasonably relies on the statement and causes the plaintiff to suffer a loss. 28.Describe the postal rule and explain when it will apply. The postal rule is when the acceptance of an offer is effective when and where sent such as when you sent the mail not when it’s received. Unless it’s ruled out by the offeror in the terms of the offer, the communication of acceptance is effective even when it’s not received but sent. 29.Explain what it means for a corporation to act beyond its capacity. If a corporation attempts to contract in a manner that exceeds its statutory powers, it acts ultra vires. When a corporation acts ultra vires, it lacks capacity to contract because it has exceeded the limits of its authority and any resulting agreements are unenforceable. 30.Explain the legal standard of care that corporate managers must observe when making business judgments. 31.Explain the difference between the actual authority of agents to enter into contracts on behalf of their principals and their apparent authority to do so.

Actual authority refers to specific powers by a principal to an agent to act on the principal’s behalf. This power may be broad, general power or it may be limited special power. An agent will have apparent authority if the principal has indicated to a third party that an agent has the authority to act on their behalf, even though the agent doesn’t have the actual authority to do so. The agents authority is just an appearance but has no actual authority.

PART C

ESSAY QUESTION (10 marks) 32.Choose ONE of the topics below and write a short essay of several paragraphs. A. Explain what it means to say that the offeror is the "master of the offer." Provide examples to support your answer. A “master of the offer” means that the offeror has the power to determine what is communicated to the offeree. Consequently, the master of the offer in entitled to revoke it at any time. Revocation is not effective unless it is reasonably communicated to the offeree. For example, if you were selling a car, the seller can revoke the offer before the buyer posts his letter of acceptance. Another example would be selling a home. Since the seller is the master of the offer, they can revoke the sale of the property until the acceptance is done by the buyer. B. Explain how a third party can establish the scope of an agent's authority to bind the principal it represents. In your answer, specifically identify barriers make it difficult for a third party to discover an agent's authority. PART D CASE STUDY QUESTION (10 marks)

32. Choose ONE of the cases below and write a case study analysis in response to the questions posed. A. Tinh agrees to purchase a block of land that Ed plans to carve out from his property. Tinh pays a large cash deposit to Ed, the closing date is set for six months away, and they shake hands on the deal. Ed falls on hard times and he realizes he cannot subdivide his land since he cannot afford to lose any equity or the bank will foreclose on his mortgage. On the agreed closing date, he sends Tinh an email to back out of the deal. Worse still, Ed lost the cash deposit at the horsetrack, and cannot afford to pay Tinh back. Ed feels terrible and avoids Tinh's calls. Tinh sues Ed for breach of contract and specific performance. How will the Statute of Frauds be applied in this case? What is the legal effect of Tinh and Ed's deal?

B. Elise and Kim are trying to decide how to set up the internal management structure of the corporation they have just incorporated to carry on their engineering consulting business. They each hold 35 percent of the shares, with the remaining 30 percent being held by five employees.

Elise will run the business. She will be responsible for all aspects of the management of the office. Kim will be a passive investor, but is nevertheless interested in being kept informed regarding what is going on in the business. Kim and Elise decide that they will both be directors and then delegate all management powers to Elise, subject only to an obligation to report to the board every two months as to what is happening. Will this structure work? Support your answer. End of Examination