Discharge of Contracts and Breach Effects
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Questions and Answers

What is one key factor that differentiates an independent contractor from an employee?

  • Degree of supervision & control over worker (correct)
  • Type of work performed
  • Level of education required
  • Amount of income generated

Which of the following does NOT represent a duty of employees?

  • Duty to find new clients (correct)
  • Duty to obey
  • Duty to exercise skill and care
  • Duty of good faith and fidelity

What is vicarious liability in the context of employment?

  • An employer's liability for actions of an employee (correct)
  • An employer's responsibility for their own actions
  • An employer's liability for actions of a non-employee
  • An employee's liability for actions of a customer

What is typically included in the calculation of payment in lieu of notice?

<p>Rate of pay and benefits (A)</p> Signup and view all the answers

What determines whether a contract is frustrated if the contract is governed by the Sale of Goods Act and the goods are destroyed?

<p>The rule for frustration under the Sale of Goods Act applies (C)</p> Signup and view all the answers

Which factor is NOT relevant when determining a reasonable notice period for termination of an employee?

<p>Employee’s personal relationships (A)</p> Signup and view all the answers

What is the implication of a breach of condition in a contract?

<p>The non-breaching party can sue for damages or force performance. (B)</p> Signup and view all the answers

Which of the following is true regarding a breach of warranty?

<p>The non-breaching party can incur damages while remaining bound. (A)</p> Signup and view all the answers

Which statement accurately describes a major breach of contract?

<p>It may discharge the non-breaching party from performance. (B)</p> Signup and view all the answers

If a party wishes to discharge a contract due to a condition breach, what must they demonstrate?

<p>They provided notice of the breach to the other party. (B)</p> Signup and view all the answers

Which act applies when determining allocation of losses in frustrated contracts in provinces that have such legislation?

<p>Frustrated Contracts Act (B)</p> Signup and view all the answers

Under what circumstance is a contract automatically discharged due to bankruptcy?

<p>All contracts with creditors are discharged. (B)</p> Signup and view all the answers

What does the limitation period refer to under the Limitations Act?

<p>The period within which a claim must be filed after discovery. (A)</p> Signup and view all the answers

What is the primary duty of an agent to their principal?

<p>To comply with the agency agreement (A)</p> Signup and view all the answers

What does the duty of care entail for an agent?

<p>Exhibiting reasonable care, diligence, and skill (B)</p> Signup and view all the answers

What constitutes the process of ratification in an agency context?

<p>Confirmation of the terms of a contract after an agent exceeds authority (A)</p> Signup and view all the answers

What is one of the agent's responsibilities when acting for two principals?

<p>To obtain consent from both principals to avoid conflicts (C)</p> Signup and view all the answers

Under what circumstances must a principal pay for an agent's expenses?

<p>When the agent acts within their real authority (B)</p> Signup and view all the answers

What is a principal's duty regarding remuneration to an agent?

<p>Compensating based on industry-standard fees or as per contract (B)</p> Signup and view all the answers

What must an agent do before acting as a contracting party?

<p>Obtain approval from the principal prior to the transaction (D)</p> Signup and view all the answers

When is a principal solely liable for actions taken by an agent?

<p>When the agent's actions align with the principal's directives (C)</p> Signup and view all the answers

What best describes unconscionable clauses in a contract?

<p>Terms agreed upon by parties of unequal bargaining power. (B)</p> Signup and view all the answers

What is the primary purpose of awarding damages in contract law?

<p>To place the injured party in their original position. (B)</p> Signup and view all the answers

Which type of damages focuses on lost profits due to breach at contract formation?

<p>Expectation damages. (B)</p> Signup and view all the answers

What is required for a court to consider an injunction?

<p>A specific need for a negative covenant in the contract. (D)</p> Signup and view all the answers

Which type of damages accounts for wasted effort due to reliance on a contract?

<p>Reliance damages. (D)</p> Signup and view all the answers

Under what condition might special circumstances affect the liability of a breaching party?

<p>When the breaching party was unaware of them. (A)</p> Signup and view all the answers

Which type of damages is typically awarded when loss is minimal or negligible?

<p>Nominal damages. (A)</p> Signup and view all the answers

What is quantum meruit meant to determine?

<p>The amount a person merits for services provided. (A)</p> Signup and view all the answers

Which category of remedies involves court orders beyond monetary compensation?

<p>Equitable remedies. (C)</p> Signup and view all the answers

What do consequential damages cover in a breach of contract situation?

<p>Other foreseeable damages resulting from the breach. (A)</p> Signup and view all the answers

What is the primary factor that determines priority in a registered security interest under the PPSA?

<p>Time of perfection of the interest (A)</p> Signup and view all the answers

What does the separation of possession and ownership imply for third-party purchasers?

<p>They are expected to be aware of existing charges. (A)</p> Signup and view all the answers

What is a key characteristic of a partnership according to legal principles?

<p>It represents the collective rights and duties of the partners. (B)</p> Signup and view all the answers

Under what conditions can a partnership be automatically deemed to be created?

<p>Two people carrying on a business with a profit motive. (A)</p> Signup and view all the answers

What is the default method for the termination of a partnership?

<p>Termination by Notice or Expiry (A)</p> Signup and view all the answers

How are partners in a partnership typically liable for the obligations of the partnership?

<p>Each partner is jointly liable for the partnership's obligations. (C)</p> Signup and view all the answers

What can trigger the dissolution of a partnership due to conduct?

<p>A partner guilty of misconduct affecting the business. (D)</p> Signup and view all the answers

What is required for a sole proprietorship to register a business name?

<p>The name cannot be the actual name of the owner. (C)</p> Signup and view all the answers

What distinguishes a public corporation from a private company?

<p>Public corporations issue their securities to the public. (A)</p> Signup and view all the answers

Which power is NOT held by the directors of a corporation?

<p>The power to hire all employees. (D)</p> Signup and view all the answers

What is required for the transfer of shares in a corporation?

<p>Approval from the board of directors is needed. (C)</p> Signup and view all the answers

What duty is expected of directors and officers when executing their powers?

<p>To act honestly and in good faith for the corporation's best interests. (B)</p> Signup and view all the answers

Which of the following applies to the personal liability of a director?

<p>Directors can be held personally liable for acquiescing in misconduct. (C)</p> Signup and view all the answers

How long can a director serve before needing re-election?

<p>3 years (A)</p> Signup and view all the answers

What constitutes a breach of the duty of care by directors?

<p>Not exercising reasonable skill that a prudent person would. (C)</p> Signup and view all the answers

What should directors NOT rely on when making decisions?

<p>Information that they have not verified if it seems questionable. (B)</p> Signup and view all the answers

What is one of the specific powers of the directors?

<p>To call meetings of the shareholders. (D)</p> Signup and view all the answers

What must happen for a director to be removed before their term ends?

<p>A special meeting of shareholders must be called. (C)</p> Signup and view all the answers

Flashcards

Frustration of a contract

A contract is discharged (ended) due to unforeseen circumstances beyond the control of either party, making performance impossible or radically different from what was intended.

Sale of Goods Act & Frustration

If a contract deals with goods and those goods are destroyed, the rules for frustration are those of the Sale of Goods Act, otherwise common law applies.

Frustrated Contracts Act

A law used to fairly allocate losses when a contract is frustrated (Some Provinces)

Condition (contract)

An essential term in a contract, its breach allows the other party to cancel the contract and sue for damages.

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Warranty (contract)

A non-essential term; breach allows damages but does not typically allow contract cancellation.

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Major Breach

A fundamental breach that defeats the purpose of the contract, allowing the non-breaching party to cancel the contract.

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Minor Breach

A breach of a non-essential term, or a minor breach of a necessary term, allowing the contract to proceed (though damages may be possible).

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Discharge by Operation of Law

A contract is terminated by a legal process, such as bankruptcy or the passing of the limitation period.

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Unconscionable Clauses

Terms in a contract that unfairly favor one party over another, especially when bargaining power is unequal.

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Public Policy/Interest

A reason why a court might not enforce a contract even if it's technically valid, when it goes against important societal values.

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Damages (Contract Law)

Money awarded to compensate a harmed party for a breach of contract.

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Expectation Damages

The expected profit a party would have made if the contract had been fulfilled.

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Mitigation of Damages

Actions taken by the harmed party to lessen the amount of damages incurred due to a breach of contract.

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Consequential Damages

Foreseeable damages that result from a breach, beyond the basic contract terms.

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Specific Performance

A court order requiring a party to fulfill their contractual obligations.

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Injunction

A court order preventing a party from acting in a certain way.

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Quantum Meruit

Fair payment for services rendered, even if there's no formal agreement.

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Liquidated Damages

Agreed-upon amount of damages in a contract in case of a breach.

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Agent's Authority

The power granted to an agent to act on behalf of a principal.

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Ratification

Confirmation by a principal of an agreement made by their agent, even if the agent acted beyond their authority.

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Agent's Duty of Care

Agent must act diligently and with reasonable skill when conducting business for the principal.

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Fiduciary Duty (Good Faith)

Agent must prioritize the principal's interests over their own.

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Agent's Duty to Disclose

Agent must reveal all relevant information to the principal.

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Principal's Duty to Pay

Principal is obligated to pay agreed-upon compensation to the agent.

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Principal's Duty to Reimburse

Principal must cover reasonable expenses made by the agent in carrying out their duties.

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Liability of Principal and Third Parties in Agency

Liability depends on the agent's authority: Principal only, agent only, or both depending on the specifics.

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Vicarious Liability

An employer is legally responsible for the actions of their employees, even if the employer didn't directly cause the harm.

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Negligent Hiring

A claim that an employer failed to properly investigate an employee's background, leading to harm caused by that employee.

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Wrongful Referral

A claim against a professional who negligently refers someone to another professional who is not qualified.

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Employee Duty of Good Faith

Employees must act with honesty and loyalty towards their employer while employed.

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Employer’s Duty to Pay

Employers have a legal obligation to pay their employees the agreed upon wages and benefits.

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Bailment

A legal relationship where one party (the bailor) transfers possession of personal property to another party (the bailee) for a specific purpose, while retaining ownership.

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Pledge

A type of bailment where the bailee receives possession of goods as security for a debt. The bailor can regain possession by repaying the debt.

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Time of Perfection

The moment a security interest becomes legally enforceable against third parties.

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Sole Proprietorship

A business owned and operated by one person. The owner is personally liable for all business debts.

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Partnership

Two or more people carrying on a business in common with a view of profit.

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Partnership Agreement

A document outlining the terms and conditions that govern the partnership, including roles, responsibilities, and profit sharing.

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Contractual Liability (Partnership)

Each partner is jointly liable for the obligations of the partnership, meaning they are all equally responsible for debts.

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Tort Liability (Partnership)

The partnership, as a whole, is responsible for the wrongful acts or omissions of its partners, even if those acts were outside the normal course of business.

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Public Corporation

A corporation that issues its securities to the general public, allowing anyone to buy shares. Also known as an issuing corporation or reporting issuer.

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Private Company

A corporation with a limited number of shareholders and restrictions on who can buy shares, making them unavailable to the general public.

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Corporate Capital

The sources of funding for a corporation, representing the money used to operate and grow the business.

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Equity

Ownership interest in a corporation, represented by shares of stock. Investors buy shares and become part-owners.

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Debt

Money borrowed by a corporation, usually with interest payments. It's a liability the company must repay.

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Corporate Governance

The system of rules and practices that direct a corporation, ensuring it operates ethically and responsibly.

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Directors

Elected representatives of shareholders who oversee the corporation's management, ensuring it acts in shareholder interests.

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Officers

The individuals responsible for running the day-to-day operations of a corporation, implementing strategies and managing the business.

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Fiduciary Duty

The legal obligation of directors and officers to act in the best interests of the corporation, placing its needs above their own.

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Duties of Care and Skill

The requirement for directors and officers to act with reasonable care, diligence, and competence in their roles, avoiding negligence.

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Study Notes

Discharge of Contracts

  • Discharge by Performance: Both parties fulfill their contractual obligations
  • Discharge by Agreement: Parties mutually agree to end the contract
    • Substituted agreement: Replace the original contract with a new one
    • Accord and satisfaction: One party agrees to pay a certain amount instead of performing
  • Discharge by Frustration: External events make performance radically different from what was agreed
    • Requirements for Frustration:
      • Unforeseen event
      • Event outside parties' control
      • Event occurs after agreement
      • Event makes performance impossible, purposeless, or drastically different
      • Self-induced frustration: One party makes performance impossible through their actions, can’t claim frustration

Effect of Breach

  • Minor Breach: Breach of a non-essential term; doesn't discharge the contract
  • Major Breach: Breach of essential term; can discharge the contract
  • How breach occurs:
    • Express repudiation: One party clearly states they won't perform
    • Failure to perform or inadequate performance: Not fulfilling the contract as agreed

Remedies

  • Damages: Monetary compensation for losses caused by breach
  • Mitigation: Efforts to reduce losses from a breach
  • Punitive damages: Intended to punish the breaching party, not just compensate
  • Equitable remedies: Court orders other than monetary settlements (e.g., specific performance, injunctions)

Agency & Franchising

  • Creating an Agency relationship: Two contracts
    • Between the Principal and Agent
    • Between Principal and Third Party
  • Apparent Authority: Authority not explicitly given but implied from the relationship.
  • Duties of an Agent to the Principal: Duty to comply; Duty of Care; Duty of Good Faith
  • Duties of Principal to Agent: Duty to Pay; Duty to Compensate
  • Rights and Liabilities of Principal and Agent to Third Parties: Under What circumstances is the principal liable? When is the agent liable? When are both liable?
  • Undisclosed Principals: Principal is hidden from third party; Principal may or may not be liable.

Employment Law

  • Employee vs. Independent Contractor: Differences in supervision, control, tools, method of payment and benefits.
  • Tort of Employer: Vicarious Liability (employer is liable for employee torts). Negligent hiring; wrong referral
  • Employee Duties: Duty to obey; Duty to exercise skill and care
  • Employer's Duties: Duty to pay; Termination of Employment: Notice, Lieu, for cause.
  • Wrongful Dismissal: An employee being fired for reasons not in the employment contract.

Secured Transactions

  • Bailment: One party has temporary possession of property owned by another with the duty to return it.
  • Secured Transactions: A loan or credit agreement where the lender takes a security interest in collateral owned by the borrower (if borrower defaults).
    • Personal Property vs. Real Property; Rights of a Secured Creditor

Business Organizations

  • Sole Proprietorship: Unincorporated business owned by one person. Risk: the business owner is personally liable
  • Partnership: Agreement among two or more people to run a business together for profit. Risk: the partners are jointly liable for debts

Corporate Governance

  • Director Roles: Oversight, setting strategy, fiduciary duties to the corporation
  • Directors/Officers/Shareholders/Stakeholders: Responsibilities and Powers
  • Shareholder Rights: Ordinary/special resolutions, Protection of minority shareholders

Intellectual Property

  • Copyright: Rights granted to creators of original work
  • Trademarks: Distinctive signs identifying goods and services
  • Patents: Protection for inventions

Criminal Liability

  • Corporate Identity Doctrine: Culpability for actions through the intent and action of an authorized director/officer
  • When can you send an advertisement under CASL (Canada Anti-Spam Law): Consent and prior business relations

Privacy

  • How can you collect/store/use personal information: Regulations based on laws and public sector/private/security requirements.
  • Liability for privacy violations: Legal liability for violating privacy (intrusive, unethical behavior)

International Law

  • Van Breda Test: Determines jurisdiction for disputes and tort liability

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BU 231 Final Contracts– Discharge PDF

Description

This quiz covers the essential concepts of contract discharge, including performance, agreement, and frustration. It also examines the effects of breaches, distinguishing between minor and major breaches. Test your understanding of these critical aspects of contract law.

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