BUSINESS LAW

Weight: 10%

Marks: 15

Assignment #2: Short Answer Questions on the Law of

Contracts

Instructions
Review the materials from Module 5 and answer the following short answer questions on the
law of contracts. Your answers must be typed. Submit your answers through the D2L
Assignments area. Please check the submission date in the Course Schedule.

Marking Key
Marks Marks
Question Allocated Obtained
1 3
2 3
3 3
4 3
5 3
Total 15

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 BUSINESS LAW

Questions
Question #1 (3 marks)

Ms. Grimes sent a letter to Mr. Howard, offering to sell him her collection of Canadian oil
paintings. Her letter stated the following:

MEMO FROM: R. Grimes

TO: T. Howard

DATE: January 1, 2016

I hereby agree to sell to T. Howard my entire collection of Canadian oil paintings

(6 paintings in total) for the sum of $1 million. This offer is open until Monday,
January 4, 2016, at 9:00 a.m.

On Sunday, January 3, 2016, Ms. Grimes decided to sell the paintings to her well-to-do
neighbour instead. Mr. Howard heard about the alleged sale later that same day and rushed
over to Ms. Grimes house, stating that he wished to accept the offer. Ms. Grimes smiled and
said “Sorry, you’re too late. I’ve sold to someone else.”

Is Ms. Grimes obligated to keep the offer open until the specified time? What could Mr. Howard
have done to better protect his position?

Ms. Grimes was not obligated to keep the offer until the specified time because Mr. Howard did
not respond back to Ms. Grimes’s offer by accepting the offer. Acceptance of an offer is usually
accomplished by communicating it to the offeror. In order to protect his position, Mr. Howard
could contact Ms. Grimes immediately after the letter was sent to accept her offer. Therefore,
the offer and the contract will be formed and cannot be terminated without valid reasons.

Question #2 (3 marks)

On May 1, Mr. B. Dunne and a business partner applied for a bank loan to purchase a piece of
property as an investment. Unfortunately, they did not have enough collateral to secure the loan
without a guarantor. Mr. B. Dunne approached his wife, who was also a successful business
person, to act as the guarantor and she agreed. Contrary to the bank’s usual policy, they did
not recommend Mrs. Dunne receive independent legal advice prior to signing the documents.
When Mr. B. Dunne and his business partner defaulted on the loan, the bank sued Mrs. Dunne
for the outstanding amount. Is the bank able to collect on this loan? What issues may arise?

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 BUSINESS LAW

The bank will not be able to collect this loan due to the absence of independent legal advice
before Mrs. Dunne signing the contract. This legal advice could help her understanding all
responsibilities related to the engagement. Independent legal advice reduces
misunderstandings or challenges which may happen in the future.

The following issues may arise:

 It may be a conflict of interest because Mrs. Dunne is a successful businessperson

and she did not receive a legal advice.

 the assignee did not get a chance to review the contract

Question #3 (3 marks)

Sayid bought a used car from a local used car dealership. While looking at one particular car,
he asked the salesperson if it had ever been in an accident. The salesperson responded “No,
this car has never even been in a fender bender. It is in amazing condition” even though he
knew it had been fixed up after a three-car pile-up. Sayid then decided to buy the car.
Unfortunately, after getting the car home, Sayid experienced numerous problems with the
vehicle. Upon further investigation, he found out that the car had been in a terrible accident and
was almost a “write-off”. What issues arise in this situation? Does Sayid have any recourse?

The following issues may arise:

1-There was no good faith from the seller as the salesperson said that the car had not ever been
in accident, which is not true.

2- The salesperson made a misrepresentation by lying: this is a Fraud because When the
salesperson making the statement knew it was false.

Sayid can decide to sue the seller because of the above stated issues. He will ask that the
nullification of the contract and also, he can ask for compensation such as rescission in contract
and claims damages.

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 BUSINESS LAW

Question #4 (3 marks)

Claire offered to sell her car to Bella for $10,000. Bella accepted the offer. The car was
currently in storage, so the two people agreed to go together later that day to pick up the car
from the storage facility. Neither one knew that the storage facility had burned down the night
before and all the property held there had been destroyed. Is there a valid contract?

No there is no valid contract because the car have been destroyed before Bella takes possession
of it. This means that there is no offer. An agreement is one of many elements of a contract. If
all other elements are not present, there is no contract.

Question #5 (3 marks)

Miles witnessed John drive through a red light while on his cell phone and hit another vehicle.
John approached Miles and offered him $500 to offer a witness statement saying he hadn’t
seen John drive through the light. Miles agreed. John gave him $100 but then never gave him
the rest of the promised money. Miles would like to sue John for breach of contract. What
issues arise in this scenario?

Throughout this situation, following issues may arise:

 The contract is voidable because the contract was formed based on an illegal purpose as
John asked Miles to lie about evidence. The object and consideration involved in the
agreement must be legal and not against public policy.
 The contract is unenforceable because it was based on an illegal purpose whether Miles
will be able to recover $400 from John.

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