CA — Contract Law — Quiz 1

Questions & answers

1. 1. Marta operates a small bakery. She sends an email to a wholesale flour supplier on Monday stating: 'I am interested in purchasing 500 kg of flour at $1.20/kg — please let me know if you can supply this.' The supplier replies on Tuesday: 'We can supply 500 kg at $1.20/kg, delivery next Friday.' Marta does not respond. On Thursday, the supplier delivers the flour. Marta refuses to accept delivery and denies any contract. Which analysis best describes the legal position?

   Answer: No contract was formed because Marta's email was merely an invitation to treat, and the supplier's reply was itself an offer that Marta never accepted.

   The correct answer is B. Marta's email used exploratory language ('I am interested… please let me know') — it is not a definite promise to buy but rather a request for an offer, i.e., an invitation to treat. The supplier's reply was therefore the true offer. Acceptance requires a positive, communicated act; silence does not constitute acceptance in Canadian contract law (a principle well-established and consistent with Cosgrave v Boyle (1881), 6 SCR 165, which affirms that a binding contract requires a clear offer and matching acceptance). Marta never communicated acceptance. A: Wrong — Marta's email lacked the certainty and commitment of an offer; it was an invitation. C: Wrong — silence cannot constitute acceptance; a party cannot be bound by failing to reject an unsolicited offer. D: Wrong — unilateral delivery by the offeror does not bind the offeree who has made no acceptance. E: Wrong — the price was perfectly certain; uncertainty of terms is not the issue here.

2. 2. Orin and Petra sign a contract for Orin to renovate Petra's kitchen 'at a reasonable price, to be agreed upon once the work is complete.' No other price mechanism is specified. The renovation is completed. When they cannot agree on price, Petra refuses to pay anything. Orin sues for breach. Which outcome is most consistent with Canadian contract law on certainty of terms?

   Answer: The contract is enforceable; courts will imply a term requiring payment of a reasonable price, and Orin can recover in quantum meruit.

   The correct answer is A. Where parties have agreed on the subject matter and left the price to be 'reasonable' or to be agreed, Canadian courts have generally been willing to imply a reasonable price term rather than void the contract, particularly where services have been fully performed. The phrase 'reasonable price' provides a standard the court can apply. This is consistent with the principle that courts prefer to uphold bargains where the parties clearly intended to be bound (see Sattva Capital Corp v Creston Moly Corp [2014] for the importance of giving effect to the parties' reasonable intentions). Orin can also recover on a quantum meruit basis. B: Wrong — while certainty is required, 'reasonable price' is not void for uncertainty; it provides a sufficiently objective standard. Courts distinguish a bare 'to be agreed' clause (which may be void) from a 'reasonable price' standard (which is workable). C: Wrong — while unjust enrichment is available, it is not the only or necessarily the best remedy here; the contract itself is likely enforceable for the reasons stated. D: Wrong — the test is objective, not subjective. E: Wrong — there is no basis on these facts for negligent misrepresentation, and voiding the contract is not the correct analysis.

3. 3. Thornbury Ltd. contracts with Apex Corp. for delivery of specialized machinery on June 1. Time is expressly made 'of the essence.' Apex delivers on June 14 without explanation. Thornbury, who has suffered no measurable financial loss from the delay, purports to terminate the contract and refuse delivery. Apex argues Thornbury must accept the machinery and pay because there was no substantial harm. Which statement best reflects the applicable law?

   Answer: Thornbury can terminate because the 'time is of the essence' clause makes the delivery date a condition, and breach of a condition entitles the innocent party to terminate regardless of actual loss.

   The correct answer is B. Where time is expressly made 'of the essence,' the delivery date is treated as a condition of the contract — a term so fundamental that any breach, however slight, entitles the innocent party to terminate the contract and claim damages. This is a well-established principle in Canadian contract law, consistent with the approach reflected in cases such as Larson v Boyd (1919), 58 SCR 275, where the Court addressed the significance of stipulated time obligations. Actual financial loss is irrelevant to the right to terminate for breach of condition; it affects only the quantum of damages. A: Wrong — termination for breach of condition does not require proof of financial loss. C: Wrong — no duty to give notice to cure exists for breach of a condition; that concept applies more to anticipatory breach or notice requirements under specific statutes. D: Wrong — 'time is of the essence' clauses are specifically designed to avoid disputes about whether a delay is material; the court honours the parties' express allocation of risk. E: Wrong — anticipatory breach concerns repudiation before the performance date; the breach here occurred at the actual performance date.

4. 4. Salima and Broker Inc. enter into an exclusive real estate listing agreement in which Salima agrees not to sell her property privately for 90 days. On day 45, Salima purports to sell privately to her neighbour, then tells Broker Inc. 'the deal is done, don't bother showing the property.' Broker Inc. had not yet found a buyer. Broker Inc. sues for damages. Which remedy analysis is most accurate?

   Answer: Broker Inc. is entitled to expectation damages reflecting the lost chance of earning a commission during the remaining 45 days, assessed on a loss-of-chance basis.

   The correct answer is B. When a party repudiates a contract (here, by making a private sale and telling Broker Inc. not to continue performing), the innocent party is entitled to expectation damages — the amount needed to put it in the position it would have been in had the contract been performed. Since the contract gave Broker Inc. the opportunity to find a buyer and earn a commission, the proper measure is the value of the lost chance of earning that commission during the unexpired period. Canadian courts recognise loss-of-chance damages in this context. A: Wrong — the 'breach as performance' principle does not automatically award the full commission as if a sale occurred; Broker Inc. only had an opportunity to earn a commission, not a guarantee. C: Wrong — absence of an actual buyer does not mean no loss; the right to attempt to earn the commission has value, and its wrongful deprivation is compensable. D: Wrong — while reliance damages are available, they are not the only remedy, and expectation damages (which may be larger) are also available; the question asks for the most accurate analysis. E: Wrong — specific performance is typically unavailable for personal service / agency contracts, and courts rarely order it where damages are an adequate remedy.

5. 5. During negotiations for the purchase of a commercial building, the vendor's agent tells the purchaser: 'The roof was completely replaced two years ago — it's brand new.' In fact, only part of the roof was patched. The purchaser, relying on this statement, agrees to buy at full price without obtaining an independent inspection. After closing, the purchaser discovers the true state of the roof and incurs $80,000 in repair costs. The purchaser sues for misrepresentation. The vendor argues the contract contained an 'entire agreement' clause stating: 'This agreement constitutes the entire agreement between the parties; no representations outside this document shall be binding.' The most likely outcome is:

   Answer: The purchaser succeeds in a claim for fraudulent or negligent misrepresentation; an entire agreement clause cannot exclude liability for a pre-contractual misrepresentation that induced entry into the contract.

   The correct answer is A. Canadian courts have consistently held that entire agreement clauses, while effective to prevent collateral contract claims, cannot as a general matter exclude liability for misrepresentation — particularly fraudulent or negligent misrepresentation that induced the very contract containing the clause. To allow the clause to do so would be to allow a party to contract out of its own deceit. Moreover, the duty of honest performance in Bhasin v Hrynew [2014] 3 SCR 494 reinforces that parties cannot actively mislead one another. The purchaser has a strong claim in misrepresentation independent of the contractual terms. B: Wrong — an entire agreement clause does not operate as a blanket exclusion of misrepresentation liability; it deals with collateral representations as additional contractual terms, not with tortious or equitable misrepresentation claims. C: Wrong — negligent misrepresentation is actionable in Canadian law (Hedley Byrne principle as adopted in Canada); fraudulent intent is not required for all misrepresentation claims. D: Wrong — the vendor's agent made the false statement; the vendor is vicariously responsible for it; and there is no general rule that the purchaser bears responsibility for the vendor's misrepresentation. E: Wrong — damages for misrepresentation are available in Canada both in tort (negligent misrepresentation) and, in some cases, through the equitable jurisdiction; rescission is not the only remedy.