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NEW QUESTION 29
Which of the following is not a way in which a contract can end?

• A. performance
• B. litigation
• C. agreement
• D. breach

Answer: B

Explanation:
Litigation is the correct answer. This is not a way in which a contract can end- it is a conflict resolution method. The three ways in which a contract can end are; performance, agreement and breach. See p. 42 for more details on how contracts end

NEW QUESTION 30
John has signed a document with Larry that says that he will give Larry his car. Both John and Larry are over the age of 18 and are of sound mind. Larry accepts this offer and signs the document. Is this a contract?

• A. no- there is no consideration
• B. no- this document is an invitation to treat
• C. yes- both parties consent and have capacity to do so
• D. yes- it has been signed

Answer: A

Explanation:
No - There is no consideration. For a document to be considered a contract there must be consideration. This means something of value must be exchanged. In this example John gives Larry something but Larry doesn't give John anything. Therefore there is no consideration and this is not a contract. See p.12

NEW QUESTION 31
What is the purpose of a limitation on liability clause?

• A. it allows a party to claim on insurance if something goes wrong
• B. it provides an accurate pre-estimate of potential loss
• C. it caps a company's exposure to risk
• D. it passes the responsibility to the other party

Answer: C

Explanation:
A limitation of liability caps a company's exposure to risk. In SOME cases this may mean that the responsibility passes to the other party- but not always. For this reason option 2 is correct and 4 isn't. Option 1 is the definition of liquidated damages and 3 is just a made-up answer. See p.20 for more information on Liability

NEW QUESTION 32
When there has been a major breach in a contract, the contract will be terminated. Is this statement true?

• A. yes- the contract must be terminated as there is no means by which the contract could continue after a major breach
• B. no- the contract can be affirmed by the injured party
• C. yes- the contract will be terminated and damages sought
• D. no- the contract can continue if the offending party proves that further breaches won't occur

Answer: B

Explanation:
"no- the contract can be affirmed by the injured party" is the correct answer. When there is a breach in a condition, one of two things can happen; the contract is terminated, or the contract is affirmed. The injured party has the choice of whether or not they want to continue working with the other party and this is called 'affirmirmation of the contract'. The contract doesn't HAVE to be terminated in the case of a major breach so options 1 and 2 are incorrect. Option 4 is also incorrect- the contract can continue even if the offending party says they'll commit further breaches - it's completely up to the injured party whether they want to continue working with them or not. See p. 46 for further details

NEW QUESTION 33
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