Free NCA Contracts Examination Practice Questions

Sample Practice Questions

Try these 10 sample questions from the NCA Contracts Examination practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A supply arrangement is described as a longer-term relational contract in the sense discussed in Bhasin. Which feature of the relationship is emphasized in that discussion?

   1. A.The parties depend on an element of trust and cooperation over time.Correct answer: A
   2. B.The parties rely solely on a single exchange without continuing cooperation.
   3. C.The parties undertake a fiduciary obligation to subordinate their interests.
   4. D.The parties agree to deal exclusively with each other throughout the term.

   Explanation: Bhasin refers to "longer term, relational contracts that depend on an element of trust and cooperation". It contrasts those relationships with transactional exchanges, while noting that arm's-length parties are not subject to fiduciary duties; exclusivity is not a necessary feature of the description.

   Reference: Bhasin v. Hrynew — 2014 SCC 71, paragraph 60

2. 2A bidder argues that every request for tenders automatically creates Contract A as soon as a bid is submitted. How should a court assess that argument under the Canadian tendering framework?

   1. A.Contract A arises from interpretation of the tendering arrangement.Correct answer: A
   2. B.Contract A arises automatically from the bidder's submission.
   3. C.Contract A arises only after the construction contract is executed.
   4. D.Contract A arises whenever the bidder expects to earn a profit.

   Explanation: The Court explains that "Contract A, however, arises (if at all) as a matter of interpretation. It is not imposed as a rule of law." A submitted bid is not by itself an automatic rule of formation, and the tendering contract may precede the construction contract. A bidder's profit expectation alone does not establish it.

   Reference: Tercon Contractors Ltd. v. British Columbia — 2010 SCC 4, paragraph 87

3. 3Two parties agree on every essential term and intend to be bound immediately, but plan to record the deal in a formal document later. Under the approach discussed in Ruparell when distinguishing Bawitko, what does the planned document mean for formation?

   1. A.A binding agreement may exist before the formal document is executed.Correct answer: A
   2. B.The agreement can bind only when the later document has been signed.
   3. C.The parties must treat every draft document as a separate agreement.
   4. D.A later document prevents an agreement on any essential term.

   Explanation: Ruparell says "It is not unusual for contracts to be made by agreement on the essential terms, which are later incorporated into a formal written document." Binding effect depends on the circumstances and the parties' intention, which the question specifies; a later document is not automatically required for formation.

   Reference: Ruparell v. J.H. Cochrane Investments Inc. — 2021 ONCA 880, paragraph 4

4. 4An insurer and an owner expressly intend a policy clause to protect a charterer, which seeks to rely on it for an activity outside the activities contemplated by their agreement. Under the principled exception to privity described in Fraser River, what is the result of applying the two threshold factors?

   1. A.The exception applies because the parties intended to benefit the charterer.
   2. B.The exception fails because the activity was outside the contemplated scope.Correct answer: B
   3. C.The exception applies if the charterer's activity was commercially reasonable.
   4. D.The exception fails because the charterer did not sign the insurance policy.

   Explanation: The Court asks whether the parties intended to extend the benefit and whether the third party's activities were "the very activities contemplated as coming within the scope of the contract in general, or the provision in particular". The factors are cumulative, so benefit alone or commercial reasonableness cannot replace the required activity. A non-signatory can benefit under the exception.

   Reference: Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. — [1999] 3 SCR 108, paragraph 32

5. 5A land sale requires subdivision approval. The agreement does not say who must obtain it, and only the vendor can legally apply. In the circumstances described in Dynamic Transport, what obligation rests on the vendor?

   1. A.Guarantee approval will be issued before the date of closing.
   2. B.Take reasonable steps in good faith to secure the approval.Correct answer: B
   3. C.Treat the required approval as making the sale unenforceable.
   4. D.Require a new payment before applying for the approval.

   Explanation: The Supreme Court's account of Dynamic Transport states that "the vendor was under an obligation to use reasonable efforts to secure the permission". This is an obligation of effort, not a guarantee of approval; neither the approval condition nor the absence of a new payment eliminates the duty in these circumstances.

   Reference: Bhasin v. Hrynew — 2014 SCC 71, paragraph 49

6. 6When interpreting an ordinary written contract under Sattva, how should the decision-maker use its surrounding circumstances?

   1. A.Consider the circumstances known at formation together with the contract as a whole.Correct answer: A
   2. B.Substitute the circumstances for the contract's words when their effect differs.
   3. C.Consider only circumstances that arose after the parties signed the contract.
   4. D.Determine meaning from each isolated sentence without considering the rest.

   Explanation: Sattva directs the decision-maker to "read the contract as a whole, giving the words used their ordinary and grammatical meaning" consistently with the circumstances known at formation. The other options either displace the text, select later circumstances, or isolate a clause from the whole agreement.

   Reference: Sattva Capital Corp. v. Creston Moly Corp. — 2014 SCC 53, paragraph 47

7. 7A party invokes an exclusion clause after an alleged breach. According to the Tercon framework, what does the court first determine when the other party disputes the clause's effect?

   1. A.Whether the clause applies to the circumstances established in evidence.Correct answer: A
   2. B.Whether the clause was unconscionable when the contract was made.
   3. C.Whether overriding public policy precludes enforcing the clause.
   4. D.Whether the clause became unreasonable after the alleged breach.

   Explanation: Tercon states that "The first issue, of course, is whether as a matter of interpretation the exclusion clause even applies to the circumstances established in evidence." Only if it applies does the analysis proceed to formation-time unconscionability and overriding public policy. A later assessment of reasonableness is not the first interpretive inquiry.

   Reference: Tercon Contractors Ltd. v. British Columbia — 2010 SCC 4, paragraph 122

8. 8A fixed-price contractor faces an unexpected increase in expense, but the work remains the same kind of work undertaken in the contract. Under the principle in Davis Contractors, what follows from the increased burden alone?

   1. A.It necessarily discharges the contract through frustration.
   2. B.It does not by itself establish frustration of the contract.Correct answer: B
   3. C.It transfers the increased expense automatically to the owner.
   4. D.It requires the court to replace the fixed price with market value.

   Explanation: In Davis Contractors the work "proved to be more onerous but it never became a job of a different kind from that contemplated in the contract". An increase in the burden alone does not establish frustration; it also does not automatically transfer cost or authorize a new price.

   Reference: Davis Contractors Ltd v Fareham Urban District Council — [1956] UKHL 3, Lord Morton of Henryton, analysis of delay

9. 9Under the majority's approach in Uber Technologies v. Heller, which combination is required for unconscionability?

   1. A.Inequality of bargaining power and a resulting improvident bargain.Correct answer: A
   2. B.Inequality of bargaining power and a resulting breach of contract.
   3. C.An improvident bargain and an express promise of independent advice.
   4. D.An improvident bargain and deliberate exploitation by the stronger party.

   Explanation: The majority says its approach "requires both an inequality of bargaining power and a resulting improvident bargain". A breach of contract is not a substitute for an improvident bargain; neither an express promise of advice nor deliberate exploitation is an element of this two-part test.

   Reference: Uber Technologies Inc. v. Heller — 2020 SCC 16, paragraph 65

10. 10A contract's object includes providing peace of mind. After a breach, a claimant proves mental distress that was within the parties' reasonable contemplation when they contracted. Under Fidler, how should that loss be treated in principle?

    1. A.It may be recoverable, subject to the evidence and ordinary remoteness principles.Correct answer: A
    2. B.It is recoverable only if the breach was accompanied by a separate tort.
    3. C.It is excluded because contractual damages cover only tangible benefits.
    4. D.It is automatically recoverable whenever any breach causes disappointment.

    Explanation: Fidler explains that where an object is a psychological benefit, mental distress damages "should in principle be recoverable where they are established on the evidence and shown to have been within the reasonable contemplation of the parties at the time the contract was made". The claim is not automatic for incidental disappointment, and an intangible benefit is not excluded merely because it is intangible.

    Reference: Fidler v. Sun Life Assurance Co. of Canada — 2006 SCC 30, paragraph 45