The Case of Canadian Imperial Bank of Commerce V

question 129

Multiple Choice

The case of Canadian Imperial Bank of Commerce v. Milhomens examined the effect of one party's insanity on a contract. What did the Court find?

• A) For a contract to be voidable because of insanity, one party must be insane and the other party must have known (or ought to have known) of the insanity.
• B) Contracts are not enforceable by either party if one party can establish a mental defect.
• C) If a insane person enters into a contract, that contract is automatically void.
• D) If a person has the mental faculties to sign a contract, that person cannot be insane.
• E) The relevant test for insanity is simply whether one party believed the other to be insane, at the moment the offer was made.

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Definitions:

Variable Expenses

Expenses that vary directly with changes in business activity level, such as sales volume or production quantity.

Fixed Expenses

Expenses that remain constant regardless of any variations in the volume of production or sales.

Break-Even Point

The level of sales at which profit is zero.

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs and contributes to covering fixed expenses and generating profit.