True or False: An insolvent person may continue to contract, but risks punitive court awards if losses are unfairly sustained by others.

The statement is true because, under Canadian law, an insolvent individual retains the capacity to enter into contracts, even while facing financial difficulties. However, this ability is not without its consequences. An insolvent party must conduct their contractual engagements in good faith; otherwise, they may face punitive court measures if their actions unjustly harm other parties involved in the transaction.

For instance, if an insolvent individual knowingly enters into a contract intending not to fulfill it or in a manner that causes unfair losses to others, the court may impose punitive damages. This serves as a deterrent against fraudulent or reckless behavior in contracting, ensuring that all parties engage responsibly and ethically, irrespective of their financial status.

While the ability to continue with contracts remains intact, the risks associated with such actions heighten the importance of transparency and fairness in dealings, thereby reinforcing the principle that insolvency does not exempt one from potential legal and financial repercussions stemming from their contractual obligations.