Q&A Hero

Q: Ira orally agrees to buy a unique collection of sports memorabilia for $1,000 from Jane and sends her $250 as a down payment. When Ira sends her the rest of the price, Jane refuses to ship Ira the collection. Ira should seek a. damages. b. reformation. c. rescission. d. specific performance.

Q: Lou and Mira want to rescind their contract under which Lou sold an MP3 player to Mira for $50. To rescind the contract a. Lou must return the $50 and Mira must return the player. b. Lou must return the $50 only. c. Mira must return the player only. d. the parties can keep the "benefits" of their bargain.

Q: Fact Pattern 18-1 AAA Properties, Inc., leases an office building to Business Corporation (BC). At the time, the amount of damages on BC's default is difficult to determine, so the parties reasonably estimate, and the lease provides, that if BC defaults, AAA is entitled to $50,000 as "liquidated damages." Refer to Fact Pattern 18-1. Suppose that the amount stipulated as "liquidated damages" is $1 million. Under the decision in Case 18.2, Green Park Inn, Inc. v. Moore, this amount is most likely a. an unenforceable penalty because at the time of the lease, the amount of damages on default was too difficult to determine. b. an unenforceable penalty because the amount is excessive. c. liquidated damages because at the time of the lease, the amount of damages on default was difficult to determine and the estimate is reasonable. d. liquidated damages because the lease refers to the amount as "liquidated damages."

Q: Fact Pattern 18-1 AAA Properties, Inc., leases an office building to Business Corporation (BC). At the time, the amount of damages on BC's default is difficult to determine, so the parties reasonably estimate, and the lease provides, that if BC defaults, AAA is entitled to $50,000 as "liquidated damages." Refer to Fact Pattern 18-1. BC defaults, and AAA asks for the $50,000. Under the decision in Case 18.2, Green Park Inn, Inc. v. Moore, this amount is most likely a. an unenforceable penalty because at the time of the lease, the amount of damages on default was too difficult to determine. b. an unenforceable penalty because the amount is excessive. c. liquidated damages because at the time of the lease, the amount of damages on default was difficult to determine and the estimate is reasonable. d. liquidated damages because the lease refers to the amount as "liquidated damages."

Q: Home Delivery Corporation and Interstate Transport, Inc., sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This is a. a liquidated damages clause. b. a mitigation of damages clause. c. a nominal damages clause. d. a penalty clause.

Q: Ron breaches his lease with Sunny Properties and vacates the premises six months before the end of the term. In some states, the landlord would have to a. avoid reletting the premises to recover any damages from Ron. b. make reasonable efforts to relet the premises to mitigate the damages recoverable from Ron. c. relet the premises to recover any damages from Ron. d. sell the premises to recover any damages from Ron.

Q: Business Office, Inc., hires Carl to repair a computer on site for $400, but Carl does not show up as agreed. Business Office hires Dan to do the job for $350. Business Office may recover from Carl a. compensatory damages. b. consequential damages. c. nominal damages. d. punitive damages.

Q: Natural Expeditions needs a tent for a mountain-climbing trip and orders one for $500 from Outdoor Supplies. Natural does not tell Outdoor about the trip, or that it must receive the tent by July 1 or it will lose $10,000. Outdoor ships the tent July 15. Natural can recover a. $10,500. b. $10,000. c. $500. d. nominal damages.

Q: Mona contracts to repair a computer for New Data, Inc. (NDI). Mona knows that without the computer, NDI will lose a sale. Mona does not perform as promised. NDI files a suit against Mona. As consequential damages, NDI can recover a. the cost of a new computer. b. the difference between Mona's price and the actual cost of repair. c. the loss of profit from the lost sale. d. nothing.

Q: Ace Contractors, Inc., agrees to build a motel for Best Motels Corporation. The project proceeds according to plan, but before it is done, Best tells Ace to quit. Ace may recover a. the contract price less costs of materials and labor. b. the contract price. c. the costs needed to complete construction. d. profits plus the costs incurred up to the time of the breach.

Q: Development Associates (DA) agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through with the deal on the agreed date, when the market price of the land is $17,000. DA may recover a. $17,000. b. $15,000. c. $2,000. d. $0.

Q: Pam contracts to buy a Quotient-brand computer set-up from Regal Systems for $5,000, but Regal fails to deliver. Pam buys the computer elsewhere for $6,500. Pam's measure of damages is a. $1,500 only. b. $1,500 plus incidental damages. c. incidental damages only. d. $0.

Q: Carol pays Dick $10,000 for Dick to design an advertising campaign for Carol's health club. The next day, Dick tells Carol that he has accepted a job in New York and cannot design the campaign. Carol files a suit against Dick. As compensatory damages, Carol can recover a. $100,000. b. $10,000. c. $1,000. d. $0.

Q: Eagle Products, Inc., breaches its contract with Federated Stores Company. Federated files a suit to recover compensatory damages, which are normally assessed to a. compensate a nonbreaching party for the loss of a bargain. b. establish, in the absence of a loss, that a party acted wrongfully. c. pay for harm caused by special circumstances beyond a contract. d. penalize a breaching party.

Q: Under the UCC, in a contract for a sale of goods, remedies cannot be limited.

Q: Recovery under quasi contract may be used when one party partially performs under a contract that is unenforceable.

Q: Specific performance is the remedy customarily used when one party has breached a contract for the sale of goods.

Q: To rescind a contract, the party that received a benefit in exchange for his or her promise to perform is required to return the benefit.

Q: A breach of contract may entitle the innocent party to rescind the contract.

Q: Liquidated damages are damages that are certain in amount.

Q: The duty owed under the mitigation of damages doctrine depends on the situation.

Q: On an employer's breach of an employment contract, the measure of the employee's damages is his or her salary with no adjustments.

Q: Punitive damages are never awarded in breach of contract actions.

Q: A person's actions may cause a breach of contract or a tort, but not both.

Q: Consequential damages are awarded to cover all of the remote consequences of whatever injury a nonbreaching party suffers.

Q: In a contract involving the sale of land, money damages is always the most appropriate remedy to seek when the seller has breached the agreement.

Q: The measure of damages for breach of a construction contract depends on which party breaches and when.

Q: A party seeking to recover compensatory damages may also be entitled to recover incidental damages.

Q: Compensatory damages compensate the nonbreaching party for injuries or damages sustained by that party.

Q: Compensatory damages are foreseeable damages that arise from a party's breach of a contract.

Q: The four broad types of damages in contract law are compensatory, consequential, punitive, and actual damages.

Q: A remedy is the means employed to enforce a right or to redress an injury.

Q: Damages are designed to compensate a nonbreaching party for the loss of the bargain.

Q: Remedies that an innocent party can seek on the breach of a contract include rescission.

Q: Fred, the owner and manager of Green Grocer Store, contracts to buy sixty crates of fresh peaches from Holly, the owner and manager of Ideal Farms. Suppose that Holly dies before she can harvest and deliver the peaches. How does Holly's death affect their contract? If Holly does not die, but does not deliver, and Fred suffers a loss, is there any limit to the time within which Fred can file a suit against Holly for breach of contract? If so, how might Fred extend this time?

Q: Able Builders, Inc., contracts with Beach Investment Company to build a Cool Juice "˜n Fruit stand near Delta Beach. The work is to begin on April 1 and be done by June 1, so that the stand can open for the summer. Able does not finish until June 14. The stand opens but Beach Investment loses two weeks' early summer sales due to the delay. Is Beach Investment's duty to pay for the construction of the stand discharged?

Q: Wolf, who is a member of the National Guard, signs an employment agreement to work for Razor Products as a chemical engineer. Before the term begins, Wolf is unexpectedly required to serve with his Guard unit in Iraq for five years. Razor Products will probably be a. unable to enforce the contract due to the passage of time. b. unable to enforce the contract due to changes in the parties' circumstances. c. able to enforce the contract if it contained a clause providing for the suspension of contractual obligations during wartime. d. both a and b.

Q: Diners Restaurant signs an agreement with Eagle Bank to borrow $10,000 at 20 percent interest. Later, the state legislature passes a law lowering the maximum permissible rate of interest from 15 percent. Diners' best argument for avoiding payment to Eagle is that a. performance of the contract is commercially impossible. b. the agreement violates the mirror image rule. c. the law has rendered performance of the contract illegal. d. the specific subject matter of the contract has been destroyed.

Q: Flo agrees to work as Gary's personal accountant for one year but dies in the sixth month of the contract. Flo's estate a. is discharged from any contractual liability. b. must find a competent accountant to fulfill the contract. c. must pay liquidated damages. d. must refund any money paid to Flo on the contract.

Q: Ron operates a scrap metal business and contracts to provide ten tons of scrap steel at $50 per ton to be delivered to Paul in six months. An unforeseen shortage of scrap steel suddenly develops, making it impossible for Ron to fulfill his contract for less than $500 per ton. Ron's best defense against performing the contract would be a. the mirror image rule. b. impossibility of performance. c. commercial impracticability. d. none of the above.

Q: On April 1, KO Contractors, Inc., contracts to build a store for Lo-Cost Jewelry at a specific location in Metro City. On May 1, Metro changes its zoning laws to prohibit the construction of a commercial building at that location. Lo-Cost files a suit against KO. In this situation a. KO is in breach of contract. b. Lo-Cost is in breach of contract. c. the contract is discharged. d. the contract is suspended.

Q: Mira and Nina want to discharge their contract by executing and performing a new agreement. They can best accomplish this by a. accord and satisfaction. b. novation. c. reinvention. d. specific performance.

Q: Toolmakers, Inc., contracts to sell its business to United Hardware Corporation. Before either party has performed, rescission of this contract requires a. a mutual agreement to rescind. b. consideration. c. performance by all of the parties. d. none of the above.

Q: Al and Shelia are parties to a contract. They subsequently agree that Bill should take the place of Al and assume all of his rights and duties under the contract. This is a. a novation. b. an accord and satisfaction. c. an assignment. d. a modification.

Q: Ira and Jill can discharge their contract through novation. This requires a. an agreement by all of the parties to a new contract. b. an express discharge of the contract. c. performance of all of the terms by all of the parties. d. performance of all of the terms by only one of the parties.

Q: Delta Construction Corporation, a general contractor, hires Eagle Electrical Company, a subcontractor, to wire a new office building. As the work progresses, Delta pays Eagle some of the price, but after completing most of the job, Eagle is owed more than $50,000. Eagle stops work to insist on being paid. Delta hires Fine Wiring, Inc., to finish the job. Eagle files a suit against Delta. Eagle's suspension of work is most likely a. a material breach. b. complete performance. c. excused by Delta's failure to pay. d. substantial, but not complete, performance.

Q: Fact Pattern 17-1 Ann sells an apartment building to Beth with a promise to repair the roof, which violates the local housing code, within six months. One year later, Ann sends Carl, a carpenter, to fix the roof. Beth orders Carl to leave and refuses to make further payments to Ann, who files a suit against Beth. Refer to Fact Pattern 17-1. Beth's refusal to make further payments is most likely a. a material breach. b. complete performance. c. excused by Ann's failure to fix the roof. d. substantial, but not complete, performance.

Q: Fact Pattern 17-1 Ann sells an apartment building to Beth with a promise to repair the roof, which violates the local housing code, within six months. One year later, Ann sends Carl, a carpenter, to fix the roof. Beth orders Carl to leave and refuses to make further payments to Ann, who files a suit against Beth. Refer to Fact Pattern 17-1. Ann's late attempt to fix the roof is most likely a. a material breach. b. complete performance. c. excused by Beth's refusal to make further payments. d. substantial, but not complete, performance.

Q: Jaguar contracted to sell a new 2002 S-type car to Jim. An oversight in the building of the car led to the installation of a ten-year-old engine with over 50,000 miles already on it. When Jim's mechanic made Jim aware of the problem, Jim demanded that Jaguar replace it. Because of the cost of replacing the engine and the loss in value when the car left the lot, Jaguar refused. Jim sued Jaguar. Based on the reasoning in Case 17.1, Jacob & Youngs, Inc. v. Kent, the court in this case would most likely rule in favor ofa. Jaguar, because the installed engine was of the same quality, appearance, market value, and cost as a new engine.b. Jim, because the installed engine was not of the same quality as a new engine.c. Jaguar, because the omission was both trivial and innocent.d. Jim, because the engine was not exactly as the contract had specified.

Q: City Construction Corporation substantially performs its contract with Downtown Apartments, Inc. Downtown is entitled to a. damages. b. nothing. c. specific performance. d. substitute performance.

Q: Bob signs a five-year contract with CSB, a television station, to host a TV show. One year later, CSB replaces Bob with a younger host. Bob is paid, but does not appear on TV. Bob sues CSB for breach of contract. The court is most likely to rule in favor of a. Bob, because he lost the opportunity to build and maintain his professional marketability. b. Bob, only if he was at the top of the ratings when he was replaced. c. CSB, because it continues to pay Bob. d. CSB, because there is no breach of contract.

Q: Ace Builders, Inc., substantially performs its contract with Best Office Company to refurbish an old building but is unable to finish the job. Ace must a. do nothing more. b. find a subcontractor to complete the contract. c. forfeit to Best the entire price of the contract. d. pay the difference between substantial and complete performance.

Q: Jill contracts to sell Ken her MP3 player for $50. This contract will be fully discharged when Jill and Ken a. agree to sign a bill of sale. b. exchange the player for the $50. c. sign a receipt. d. shake hands and go their separate ways.

Q: Paul signs a lease that provides that any change in the zoning law will result in an automatic termination of the lease. The zoning board adopts a new zoning classification before the lease expires. The change in zoning satisfies the a. condition precedent. b. concurrent condition. c. condition subsequent. d. illegal condition.

Q: Dina contracts to repair a computer for Earl for $100. If Dina does not perform, Earl must pay a. $100. b. $50. c. $10. d. $0.

Q: Rita contracts to develop a marketing strategy for Sweet Candy Company for $2,500. This contract will, like most contracts, be discharged by a. agreement. b. novation. c. operation of law. d. performance.

Q: Subjective impossibility discharges a contract.

Q: An accord is an executory contract.

Q: The formation of a substituted agreement that does not involve a third party is a novation.

Q: A novation occurs when a contract is canceled and the parties are returned to the positions they occupied before the contract.

Q: To rescind a contract, the parties must make a second agreement that contains an offer, an acceptance, and consideration.

Q: A party's refusal to perform an executory contract is anticipatory repudiation.

Q: Any breach allows the nonbreaching party to cancel the contract.

Q: Any breach discharges the nonbreaching party from the contract.

Q: Anything less than complete performance is a material breach of contract.

Q: If a contract requires performance to the personal satisfaction of a party, the party to be satisfied must act honestly and in good faith.

Q: An intentional variation from a contract prevents substantial performance.

Q: Performance that provides a party with the essential benefits of a contract, in spite of any deviation from the terms, is substantial performance.

Q: Complete performance occurs when conditions in a contract are fully satisfied.

Q: A party normally satisfies its duties under a contract by actual performance.

Q: A buyer's duty to pay becomes absolute once a contract is formed.

Q: Conditions subsequent are more common than conditions precedent.

Q: A condition precedent must be met before a party's performance can be required.

Q: A promise to perform subject to being able to obtain financing is an example of a condition precedent.

Q: Performance under a contract may not be conditioned on the nonoccurrence of an event.

Q: Performance under a contract may be conditioned on the occurrence of a certain event.

Q: Quest Resources, Inc, contracts with Ring Communications Corporation (RCC) for RCC to design and build an all-weather communications system for Quest's field operations. RCC builds the system, but it functions effectively only in good weather. Is this a breach of the contract? If so, what remedies does Quest have?

Q: Investment Properties, Inc., hires Commercial Construction Company (CCC) to renovate the interior of Investment's office building. CCC submits plans that Investment approves. CCC completes the major reconstruction, paints the interior, and buys the fixtures and furnishings. Investment rejects some of the furnishings because they do not match the plans, and subsequently refuses to allow CCC to finish the work or to collect payment. Could CCC sue successfully for payment for the entire contract?

Q: Sam contracts to harvest Tina's crop on August 1. Due to bad weather, Sam cannot perform on the specified date. In this situation a. Sam is in breach of contract. b. the contract is discharged. c. the contract is suspended. d. Tina is in breach of contract.

Q: Frank agrees to lease an apartment from Gina for one day to see Harry, the president of the United States, deliver a speech in the street below. The speech is canceled ten days before its delivery date. The contract a. is discharged. b. is not affected. c. is postponed until another event is scheduled. d. must be performed immediately.