BUAD 3355 CH. 18

1. A breach of contract entitles the breaching party to sue for damages.

F

Damages are awarded for whatever injury a non-breaching party suffers, whether or not the breaching party could have foreseen the injury.

F

On a tenant's abandonment of leased premises, the landlord's measure of damages is the amount of the unpaid rent with no adjustments.

F

The doctrine of election of remedies requires a court to "poll" the parties to a contract to "elect" a remedy.

F

The measure of damages for the breach of a contract for a sale of land depends on which party breaches and when.

F

To rescind a contract, each party essentially advances to the position he or she would have been in if the contract had been fully executed.

F

Consequential damages are foreseeable damages that arise from a party's breach of a contract.

T

Courts generally do not grant specific performance of personal service contracts.

T

Damages compensate a party for harm suffered as a result of another's wrongful act.

T

Expenses that are caused directly by a breach of contract—such as those incurred to obtain performance from another source—are incidental damages.

T

In a contract for a sale of goods, the usual measure of compensatory damages is the difference between the contract price and the market price.

T

In a contract for a sale of land, the usual remedy is specific performance

T

Liquidated damage clauses typically require a party who breaches a contract to pay a certain amount to the non-breaching party.

T

Nominal damages normally establish that the defendant acted wrongly.

T

Nominal damages usually involve very small amounts.

T

Normally, when a non-breaching party has been damaged by a breach of contract, he or she has a duty to mitigate those damages.

T

Rescission is available in cases involving fraud.

T

The amount of damages on a breach of contract is the difference between the value of what was promised and the value of what was delivered or performed.

T

The injury suffered by a non-breaching party due to the breach of a contract may be remedied by payment of compensatory damages.

T

When a party fails to deliver goods contracted for, the non-breaching party may obtain consequential damages for a loss of profit from a planned resale.

T

First Properties, Inc., negotiates with Great Management Corporation to include a liquidated damages clause in their contract. The clause is enforceable if, when the parties enter into the contract, estimating the potential amount of damages on a breach is a. a reasonable possibility. b. difficult. c. nearly impossible. d. not possible.

a. a reasonable possibility.

Dan hires Eve to perform at Dan's Club, but Eve later breaches the agreement to accept a higher-paying job at First Star Arena. Dan files a suit against Eve. The court will most likely a. award damages to Dan. b. cancel Dan and Eve's contract. c. order Eve to perform the contract. d. reform Dan and Eve's contract.

a. award damages to Dan.

Interstate Purchases, Inc. (IPI), contracts to buy Jiffy Corporation's assets. Jiffy breaches the contract. IPI files a suit against Jiffy, seeking a variety of remedies. The doctrine of election of remedies has been eliminated in contracts involving sales of a. goods. b. intellectual property. c. real property. d. services.

a. goods.

Loyal Engineers, Inc., needs a drill to continue its operations and orders one for $3,000 from Mining Supplies Company. Loyal tells Mining that it must receive the drill by Tuesday, or it will lose $10,000. Mining ships the drill late. Loyal can recover a. $13,000. b. $10,000. c. $3,000. d. $0.

b. $10,000.

Kris contracts to work exclusively for Local Company during May for $5,000. On April 30, Local cancels the contract. Kris finds another job during May but earns only $3,000. Kris files a suit against Local. As compensatory damages, Kris can recover a. $3,000. b. $2,000. c. $1,000. d. $0.

b. $2,000.

John owned an apartment and leased it to Steve. The lease agreement was for one year. After ten months, Steve told John that he was moving out of the apartment immediately. When John went to the apartment, he saw that Steve had put holes in the walls, ruined the carpets, and damaged the wiring. John was told that repairs would take at least two months. John sued Steve for damage to the apartment and for the rent payments for the last two months of the lease. Steve argues that the remaining rent owed should be offset by John's duty to find another tenant and mitigate his damages. The court would most likely rule in favor of a. Steve, because John had a duty to mitigate his damages. b. John, because the apartment could not be rented for two months due to the damage caused by Steve. c. Steve, because the John could have rented the apartment "as is." d. John, because Steve argued against his recovery in their dispute.

b. John, because the apartment could not be rented for two months due to the damage caused by Steve.

Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corporation. Fresh Food does not pay for the storage. Earl sells the fruit to Green Grocery Stores, Inc. This sale represents a. a breach of contract. b. a mitigation of damages. c. rescission and restitution. d. specific performance.

b. a mitigation of damages.

Quality Sales Corporation seeks punitive damages in a suit against Regional Distributors, Inc. Generally, punitive damages may be recovered when a contract has been breached a. in almost all cases. b. only if the breach is directly related to the commission of a tort. c. only if the contract involves a sale of goods or a sale of land. d. under no circumstances.

b. only if the breach is directly related to the commission of a tort.

Ann hires Ben to construct fifteen oil storage tanks over a period of five years, with payment for each tank to be made as it is completed, but they do not put their agreement in writing. Ann breaches the contract when she refuses to pay Ben for the first tank. To redress the breach, Ben's best choice is a. damages. b. quasi-contractual recovery. c. rescission. d. specific performance.

b. quasi-contractual recovery.

A contract for a sale of land from United Properties, Inc., to Commercial Investments Corporation contains an erroneous legal description. The most appropriate remedy for these parties is a. damages. b. reformation. c. rescission. d. specific performance.

b. reformation.

Dina and Elle agree to a contract, which Dina breaches. For this breach, Elle seeks restitution. Restitution is a. the canceling of the contract. b. the recapture of the benefit that Elle conferred on Dina through which Dina has been unjustly enriched. c. the "reinstitution" of the parties' respective benefits under the contract after a punitive assessment against Dina. d. the "resting," or suspension, of contractual duties until Din "re-agrees" to perform.

b. the recapture of the benefit that Elle conferred on Dina through which Dina has been unjustly enriched.

Bob contracts to work for Central Construction Corporation (CCC) during July for $4,500. On June 30, CCC cancels the contract. Bob declines a similar job with Design Builders, Inc., which would have paid $4,000. Bob files a suit against CCC. As compensatory damages, Bob can recover a. $4,500. b. $4,000. c. $500. d. $0.

c. $500.

Roy contracts to sell his Double-R Ranch to Sam on May 1. On April 20, Roy tells Sam that he will not go through with the deal. Sam files a suit against Roy. Sam can recover a. the cost of any ranch that would suit him. b. the cost of a similar, nearby ranch. c. the Double-R Ranch. d. nothing.

c. the Double-R Ranch.

Recreational Pools, Inc., agrees to build a swimming pool for Sandy, but fails to build it according to the contract specifications. Sandy hires Total Fix-It Company to finish the project. Sandy may recover from Recreational Pools 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.

c. the costs needed to complete construction.

Great Hardware Store agrees to hire Holly for one year at a salary of $500 per week. When Great cancels the contract, Holly spends $100 to obtain a similar job that pays $450 per week for a year. Holly is entitled to recover a. the amount of the wages that Great promised only. b. the difference between the wages at the two jobs only. c. the difference between the wages at the two jobs plus $100. d.$100 only

c. the difference between the wages at the two jobs plus $100.

Amy contracts to sell a residential duplex to Burt. The contract provides that if Amy does not close the deal by September 15, she must pay Burt one-half of the duplex's sale price. This provision is not enforceable because it is a. a liquidated damages clause. b. a mitigation of damages clause. c. a nominal damages clause. d. a penalty clause.

d. a penalty clause.

A contract between National Supplies Company and Omega Manufacturing Corporation includes a provision excluding liability as a result of fraud. This provision is a. enforceable because the parties are protected from liability. b. enforceable because the parties consented to it. c. enforceable if the parties have equal bargaining power. d. not enforceable.

d. not enforceable.

For Pete to recover the benefit of his bargain from a breached real estate contract with Quality Properties, Inc., the most appropriate remedy is a. damages. b. quasi-contractual recovery. c. rescission. d. specific performance.

d. specific performance.

Edie, who has no business experience, decides to open E.D.'s Storage. Frank, an experienced architect, designs a warehouse for Edie under a contract drafted by Frank that limits his liability "for any mistakes" to his fee. When the warehouse collapses due to a design error, Edie files a suit against Frank. Like the situation in Case 18.3, Lucier v. Williams, this limitation-of-liability clause is most likely a. enforceable because at the time of the contract, mistakes were too difficult to foresee and the limit is reasonable. b. enforceable because both parties agreed to it. c. unenforceable because at the time of the contract, mistakes were too difficult to foresee. d. unenforceable because Frank prepared the contract and the parties had unequal bargaining power.

d. unenforceable because Frank prepared the contract and the parties had unequal bargaining power.

Chris hires Delta Corporation to inspect a house under a contract drafted by Delta that limits Delta's liability "from any cause" to half of its $400 fee. Delta's inspector passes the house, which Chris buys. Defects soon become apparent, requiring repairs costing $10,000. Chris files a suit against Delta. Under the decision in Case 18.3, Lucier v. Williams, the limitation-of-liability clause is most likely a. enforceable because at the time of the contract, the amount of liability was difficult to determine and the limit is reasonable. b. enforceable because both parties agreed to it. c. unenforceable because at the time of the contract, the amount of liability was too difficult to determine. d. unenforceable because the clause allows Delta to avoid almost all responsibility for its negligence.

d. unenforceable because the clause allows Delta to avoid almost all responsibility for its negligence.