Business Law and Ethics: Chapter 10

A novation requires the existence of a previous, valid obligation A. True B. False

A. True

Orchid and Peony enter into a contract for the sale of Orchid's textbook at the end of the fall semester for which Peony agrees to pay Orchid $75. Peony wants to transfer her right to payment for the book to Queenie. A transfer of this right is A. an assignment B. a delegation C. a third-party beneficiary contract D. prohibited

A. an assignment

Planners & Builders, Inc., enters into a contract with O'Reilly to refurbish a garage on his property as an auto repair shop. O'Reilly's neighbor Nora challenges the project as a violation of the local zoning laws. A court orders a halt to the project. O'Reilly's contract with Planners & Builders is A. discharged B. breached C. not affected D. suspended

A. discharged

Isabel agrees to buy a unique collection of nineteenth-century cowboy memorabilia for $10,000 from Jessie and sends $2,500 as a down payment. When Isabel pays the rest of the price, Jessie refuses to ship the collection. Isabel should seek A. specific performance B. damages C. restitution D. recission

A. specific performance

Tile & Grout contracts to resurface the insides of the pools at WaterWorld Park. Tile & Grout knows that without the resurfacing, WaterWorld will have to delay its seasoning opening. Tile & Grout does not perform as promised. As consequential damages, WaterWorld can recover A. the loss of profit from the delayed opening B. nothing C. the difference between T&G's price and the eventual cost of resurfacing D. the cost of new pools

A. the loss of profit from the delayed opening

Opportunity Market Company (OMC) and Pierce enter into a contract for Pierce to cut and trim the landscaping around OMC's building before a meeting of the company's sales staff. When Pierce's schedule conflicts, he asks Rachel to do the cutting and trimming. This transfer of duties is A. a third party beneficiary contract B. a delegation C. prohibited D. an assignment

B. a delegation

D'Alemberte contracts with Elias to render personal nursing services for the benefit of Federica. This is A. an alienation B. a third party beneficiary contract C. an assignment D. a delegation

B. a third party beneficiary contract

Paolho and Roth agree that Paolho will fix Roth's boat dock in exchange for $5,000. Paolho spends half of the amount due under the contract to aquire the materials for the job fromSav-U Economy Lumber. Sav-U is A. an assignor B. an incidental beneficiary C. a delegatee D. an intended beneficiary

B. an incidental beneficiary

Kali contracts to sell Levon her car for $3,000. This contract will be fully discharged when Kali and Levon A. shake hands and go their separate ways B. exchange the car for the $3,000 C. agree to sign a bill of sale D. sign a receipt

B. exchange the car for the $3,000

Joy and Kris enter into a contract for Kris to lay sod in Joy's yard for which she agrees to pay Kris. When Kris's schedule conflicts, she contacts Leza, to whom Kris "assigns all rights under the contract." Kris is A. liable to Leza for inducing a prohibited contract B. liable to joy if Leza does not perform C. liable to joy for breech of contract D. absolved for any liability under the contract

B. liable to joy if Leza does not perform

Pico, a famous chef, agrees to give ten culinary lessons to Rhoda in exchange for $1,200. Pico's attempt to transfer his contract duties to Sven, an unknown sous-chef, will probably be A. permitted because contracts may be freely delegated B. prohibited if Pico and Sven have different skill levels C. prohibited because contracts may not be freely delegated D. permitted because the contract is concerned with cookery

B. prohibited if Pico and Sven have different skill levels

Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be A. absolute B. substantial C. complete D. material

B. substantial

Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract A. Hal must return the bike only B. the parties can keep the "benefits" for their bargain C. Guido must return the $100 and Hal must return the bike D. Guido must return the $100 only

C. Guido must return the $100 and Hal must return the bike

Rikki agrees to sell her Sunrise Breakfast Café to Tia. As part of the deal, Rikki signs a covenant not to open a competing business within a hundred-mile radius for ten years. If this covenant is later determined to be unreasonable, the appropriate remedy is most likely A. damages B. specific performance C. reformation D. rescission

C. reformation

Excavate n' Fill, Inc., enters into a contract with Fred to fill and landscape an abandoned quarry on Fred's land. Fred advances Excavate n' Fill 10 percent of its cost. The parties rescind the contract. Excavate n' Fill's refund of the payment is A. liquidated damages B. a penalty C. restitution D. reformation

C. restitution

Sati contracts to work exclusively for Thermal Imaging Company during July for $5,000. On June 30, Thermal Imaging cancels the contract. Sati finds a similar job for the month of July but earns only $3,000. Sati files a suit against Thermal Imaging. As compensatory damages, Sati can recover A. $0 B. $3,000 C. $1,000 D. $2,000

D. $2,000

Copper Conduit, Inc., and Dependable Electric Company 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 waiver-of-breech clause B. a mitigation-of-damages clause C. a penalty clause D. a liquidated damages clause

D. a liquidated damages clause

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is A. a settlement agreement B. an accord and satisfaction C. a mutual agreement to rescind D. a novation

D. a novation

Metro Facilities, Inc., contracts to sell a parking garage to Nouveau Property Company. The contract provides that if Metro does not close the deal by September 15, it must pay Nouveau one-half of the contract price. This provision is not enforceable because it is A. a limitation-of-liability clause B. an exculpatory clause C. a liquidated damages clause D. a penalty clause

D. a penalty clause

Bea takes out a life insurance policy with Vida Insurance Corporation that names her spouse Wendell as the beneficiary. This is A. a third party incidental beneficiary contract B. a delegation C. an assignment D. a third party intended beneficiary contract

D. a third party intended beneficiary contract

Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager for two years. If Rig breaches the contract, Scott has a duty to A. punish Rig and set an example to deter others from similar acts B. rescind the contract with Rig C. do nothing D. reduce damages that Sinead might otherwise suffer

D. reduce damages that Sinead might otherwise suffer

Ready Repair Service enters into a contract to fix washers and dryers in Scrub n' Dry Company's coin-operated laundries. If Ready Repair breaches the contract, Scrub n' Dry can A. file a criminal complaint against Ready Repair B. do nothing but temporarily suspend operations and wait C. do nothing but make a deal with a different service provider D. sue Ready Repair for damages

D. sue Ready Repair for damages