law exam 2 [CH. 12]
this is the most common damage awards for the expectation interest. These are the damages that inevitably result from the breach?
direct damages
If performing a contract was truly impossible, a court will ________ the agreement. But if honoring the deal merely imposed a financial burden, the law will generally _______ the contract.
discharge, enforce
Courts typically divide the __________ damages into three parts: 1. direct (or "compensatory") 2. consequential (or "special") damages 3. incidental damages
expectation
what breach of contract gets discharged?
material breach
This breach occurs when one of the parties fails to complete a minor part of the contract:
minor/immaterial
The most common remedy, used in the great majority of lawsuits, is what
money damages
In what situation could a party enforce strict performance? When the parties specifically agree to it in the contract When the requirement is reasonable When one of the parties did not act in good faith The plaintiff received sufficient benefit and the difference can be compensated with monetary damages
When the parties specifically agree to it in the contract When the requirement is reasonable
this remedy forces the two parties to perform their contract
specific performance
Typically, an ________ interest is the profit the plaintiff would have earned under a contract
expectation
Big Co., a construction company, builds a grocery store. The contract calls for a final price of $5 million. Big Co. incurred $4.5 million in costs and stands to make a profit of $500,000. On a final inspection, the grocery store owner is upset. His blueprints called for 24 skylights, but the finished building has only 12. Installing the additional skylights would cost $100,000. Big Co. made no other errors. How much must the grocery store owner pay Big Co.?
$4,900,000
the most common remedy that the law provides for a party injured by a breach of contract
expectation interest
____________ means some event has occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party
Commercial impracticability
What is the difference between legal remedies and equitable remedies for breach of contract? Legal remedies must be applied by the courts, while equitable remedies can be written into the contract. Legal remedies are monetary while equitable remedies are non-monetary. Equitable remedies are monetary, while legal remedies are non-monetary. Equitable remedies are only available in quasi-contract, while legal remedies are available in all other types of contracts.
Legal remedies are monetary while equitable remedies are non-monetary.
________ remedies are based on fairness and the prevention of unjust enrichment
Equitable
_____________ means some event has occurred that neither party anticipated, and the contract now has no value for one party
Frustration of purpose
The Grand Performance Hall is in the process of remodeling and is scheduled to open for business after being closed for 50 years. As part of the remodeling, it is installing a new sound system. The sound system is to be installed by Sound Systems, Inc. on or before April 10. Opening night of the hall is May 1. The contract states that "time is of the essence" because of the opening-night deadline. Sound Systems has some financial difficulties and doesn't deliver the system until April 20. Grand Hall refuses to accept it, and Sound Systems sues. What will be the result? Grand Hall wins; the contract date was strictly enforceable. Sound Systems wins; the contract was substantially performed. Grand Hall wins; there was commercial frustration. Sound Systems wins; there was a true impossibility.
Grand Hall wins; the contract date was strictly enforceable.
The concept that expectation interest is designed to put the injured party in the position he or she would have been in had both sides fully performed their obligations is found in: Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York. Hadley v. Baxendale. Hawkins v. McGee.
Hawkins v. McGee.
What must a party show to win a substantial performance lawsuit? There were no deviations from the contractual requirements. He or she acted in good faith. The breach caused no monetary damages. The breach was not intentional.
He or she acted in good faith. The breach was not intentional.
What are the differences between legal and equitable remedies? Choose 2 answer choices. Both attempt to reform the contract. One attempts to assist one party and penalize or restrict the other party. One requires actions instead of damages. One is monetary.
One requires actions instead of damages. One is monetary.
Fred and Wilma enter into a contract for horse riding lessons. Fred accidentally types the price for lessons to be $4.00 each instead of $44.00 each. Wilma wishes to enforce the contract at $4.00 per lesson. Which remedy would be most effective? Rescission Specific performance Injunction Reformation
Reformation
What is the evaluation standard for a personal satisfaction contract? Expert standards Subjective personal taste Objective, reasonable person standard Accepted standards for the area or region
Subjective personal taste Objective, reasonable person standard
Ralph is a professional football player. He signs a valid contract with the Jets. Later, the Giants offer him more money, so he signs a contract with them. If the Jets sue Ralph, what would the most likely result be? The court will order Ralph to play with the Jets. The court will order Ralph to play with the Jets, but Ralph is entitled to be paid the amount he negotiated under the Giants contract. The court will issue a preliminary injunction barring Ralph from playing with any team other than the Jets during the course of the lawsuit. The court will order Ralph to pay compensatory damages in the amount of the difference between the two contracts.
The court will issue a preliminary injunction barring Ralph from playing with any team other than the Jets during the course of the lawsuit.
means that something has happened making it literally impossible to do what the promisor said he would do
True impossibility
Manuel contracts to sell a painting that was painted by his deceased grandmother, then has a change of heart and decides to hang it in his own bedroom. He notifies Nadine, the person who had planned to buy it. Can Nadine have the contract enforced? No, it can't be enforced because this is of a personal nature, and Manuel retains the rights to the painting. Yes, it can be enforced under the equitable remedy of specific performance. Yes, it can be enforced under the theory of quasi-contract because Nadine had relied on Manuel's promise. No, it can't be enforced because Manuel canceled the contract before it was executed.
Yes, it can be enforced under the equitable remedy of specific performance.
A contract clause which specifies the amount of damages to be paid in the event of a breach is called: a covenant of damages clause. a reliance interest of damages clause. a liquidated damages clause. an incidental damages clause.
a liquidated damages clause.
Al contracted to sell his house to Bev. Subsequently, they both changed their minds and decided to cancel the contract. The contract between Al and Bev is discharged by: full performance. agreement. (recission) accord and satisfaction. novation.
agreement. (recission)
Which of the following is an equitable remedy for breach of contract? punitive damages when a seller has repeatedly shipped unsafe goods compensatory damages for having to hire extra help to correct nonconforming goods payment of the cost of cover for items not delivered on time an order for specific performance
an order for specific performance
What is the term for the action of a party to a contract who notifies the other party that he or she will not perform his or her duty under a contract? suspension of performance nullified obligations retractment anticipatory repudiation
anticipatory repudiation
an assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time
anticipatory repudiation
Courts use the related doctrines of __________ and ____________ to decide when a change in circumstances should permit one side to escape its duties
commercial impracticability and frustration of purpose
Ron operates a garbage pickup business. He contracts to pick up garbage from an apartment complex for the next 52 weeks at a price of $150 per week. Unexpectedly, the landfill center where Ron takes the garbage to dispose of it, files for bankruptcy. As a result, Ron must travel an additional 100 miles to the nearest landfill center, turning Ron's expected profit into a loss of $40 per week. Ron's best argument in support of his petition to be discharged from the contract is: the mail box rule. commercial impracticability. frustration of purpose. true impossibility.
commercial impracticability.
The goal of this damage is to put the nonbreaching party in the same position as if the breach has not occurred
compensatory
All Seasons, Inc. ordered $5,000 worth of Christmas decorations from Santa, Inc. The shipment of decorations was to arrive no later than October 1, but did not arrive until December 1. All Seasons was able to purchase some of the unfulfilled order through other suppliers, but had to pay 15% more than the price under contract with Santa, Inc. As a result of the delay, All Seasons' sales were down 25%. All Seasons can recover: punitive damages. nominal damages. compensatory damages and consequential damages. compensatory damages, consequential damages, and punitive damages.
compensatory damages and consequential damages.
A manufacturer delivers a new tractor to Farmer Ted on the first day of the harvest season. But the tractor will not start. It takes two weeks for the right parts to be delivered and installed. The repair bill comes to $1,000. During the two weeks, some acres of Farmer Ted's crops die. He argues in court that his lost profit on those acres is $60,000. If a jury awards $60,000 for tractor repairs, it will be in the form of _________ damages. consequential direct incidental specific performance
consequential
These are damages incurred directly as a result of the breach. Consequential damages should be foreseeable to the breaching party, and can include lost profits and lost business
consequential
Julie signs a contract to buy Nick's 2002 Mustang GT for $5,000. Later, Nick changes his mind and refuses to sell his car. Julie soon buys a similar 2002 Mustang GT for $5,500. She then sues Nick and wins $500. The $500 represents her _______ expectation interest reliance interest restitution interest
expectation interest
Most contracts are discharged by:
full performance
What is the implied duty in every contract that each party will deal fairly with the other? strict performance good faith reasonable person standard golden rule
good faith
Substantial performance involves an _______ breach
immaterial
if a builder fails to seed the lawn and plant landscaping after a house is built would be an example of what breach of contract?
immaterial
It is rare for contract performance to be truly _______ but very common for it to become a ________ burden to one party.
impossible, financial
These damages include costs the party did not expect to incur, but experienced due to the breach
incidental
Statutes of limitations: define how much money the injured party can sue for under a breach of contract claim. define whether there has been substantial performance of a contract or a material breach. limit the time in which an injured party may sue. only apply to the sale of goods. There is no statute of limitations on a service contract.
limit the time in which an injured party may sue.
this clause will be enforced if, and only if, at the time of creating the contract, it was very difficult to estimate actual damages and the amount is reasonable
liquidated damages
an order issued early in a lawsuit prohibiting a party from doing something during the course of the lawsuit
preliminary injunction
The goal of expectation interest is to: serve as a penalty for breaching a contract. award damages under the UCC when the sale of goods is the subject of the contract. put the non-breaching party in the position it would have been in had the contract never been formed. put the non-breaching party in the position it would have been in if the contract hadn't been breached.
put the non-breaching party in the position it would have been in if the contract hadn't been breached.
What is the principle that is applied to determine how much compensation a party receives in a quasi-contract settlement? bona fide reliance de facto justification quantum meruit quasi benefit
quantum meruit
Farmer Elvin is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract by failing to pay for the potatoes. If Farmer Elvin sells the potatoes to a local diner to make potato soup and salad, then this action would be considered a(n): reasonable mitigation of damages. attempt to maximize damages. attempt to realize an unwarranted profit. attempt at reformation.
reasonable mitigation of damages.
The injured party may be unable to demonstrate expectation damages, perhaps because it is unclear he would have profited describes what interest
reliance
________ damages can be difficult to win because they are harder to quantify
reliance
What remedies are available after an anticipatory repudiation? Choose 3 answers. requiring assurance cover canceling all other contracts with the breaching party suspending performance
requiring assurance canceling all other contracts with the breaching party suspending performance
the objective is to restore to the injured party the benefit she has provided. Margot provided the service with a benefit—money. Her best argument describes what interest
restitution
________occurs when one party to a contract fails to perform a contractual duty
breach of contract
Francoise owns a vineyard that produces Beaujolais Nouveau wine. She agrees to ship 1,000 cases of her wine to Ty, a New York importer, as soon as this year's vintage is ready. Ty will pay $50 per case. But a fungus wipes out her entire vineyard. Francoise is discharged. Describes what case?
true impossibility
Lenny makes K2, a synthetic form of marijuana, in his basement. He signs an agreement with the Super Smoke Shop to deliver 1,000 cans of K2 for $10,000. After the contract is signed, but before the delivery, Super Smoke Shop's state legislature makes the sale of K2 illegal. Lenny's contract will be discharged because of _________ true impossibility commercial impracticability frustration of purpose
true impossibility
What is the standard to which most personal satisfaction contracts must adhere? Choose 2 answers. satisfaction of the performing party (seller) satisfaction of the receiving party (buyer) satisfaction of a reasonable person satisfaction of an expert third party
satisfaction of the receiving party (buyer) satisfaction of a reasonable person
A statutory time limit within which an injured party must file suit:
statute of limitations
Requires one party to perform its obligations precisely, with no deviation from the contract terms
strict performance
What is the term for when a party to a contract performs his duties exactly according to the terms of the contract? perfect performance strict performance specific performance substantial performance
strict performance
What are the legal differences between a material breach and an immaterial breach of contract? Choose 2 answer choices. Whether a party has announced repudiation of the contract The dollar amount of damages Whether the court will discharge the contract The level of the performance of the contractual obligations
Whether the court will discharge the contract The level of the performance of the contractual obligations
these circumstances relate to which damage? If 1. the lost profits were foreseeable and If 2. the plaintiff provides enough information so that the fact finder can reasonably estimate a fair amount.
consequential
this contract remedy could include correcting a math error, or correcting a detail that makes a noncompete clause in a business sales contract excessive and unenforceable
contract reformation
If the builder failed to include a basement when building the house, however, that would be a material breach would be an example of what breach of contract?
material
Substantial performance involves a _______ breach?
material
occurs when one party fails to perform his or her contractual obligations and defeats the essential purpose of the agreement?
material breach
LaVon contracts with Nathan for Nathan to sing at her comedy club every Friday night in July. The first Friday, the crowd loved Nathan. The second Friday, they booed him. The next week, Nathan got a better offer, so he hired his twin brother Ethan to fill in for him at LaVon's club. Can LaVon compel Nathan to perform? No, she can't compel him because Nathan has gotten a better offer. Yes, she can compel him under the theory of quasi-contract because LaVon had relied on Nathan's promise and she has printed posters and advertisements. No, because you cannot compel performance of personal services under specific performance. No, she can't compel him because Ethan is an acceptable substitute for Nathan.
No, because you cannot compel performance of personal services under specific performance.
