Module 6 Quiz
The correct answer is "still liable on the bid." If a mistake concerns the future market value or quality of the object of the contract, the mistake is one of value, and the contract normally is enforceable. The reason that mistakes of value do not affect the enforceability of contracts is that value is variable. Depending on the time, place, and other circumstances, the same item may be worth considerably different amounts. When parties form a contract, their agreement establishes the value of the object of their transaction—for the moment. Each party is considered to have assumed the risk that the value will change in the future or prove to be different from what they thought. Without this rule, almost any party who did not receive what they considered a fair bargain could argue mistake. Ben believed that the car was worth more than he paid; he has made a mistake of value, especially when he must pour more money
At an auction, Ben bids on a 1957 Chevy coupe, believing that it is worth more than the price asked. When the car proves to need more repairs than Ben estimated, and thus is worth less as is, Ben is not liable on the bid because the need for repair is not a material fact. still liable on the bid. not liable on the bid because he underestimated the cost of repairs. not liable on the bid because the auctioneer misrepresented the value.
The correct answer is "the market price at the place at which Concrete delivered the goods plus incidental damages." If a buyer repudiates a contract or wrongfully refuses to accept the goods, a seller can bring an action to recover the damages sustained. Ordinarily, the amount of damages equals the difference between the contract price or lease payments and the market price at the time and place of tender of the goods, plus incidental damages. This is the only way to make Concrete whole, given the fluctuations in the price of concrete.
Builder Inc. and Concrete Supply Company enter into a contract for a sale of cement. Concrete delivers, but Builder does not pay. Concrete can recover as damages the market price at the place at which Concrete delivered the goods plus incidental damages. whatever amount Concrete wishes to claim. any profit lost minus any loss avoided. the purchase price plus incidental damages.
The correct answer is "specific performance." In this case, specific performance demands that Forest Acres close the sale. The equitable remedy of specific performance calls for the performance of the act promised in the contract. This remedy is attractive to a nonbreaching party because it provides the exact bargain promised in the contract. A court may grant specific performance to a buyer in an action for a breach of contract involving the sale of land. In this situation, the legal remedy of monetary damages may not compensate the buyer adequately. After all, every parcel of land is unique: the same land in the same location obviously cannot be obtained elsewhere. Only when specific performance is unavailable (such as when the seller has sold the property to someone else) will monetary damages be awarded instead.
Erma enters into a contract to buy a tract of riverfront property from Forest Acres to build and sell a residential development. Forest Acres fails to close the sale. Erma's remedy is most likely specific performance. the amount that Erma invested in the project to the date of the closing. nothing—Forest Acres still owns the land. the difference between the contract and market prices of the land.
The correct answer is "$1,000." $1,000 is the difference between the amount Len can earn at New Ads as opposed to the amount Len would have earned at Media. Damages that compensate the nonbreaching party for the "loss of the bargain" are known as compensatory damages. These damages compensate the injured party only for damages actually sustained and proved to have arisen directly from the loss of the bargain caused by the breach of contract. They simply replace what was lost because of the wrong or damage and, for this reason, are often said to "make the person whole." Len may also be able to recover any expenses incurred to find a new job as incidental damages. An award of more than the difference between the two jobs would leave Len better off.
Len contracts to work for Media Corporation during May for $4,500. On April 30, Media cancels the contract. Len then accepts a similar job with New Ads Inc., which pays $3,500. Len files a suit against Media. As compensatory damages, Len can recover $1,000. $4,500. $3,500. $0.
The correct answer is "reject the shipment." If a seller fails to deliver the goods ordered, the buyer can reject the shipment. The buyer must reject the shipment within a reasonable time and notify the seller of the rejection and the reason for the rejection. The buyer may also cancel the contract or sue for damages.
Office Express orders 100 smartphones from Electronic Supply for $500 per phone. Electronic Supply sends 100 flip phones instead. Office Express has the right to: revoke acceptance. stop the delivery of the good in transit. reject the shipment. replevy the goods
The correct answer is "not rescind the contract." In this case both parties have assumed that the land is essentially worthless. A bilateral mistake is a "mutual misunderstanding concerning a basic assumption on which the contract was made." Note that, as with unilateral mistakes, the mistake must be about a material fact. When both parties are mistaken about the same material fact, the contract can be rescinded by either party. The court would refer this back to the parties and let the two of them decide whether they want to go through with the deal.
Open Range agrees to sell Pinewood Ranch a remote parcel of land for $15,000. Both parties believe the land to be worthless, but beneath it is shale rock containing oil. A court would rescind the contract on the basis of a mistake of opinion. rescind the contract on the basis of a mistake of quality. rescind the contract on the basis of a mistake of value. not rescind the contract
The correct answer is "resell the garages and recover any damages from Truck." When a buyer or lessee breaches or repudiates (fails to pay) the contract while the seller or lessor is in possession of the goods, the seller or lessor can resell or dispose of the goods. Any resale of the goods must be made in good faith and in a commercially reasonable manner. The seller must give the original buyer reasonable notice of the resale, unless the goods are perishable or will rapidly decline in value [UCC 2-706(2), (3)]. The seller can retain any profits made as a result of the sale and can hold the buyer or lessee liable for any loss [UCC 2-703(d), 2-706(1), 2A-523(1)(e), 2A-527(1)]. (Here, a loss is any deficiency between the resale price and the contract price.)
Steel Buildings Inc. agrees to sell four portable garages to Truck Service Center. Five days later, Truck refuses delivery and cancels the contract. Steel is entitled to recover any damages from Truck but not resell the garages. resell the garages and recover any damages from Truck. force Truck to accept the garages. resell the garages but not recover any damages from Truck
The correct answer is "recover consequential damages." Consequential damages to compensate for indirect losses (such as lost profits) resulting from the breach that were reasonably foreseeable at the time of contract formation. Both ABC and Tools R Us knew that the items were needed for a special event. With that opportunity missed, ABC lost the profits they expected.
ABC Hardware orders a shipment of hammers and saws from Tools R Us for a special DIY event that they are planning. ABC agrees to pay for the tools on delivery. Tools R Us accepts the order but fails to deliver. ABC Hardware then purchases the hammers and saws from Enzo's Tools, but the tools do not arrive in time for the event. ABC can: recover consequential damages. obtain specific performance. do nothing. obtain the hammers and saws in event of insolvency
The correct answer is "obtain specific performance." A buyer can obtain specific performance if the goods are unique or monetary damages are not sufficient to cover the injury. In this case the items are clearly unique: imperial jade is unique and the carvings that exist are very rare. They clearly either wanted the items for their own collection or to resell to very discriminating buyers. No amount of monetary damages would cover for their loss of reputation or the loss of the customers.
Art and Antiquities, LLC orders 5 pieces of rare imperial jade from Art Brokers, Inc. In order to meet the terms of the sale, Art and Antiquities pays in full prior to shipment. When the shipment does not arrive in the expected time, Art and Antiquities contacts Art Brokers who responds that they have decided not to sell and offers to return the payment. Art and Antiquities can: replevy the goods. obtain specific performance. reject the next shipment from Art Brokers. recover damages equal to the difference between the agreed price and the market price
The correct answer is "$10,000 from Bee." Damages that compensate the nonbreaching party for the "loss of the bargain" are known as compensatory damages. These damages compensate the injured party only for damages actually sustained and proved to have arisen directly from the loss of the bargain caused by the breach of contract. They simply replace what was lost because of the wrong or damage and, for this reason, are often said to "make the person whole." An award of the $100,000 received for the sale of the information would have left Credit better off than if the breach had not occurred.
Bee is an employee of Credit Agency Inc. On the termination of Bee's position, Credit pays Bee $10,000 to agree not to disclose the employer's confidential information. Later, Bee sells the information to Debt Records LLC for $100,000. In a suit for breach, Credit is most likely to recover all future profits from Debt. $110,000 from Bee. $100,000 from Debt. $10,000 from Bee
The correct answer is "can rescind the deal based on fraudulent misrepresentation." Clay has committed a unilateral mistake of fact. Normally no relief would be allowed, but in this case, Clay knew he was misrepresenting his knowledge and experience. Beryl is well within her rights to rescind the deal.
Beryl enters into a contract with Clay for a guided tour of Deep Canyon. Clay represents that he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Most likely, Beryl can rescind the deal based on fraudulent misrepresentation. could exert duress to obtain a new guide. might recover damages for the mistake. must comply with the contract because the representation is an opinion
The correct answer is "$500." If a buyer repudiates (fails to pay) a contract or wrongfully refuses to accept the goods, a seller can bring an action to recover the damages sustained. Ordinarily, the amount of damages equals the difference between the contract price or lease payments and the market price at the time and place of tender of the goods, plus incidental damages. In other words, even if Fiesta refuses to go through with the deal, they are still liable for the $500 difference between the contract price and what Gas Bags can get for the balloons on the market today.
Fiesta LLC contracts to buy 1,000 balloons from Gas Bags Inc. for $1 per item. When the market price decreases to 50 cents per balloon, Fiesta refuses to go through with the deal. Gas Bags can recover $0. $1,500. $500. $1,000
The correct answer is "withhold delivery." Carlos still had the appliances in his warehouse. Carlos is entitled to withhold delivery of the appliances until Keisha pays at least the 50% she agreed to as partial payment. He can then withhold final delivery, placement in the house, until she makes the final payment as well.
Keisha contracts to buy appliances from Crazy Carlos Appliances. Keisha agrees to pay half within 5 days of the order and the remainder upon delivery. Keisha fails to pay the first 50%. Carlos can: obtain specific performance. withhold delivery. claim the difference between market price and purchase price. recover as damages the full purchase price plus incidental damages.
The correct answer is "the contract price and the market price." If a seller fails to deliver the goods, the buyer can sue for damages. For the buyer, the measure of recovery is the difference between the contract price and the market price of the goods at the time the buyer learned of the breach. The market price or market lease payments are determined at the place where the seller or lessor was supposed to deliver the goods. The buyer or lessee can also recover incidental and consequential damages less the expenses that were saved as a result of the breach [UCC 2-713, 2A-519].
Real Stones Inc. and Sparkling Jewelry stores enter into a contract for a sale of gemstones. The seller fails to deliver. Sparkling can recover as damages the difference between the contract price and the market price. the actual price and the hoped-for price. the current prices in the contracting parties' places of business. any loss avoided and any profit gained.
The correct answer is "the loss of profit from the delayed opening." Foreseeable damages that result from a party's breach of contract are called consequential damages, or special damages. They differ from compensatory damages in that they are caused by special circumstances beyond the contract itself. They flow from the consequences, or results, of a breach. For the non-breaching party to recover consequential damages, the breaching party must have known (or had reason to know) that special circumstances would cause the non-breaching party to suffer an additional loss. Renew should have known that Swim Park needed the work to be completed by June 1 to open on time. The damage to Swim Park is the lost profit.
Renew Inc. contracts to resurface the pools at Swim Park by June 1. Renew knows that if performance is not timely, Swim Park will have to delay its seasonal opening. Renew finishes the job June 15. In a suit for breach, Swim Park can recover the loss of profit from the delayed opening. nothing—the work is done. the cost of the new pools. the difference between the contract and market prices for the work.
The correct answer is "is bound to the deal at the offered price." A unilateral mistake is made by only one of the parties. In general, a unilateral mistake does not give the mistaken party any right to relief from the contract. Normally, the contract is enforceable. This general rule has at least two exceptions. The contract may not be enforceable if (1) the other party to the contract knows or should have known that a mistake of fact was made, or (2) the error was due to a substantial mathematical mistake in addition, subtraction, division, or multiplication and was made inadvertently and without gross (extreme) negligence. If, for instance, a contractor's bid was significantly low because the contractor made a mistake in addition when totaling the estimated costs, any contract resulting from the bid normally may be rescinded.
Restaurant Food Inc. intends to sell a certain quantity of beef for $1,100. In an e-mail, however, the firm's sales representative mistakenly offers to sell the beef to Steak House for $1,000. Steak's manager immediately accepts. The seller can rescind the deal and recover damages for the mistake. is bound to the deal at the offered price. is bound to the deal but can charge the intended price. can rescind the deal.
