Business Law, Chapter 18, Exam 2
False An omission, variance, or defect in performance is considered minor if it can easily be remedies in compensation (monetary damages)
True or False: An omission in performance, even if it can remedied by compensation, leads to the contract not being substantially performed
True
True or False: Any breach entitles the non breaching party to sue for damages
True
True or False: Any contract can be discharged by agreement of the parties
True
True or False: Concurrent conditions only exist when the contract expressly or impliedly calls for the parties to perform their respective duties simultaneously
False discharges original obligations
True or False: An accord and satisfaction holds the parties to their original contractual obligation
Settlement agreement does not involve a third party
What sets a settlement agreement apart from a novation?
condition precedent
A contract that is conditioned an an independent appraisal of value contains what kind of condition?
D
An omission, variance, or defect in performance is considered minor if it can easily be remedied by: A. punitive damages B. compensation C. monetary damages D. B and C
material; can
Anticipatory repudiation is a (minor, material) breach and the non breaching party (can, cannot) being an action for damages immediately
anticipatory repudiation
Before either party to a contract has a duty to perform, one of the parties may refuse to carry out hit or her contractual obligations
D
Bruce signs a contact for a 10 city tour with a promotion company. He injures himself during the first show. This circumstance, at least initially, A. Breaches the contract B. Discharges the contract C. Has no effect on the contract D. Suspends the contract
commercial impracticability
Courts may excuse parties from their performance when it becomes much more difficult or expensive than the parties originally contemplated at the time the contract was formed under the doctrine of _______________
make another agreement that satisfied the legal requirements of the contract. There must be an offer, acceptance, and consideration
For mutual rescission to take place, the parties must ___________________. There must be an ________, _________, and _________
1. The non breaching party should not be required to remain ready and willing to perform when the other party has already repudiated the contract 2. The non breaching party should have the opportunity to seek a similar contract elsewhere and may have a duty to do so to minimize his or her loss
For what two reasons is anticipatory repudiation treated as a material breach?
precedent; subsequent
Generally, conditions _______ are common and conditions ________ are rare
No (discharge of their contractual duties after declaring bankruptcy)
If a party declares bankruptcy, can the creditors enforce the debtor's contracts?
1. the parties normally must perform within the stated time period because the time element is treated as a condition 2. a delay in performance will not destroy the performing party's right to payment
If a specific time is stated, the parties must usually perform by that time. What happens if time is of the essence and they do not perform by the specified date? What is time is not expressly stated as vital?
reasonable time for performance
If no time for performance is stated in the contract, a _______ is implied.
When a supervening event (such as a fire) makes performance impossible in an objective sense
Impossibility of performance is a discharge of operation by law when what occurs?
impossible for ANYONE to perform
Impossibility of performance refers to objective impossibility. What is objective impossibility?
C
In Case 18.2 Jacob and Youngs, Inc v. Kent, the court held that A. Once a contractor substantially performs the tasks that the contractor contractually agreed to perform, the contractor has no further obligation to the other party to the contract B. Substantial performance is never a substitute for perfect and complete performance C. Once a contractor substantially performs the tasks that the contractor contractually agreed to perform, the contractor is not obligated to complete performance but must compensate the other party for the difference in value between substantial and complete performance of the contract. D. The contractor failed to substantially perform
accept performance that is different from the performance originally promised
In a discharge by accord and satisfaction, the parties agree to
impliedly; inconsistent
In novation, if the parties do not expressly discharge the old contract, it will be _______ discharged if the new contract's terms are ____________ with the old contract's terms
not been reasonably foreseeable
In order for frustration of purpose to be used as a discharge, the supervening event must have ___________________ at the time the contract was formed
significantly difficult or costly
In order for someone to invoke the doctrine of commercial impracticability, the anticipated performance must become
D
Lisa Marie Presley is selling the bulk of the Elvis Estate, including rights to her father's name and image in a deal worth approximately $100 million. The deal does not include Graceland. If this contract turns out like most contracts, it will be discharged by A. agreement B. novation C. operation of law D. performance E. breach
D
Mobile X enters into a contract to manufacture and sell 100,000 cell phones to Best Com two months from the date of the contract. One month later, Mobile X emails BestCom stating that it can't deliver the 100,000 cell phones at the contract price because of a huge increase in inventory supply prices. This action constitutes A. material breach of contract B. minor breach of contract C. anticipatory repudiation D. A and C E. none of the above
a reasonable person
Most contracts must be performed to the satisfaction of ______________, unless they expressly state otherwise
substituted as a new contract
To discharge by a settlement agreement, the agreement will be ______________________ and will either expressly or impliedly revoke and discharge the obligations under the prior contract
settlement agreement
To discharge by a__________________, the agreement will be substituted as a new contract and will either expressly or impliedly revoke and discharge the obligations under the prior contract
True
True or False: A condition subsequent terminates a party's promise to perform.
True This is called frustration of purpose
True or False: A contract will be discharged if supervening circumstances make it impossible to attain the purpose both parties had in mind when they made the contract
False
True or False: A minor breach of contract excuses the nonbreaching party from their contractual duties
True
True or False: A novation involves a third part while an accord and satisfaction does not
True
True or False: Agreements to rescind contracts involving transfers of realty must be evidenced by a writing or record
True
True or False: Agreements to rescind most executory contract are enforceable whether orally or written, even if the original contract was in writing
False Must satisfy the conditions of the person mentioned in the contract
True or False: Contracts for the performance to the satisfaction of another, such as for a work of art, must satisfy a reasonable third person when the subject matter of the contract is personal.
True
True or False: Courts decide whether performance was substantial on a case-by-case basis
True
True or False: Even when the contract states that time is of the essence, a court may find that a party who fails to complain about the other party's delay has waived the breach of time provision
True
True or False: If a condition subsequent occurs, the party's duty to perform is discharged
True
True or False: If performance is not substantial, there is a material breach and the non breaching party is excused from further performance
False
True or False: If performance is substantial, the other party's duty to perform does not remain absolute
True
True or False: If the condition in a conditional contract is not satisfied, the obligations of the parties are discharged
False Performance is not complete
True or False: If the parties to a contract don't expressly make the specifications in a construction contract conditions and the builder fails to meet the specifications, the builder has materially breached the contract.
True
True or False: In a real estate contract involving the sale/purchase of a house, an example of a condition precedent is the completion of a home inspection before the obligation to purchase the house is required.
False Not less than 1 year
True or False: In lawsuits for breach of a contract for the sale of goods, parties can reduce the 4 year statute of limitations to not less than 2 years, but they cannot agree to extend it
True
True or False: Normally, conditions expressly stated in a contract must fully occur in all respects for complete performance of the contract to take place. Any deviation breaches the contract and discharges the other party's obligation to perform
True
True or False: Once performance has been tendered, the party making the tender has done everything possible to carry out the terms of the contract. If the other party then refuses to perform, the party making the tender can sue for breach of contract
True
True or False: Once temporary impossibility ends, the parties ordinarily must perform the contract as originally planned
False
True or False: Partial payment of a debt after discharge in bankruptcy will revive the debt
True
True or False: Performance can be accomplished by tender
A new contract with a new third party
True or False: The Wonders enter into a promotional contract with manager Phil Horris. Later, Play-Tone buys out Horris and the Wonders sign a new standard form, Play-Tone contract under which Play-Tone will manage the Wonders. This transaction is most likely A. Novation B. Assignment
True
True or False: The law allows an innocent party to be discharged when the other party has materially altered a written contract without consent
False in writing
True or False: Under the UCC, agreements to rescind a sales contract are enforceable whether oral or in writing when the contract requires a written rescission as long as it is mutual
True
True or False: Until the non breaching party treats an early repudiation as a brach, the repudiating party can retract his or her anticipatory repudiation by proper notice and restore the parties to the original obligations
True
True or False: With a temporary impossibility, performance can be discharged
True
True or False:When the subject matter of the contract is mechanical, courts are more likely to find that the performing party has performed satisfactorily if a reasonable person would be satisfied with what was done
1. Material alteration of the contract 2. Statutes of limitations 3. Bankruptcy 4. Impossibility of performance 5. Commercial Impracticability 6. Frustration of Purpose
Under what 6 circumstances can contractual duties be discharged by operation of law
1. When one of the parties to a personal contract DIES or becomes INCAPACITATED prior to performance 2. When the SPECIFIC SUBJECT MATTER of the contract is DESTROYED 3. When a change in law renders performance ILLEGAL
What are the 3 basic types of situations that may qualify as grounds for the discharge of contractual obligations based on impossibility of performance?
1. The party must have performed in GOOD FAITH. Intentional failure to comply with the contract terms is a breach of contract 2. The performance must not VARY GREATLY from the performance promised in the contract. An omission, variance, or defect in performance is considered minor if it can easily be remedied by compensation (monetary damages) 3. The performance must create substantially the SAME BENEFITS as those promised in the contract
What are the basic requirements of substantial performance? (3)
1. A previous, valid obligation 2. An agreement by all parties to a new contract 3. The extinguishing of the old obligation (discharge of the prior party) 4. A new contract that is valid
What are the requirements of a novation? (4)
the non breaching party is excused from the performance of contractual duties Yes
What happens to the duties of the non breaching party in the occurrence of a material breach? Can the non breaching party sue the breaching party for the damages resulting from the breach?
The non breaching party's duty to perform can sometimes be suspended until the breach has been remedies, but the duty to perform is not entirely excused
What happens to the non breaching party's duty if the breach is minor (not material)?
their promises not to perform the acts stipulated in the original contract
What is legally sufficient consideration in a mutual rescission contract?
Substantial performs exists and the measure of the allowance is not the cost of replacement (which would be great and unreasonable), but the difference in value (which would be either nominal or nothing)
What is the conclusion in Jacobs and Young Inc v. Kent?
Commercial impracticability usually involves an event that increases the cost or difficulty of performance. In contrast, frustration of purpose typically involves an event that decreases the value of what a party receives under the contract.
What is the difference between commercial impracticability and frustration of purpose?
Whether or not Jacobs and Youngs had substantially performed and if so, what is the measure of the damages
What is the issue in Jacobs and Youngs Inc v. Kent?
1. the cost to bring the object of the contract into compliance with its terms 2. the difference in value between the performance that was rendered and the performance that would have been rendered if the contract had been performed completely
What is the measure of damages for substantial performance when the cost is reasonable? What about when it is unreasonable?
performance
What is the most common way to discharge, or terminate, one's contractual duties
4 years
What is the statute of limitation for a lawsuit for a breach of contract for the sale of goods?
2-3 years
What is the statute of limitation for oral contracts?
10-20 years
What is the statute of limitation for recovery of amounts rewarded in judgments?
4-5 years
What is the statute of limitation for written contracts?
there is a new contract in novation
What makes novation different from assignments and delegation?
conditions subsequent
When a condition operated to terminate a party's absolute promise to perform; the condition follows the time that the absolute duty to perform arose
Only when the parties could not have reasonably foreseen, at the time the contract was formed, the event that rendered performance impossible
When does the doctrine of impossibility of performance occur? Only when...
concurrent conditions
When each party's performance is conditioned on the other party's performance or tender (offer to perform) of performance
when performance is not at least substantial
When is a breach of contract considered material?
unenforceable (unless there is additional consideration)
When one party has fully performed, an agreement to cancel the original contract will normally be (enforceable, unenforceable)
conditional
When the subject matter of the contract is personal, the obligation is ________ and performance must actually satisfy the party specified in the contract.
lapse of time; change in circumstances surrounding the contract
With a temporary impossibility, sometimes, the __________ and the __________ make it substantially more burdensome for the parties to perform the promised acts. In that situation, the contract is discharged
conditions precedent
a condition that must be fulfilled before a party's performance can be required; the condition goes before the absolute duty to perform
substantial performance
a party who in good faith performs substantially all of the terms of the contract can enforce the contract against the other party under the doctrine of __________________
condition
a qualification in a contract based on a possible future event; the occurrence of nonoccurence of the event will trigger the performance of a legal obligation or terminate an existing obligation under the contradict.
suspend performance until the impossibility ceases
an occurrence or event that makes performance temporarily impossible operates to do what to performance?
tender
an unconditional offer to perform by a person who is ready, willing, and able to do so
express conditions
conditions that are provided for by the parties' agreement; normally prefaced by the words "if, provided, after, or when" (but no specific words required)
implied conditions
conditions that are understood to be a part of the agreement, but not found in the express language of the contract; inherit in the actual performance of the contract
absolute contract
contract that does not have conditions; more common
breach of contract
nonperformance of a contractual duty
novation
occurs when both of the parties to a contract agree to substitute third party for one of the original parties
complete performance
occurs when there is no question as to whether the contract has been performed; performance is perfect
