Business Law - Chapter 10

If a breach of contract is minor, the non-breaching party's duty to perform is discharged. True False

False

If a contract performance is rendered directly to a third party, the third party is an incidental beneficiary. True or False

False

In contract law, damages compensate for harm suffered as a result of another's wrongful act, not for the loss of a bargain. True or False

False

In most states, a person whose employment is wrongfully terminated, has no duty to take a similar job if one is available. True False

False

The assignee receives greater rights than the original assigner had. True False

False

The function of a quasi-contract is to impose a legal obligation on a party who purposely failed to fulfill an express promise. True or False

False

The measure of compensatory damages does not vary by type of contract. True or False

False

The standard measure of compensatory damages is the value of the breaching party's actual performance. True False

False

The transfer or one's contract rights is called a delegation. True or False

False

If a condition to a lease for university housing that the tenant must be a student is not satisfied, then the landlord's obligations under the lease are discharged. True False

True

If it were not possible to assign contract rights, many businesses could not continue to operate. True or False

True

If performance of a contract is not substantial, there is a material breach, which excuses the innocent, non-breaching party from performance. True False

True

In general, an assignment can be in writing or oral. True False

True

Consequential damages are designed to punish the wrongdoer and set an example to deter similar conduct in the future. True or False

False

Expenses incurred because of a breach of contract to obtain performance from another source are not recoverable in a suit for breach. True or False

False

A court will grant specific performance as a remedy only when the legal remedy is adequate. True or False

False

A court will only impose a quasi-contract if the parties originally had a contract with one another. True or False

False

A covenant not to compete imposed, as part of a sale of an ongoing business will be enforced even if the restrictions are unreasonable. True or False

False

A seller cannot avoid the risk of liability for consequential damages by limiting the buyer's remedies in their contract. True or False

False

A seller who places goods at the disposal of a buyer has tendered delivery, but cannot yet demand payment. True False

False

An accord and its satisfaction do not discharge an original contractual obligation. True False

False

For a nonbreaching party to recover consequential damages, the breaching party must know (or have reason to know) that special circumstances will cause the nonbreaching party to suffer an additional loss. True False

True

For mutual rescission of a contract to take place, the parties must make another agreement that satisfies the legal requirements for a contract. True or False

True

A novation terminates the original contract. True False

True

A party who in good faith performs substantially all of the terms of a contract can enforce the contract against the other party. True or False

True

As a general rule, any duty can be delegated. True False

True

Before either party to a contract has a duty to perform, one of the parties may refuse to perform that party's contractual obligations. This is referred to as an anticipatory repudiation. True or False

True

Contractual obligations will be discharged when the specific subject matter of the contract is destroyed. True or False

True

In quasi-contract, the party who is seeking recovery must show that the other party who received a benefit, would be unjustly enriched if they were allowed to retain the benefit without paying for it. True or False

True

Restitution may be available in situations when damages cannot be proved or are difficult to prove. True or False

True

The failure of one party to perform under a contract, entitles the other party to rescind the contract. True False

True

Under a construction contract that requires a builder to meet certain specifications, complete performance is required to avoid material breach. True or False

True

When a buyer breaches a contract for a sale of land, the seller can recover the difference between the contract price and the market price of the land. True or False

True

When a seller breaches a contract for a sale of goods, knowing the buyer plans to resell the goods, the buyer can recover the lost profits from the planned resale. True or False

True

When both an owner and a contractor breach a construction contract, a court will attempt to strike a fair balance in awarding damages. True or False

True

When the performance of a contract depends on the personal skill of the obligor, a delegation of the duty is prohibited. True False

True

Rita contracts to work for Social Media Corporation (SMC) during April for $4,500. On March 31, SMC cancels the contract. Rita declines a similar job with Tech Talk, Inc., which would have paid $3,500. Rita files a suit against SMC. As compensatory damages, Rita can recover a.$1,000.b.$0.c.$3,500.d.$4,500.

a. $1,000

Debt Collection Service enters into a contract to employ Emma as a billing manager for two years. During the first year, Emma is often absent without explanation, and when present fails to adequately do her job. This a.discharges the employer from the contract.b.has no effect on the employer's performance.c.changes the employer's duties under the contract.d.suspends the employer's duty to perform.

a. discharges the employer from the contract

Ochre holds one ton of perishable fruit in storage for Produce Corporation. If Produce does not pay for the storage, under the doctrine of mitigation of damages, Ochre is held to a duty to a.do whatever is reasonable to minimize the damages.b.continue to store the fruit until Produce pays.c.set an example to deter similar misconduct in the future.d.dispose of the fruit immediately.

a. do whatever is reasonable to minimize the damages

Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez a. does not have to pay Josh. b. must pay Josh only the cost of his materials. c. must pay Josh half of the contract price as a compromise. d. must pay Josh the contract price.

a. does not have to pay Josh

Bill and Charlene enter into a contract for the clearing, plowing, and preparing of Charlene's 100-acre tract for which she agrees to pay $1,000. Bill transfers his duty under this contract to Dewey. With respect to the duties under the original contract, this transfer a. does not relieve Bill of the potential obligation to perform. b. requires a special form to constitute a valid transfer. c. extinguishes Bill's obligation to perform. d. is an invalid transfer of a non-transferable obligation.

a. does not relieve Bill of the potential obligation to perform

Armand orally agrees to pay Borges to seed and harvest a quarter of Armand's farm acreage for four planting seasons. After Borges prepares the land and plants the first crop, Armand says that the deal is off. Borges can most likely recover on a theory of a. quasi contract. b. specific performance. c. restitution. d. reformation.

a. quasi contract

Lyn orally contracts to sell five acres of timber to Mountain Mill LLC. The buyer harvests the trees, but fails to remit the full price. Because of the lack of a written contract, Lyn could most likely recover on a theory of a. quasi contract. b. liquidated damages. c. specific performance. d. restitution.

a. quasi contract

Restore, Inc., contracts to resurface the pools at Swim Park by June 1. Restore knows that if performance is not timely, Swim Park will have to delay its seasonal opening. Restore finishes the job June 15. In a suit for breach, Swim Park can recover a.the loss of profit from the delayed opening.b.the cost of new pools.c.nothing—the work is done.d.the difference between the contract and market prices for the work.

a. the loss of profit from the delayed opening

An intended third-party beneficiary cannot enforce a contract against the original parties until the third party's rights have a. vested. b. been breached. c. terminated. d. been fulfilled.

a. vested

Shuster's lease of retail premises from Thurgood requires Shuster to pay certain fees, subject to the landlord's proof of the correct amount. Thurgood overcharges Shuster for the fees, without explanation. Most likely, the tenant can rescind the lease a. with prompt notice. b. after paying the overcharge. c. by finding a new tenant for the premises. d. under no circumstances.

a. with prompt notice

Lyle and Miranda agree that Lyle will fix the refrigeration unit in Miranda's Bagel Café in exchange for her payment of a debt that Lyle owes to New Credit Corporation. Under this contract, the intended beneficiary is a.any customer of Miranda's.b.New Credit.c.Miranda.d.Lyle.

b. New Credit

Apps LLC enters into a contract with Birk, the chief executive officer of Corporate Sales, Inc., to create an app for the firm. To fulfill the contract, Apps hires Dave as a student intern. With respect to the app contract, Dave is a.a promisee.b.an incidental beneficiary.c.an intended beneficiary.d.a promisor.

b. an incidental beneficiary

East Bay Café orders seafood from Fresh Catch Company. Fresh places the goods at East's disposal. Fresh's performance under the contract is a.material.b.complete.c.substantial.d.conditional.

b. complete

Sara enters into a contract to sell her condo to Ted for a certain price on a specific day. On that day, Sara unconditionally offers to perform. Sara's offer a.conditions Ted's promise to pay for the property.b.constitutes tender of performance.c.excuses the parties' performance under the contract.d.suspends the parties' contractual obligations.

b. constitutes tender of performance

Metro Holdings, Inc., contracts to sell a commercial parking garage to New Property LLC. The contract provides that if Metro does not close the deal by a certain date, it must pay the buyer one-half of the value of the property. This provision is not enforceable if it is a. meant to pay for additional work in the event of damage. b. designed to penalize Metro. c. a reasonable estimate of the loss on the breach. d. intended to quickly provide cash to New Property.

b. designed to penalize Metro

Don enters into a contract to buy Ezra's office building for a certain price subject to an appraiser's evaluation of the structure's condition. If the appraiser deems the condition to be substandard, the parties' obligations will be a. performed. b. discharged. c. altered. d. breached.

b. discharged

Repair Service enters into a contract to fix washing machines in Soapy Suds Company's coin-operated laundries. Repair breaches the contract. Soapy is awarded compensatory damages. The purpose is to a. provide Soapy with funds for a loss beyond the contract. b. provide Soapy with funds for its loss of the bargain. c. establish, as a matter of principle, that Repair acted wrongfully. d. punish Repair and deter others from similar acts.

b. provide Soapy with funds for its loss of the bargain

A contract for a sale of land from Beachfront Properties, Inc., to City Development Corporation contains an erroneous legal description. The appropriate remedy for these parties is most likely a.damages.b.reformation.c.specific performance.d.a quasi-contract.

b. reformation

Fez enters into a contract to buy 350 acres from Grain Farm to cultivate hops and open a brewery. Fez fails to make the purchase. Grain Farm's remedy is most likely a.nothing—Grain Farm still owns the land.b.the difference between the contract and market prices of the land.c.a percentage of Fez's unrealized profit.d.the amount that Fez expected to invest in the brewery.

b. the difference the contract and market prices of the land

Rene contracts with Scot to pay him $5,000 for repairs to Rene's lake cabin. After Scot performs, Rene tells him that she cannot pay him in full immediately. They sign an agreement in which Rene promises to pay $2,500 now, instead of $5,000 later. This is a.a novation.b.specific performance.c.an accord and satisfaction.d.a mutual agreement to rescind.

c. an accord and satisfaction

Daisy enters into a contract with Evan for the construction of a Fast-Food Café, according to a certain schedule. The parties perform some preparatory steps, but Evan materially and willfully fails to begin work on the specified date. To rescind the contract, Daisy must show that the parties can a.obtain a reasonable exchange of values for the preparatory steps.b.realize at least some of the benefit of their bargain.c.be restored to the status quo.d.profit from the partial performance.

c. be restored to the status quo

Ilene, an accountant, and Jerry enter into a contract under which Ilene agrees to perform audits for Jerry's Plastics Company. Ilene can delegate the duty to perform the audits to a.any accountant working at Ilene's firm.b.any accountant performing other financial services for Jerry.c.no other party.d.any reputable accountant.

c. no other party

Reese contracts to sell her Spicy Pizza restaurant to Titian. As part of the deal, Reese agrees not to open a competing business within a hundred-mile radius for ten years. Reese later sues Titian, alleging that the agreement is illegal. To enforce the covenant not to compete, the court will most likely a.rescind the contract and require restitution.b.order specific performance.c.reform the contract to make the distance and time limits reasonable.d.award damages for Reese's complete compliance with the terms.

c. reform the contract to make the distance and time limits reasonable

Under ______, parties are restored to their original position prior to loss or injury, or placed in the position they would have been in had the breach not occurred. This often involves returning goods, property, or funds. a.specific damagesb.legal actionc.restitutiond.recission

c. restitution

Music Masters, Inc., enters into a contract to pay Nagi for a dozen original songs. Nagi transfers the right to payment under the contract to Omni Artists. After the transfer, Nagi's contract right to the payment is a. conditional. b. secondary. c. unaffected. d. extinguished.

d extinguished

State University provides housing on campus, and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be a student at State. This requirement is a.a breach of contract.b.an operation of law.c.a novation.d.a condition.

d. a condition

Max orally agrees to construct two outbuildings on Ned's ranch for a stated price. Max performs, but Ned does not pay. To recover on a theory of quasi contract, Max must show that if Ned were allowed to retain the benefit of their bargain, Ned would a. profit from Max's performance. b. obtain a reasonable exchange of values. c. be restored to the status quo. d. be unjustly enriched.

d. be unjustly enriched

Jill enters into a contract to buy a certain office building from Kim. At the closing, Kim refuses to transfer title. In a suit for breach, Jill should seek specific performance to a. reform the contract to reflect the parties' true intentions. b. return the parties to the positions they occupied before the contract. c. make the terms reasonable, and enforce the contract as reformed. d. obtain the exact bargain promised in the contract.

d. obtain the exact bargain promised in the contract