Chapter 13: Contract Performance, Breach, and Remedies
When a change in the law renders the performance of a contract illegal, the nonperforming party is normally held in breach of contract. a. True b. False
False
When a contract party materially alters a written contract without consent, the other party must adapt his or her performance accordingly. a. True b. False
False
When both parties to a contract are mistaken about the same material fact, the contract cannot be rescinded. a. True b. False
False
A statement of opinion is generally subject to a claim of fraud. a. True b. False
False
Punitive damages are generally not awarded in an action for breach of contract. a. True b. False
True
Restitution involves one party's recapture of a benefit through which another party has been unjustly enriched. a. True b. False
True
The failure of one party to perform a contract entitles the other party to rescind it. a. True b. False
True
The measure of compensatory damages often varies by type of contract. a. True b. False
True
To rescind a contract, the parties must make a second agreement that satisfies the legal requirements for a contract. a. True b. False
True
Words or terms in contracts that are subject to more than one reasonable interpretation can lead to mistakes. a. True b. False
True
In most situations, when a breach of contract occurs, the innocent injured party is held to a duty to mitigate the damages. a. True b. False
True
Under the doctrine of mitigation of damages, the duty owed depends on the nature of the contract. a. True b. False
True
When an anticipatory repudiation occurs, it is treated as a material breach of a contract. a. True b. False
True
When a waiver of a breach of contract occurs, the party waiving the breach cannot take any later action on it. a. True b. False
True Multiple Choice
A contractual obligation may not be discharged through novation. a. True b. False
False
A material breach occurs when performance is substantial, but not complete. a. True b. False
False
An award of damages for a breach of contract can elevate the nonbreaching party to a better position than he or she would have been in if the contract had not been breached. a. True b. False
False
Any breach discharges the nonbreaching party from the contract. a. True b. False
False
Anything less than complete performance is a material breach of contract. a. True b. False
False
Avoiding the enforcement of a standard-form contract is not possible. a. True b. False
False
Damages that compensate the nonbreaching party for the loss of a bargain are known as consecutive damages. a. True b. False
False
Expenses that are caused directly by a breach of a contract are known as primary damages. a. True b. False
False
If a mistake concerns the future value of the object of the contract, a court will normally provide relief. a. True b. False
False
Liquidated damages provisions are generally unenforceable. a. True b. False
False
Reformation is an equitable remedy that allows a court to rewrite a contract to suit itself. a. True b. False
False
Misrepresentation of a material fact is an element of fraud. a. True b. False
True
Normally, specific performance will not be granted unless the party's legal remedy is inadequate. a. True b. False
True
A contract entered into under undue influence is voidable. a. True b. False
True
A contract is substantially performed when performance creates substantially the same benefits as those promised in the contract. a. True b. False
True
A contract will be discharged if unforeseeable circumstances make it impossible to attain the contract's purpose. a. True b. False
True
After a contract is made, a supervening event may make performance impossible and discharge the contract. a. True b. False
True
An innocent party can rescind a fraudulent contract and be restored to his or her original position. a. True b. False
True
Duress is a possible ground for rescission of a contract. a. True b. False
True
For a party to a contract to receive relief from a mistake, the mistake must involve a material fact. a. True b. False
True
If no time for performance is stated in a contract, a reasonable time is implied. a. True b. False
True
Alan induces Beth to enter into a contract for the purchase of a Chef's Burger House restaurant. Alan knowingly misrepresents a number of material features about the restaurant and the business. When Beth discovers the truth, she can rescind the contract on the basis of a. fraud. b. undue influence. c. mistake. d. none of the choices.
a
Copper Circuit, Inc., and Direct Electric LLC 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 liquidated damages clause. b. a nominal-damages clause. c. a waiver-of-breach clause. d. a penalty clause.
a
Don enters into a contract with Eve, who claims to have access to a stock-trading algorithm that will multiply an investment many times over. When the results do not match this promise, Don learns that Eve does not have access to any unique software and files a suit, alleging fraud. Proof of an injury is required to a. recover damages. b. rescind the contract. c. undo Eve's influence. d. punish the defendant.
a
Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract a. Guido must return the $100 and Hal must return the bike. b. Guido must return the $100 only. c. Hal must return the bike only. d. the parties can keep the "benefits" of their bargain.
a
Home Construction LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases—in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is a. breached. b. discharged. c. rescinded. d. suspended.
a
Moe threatens physical harm to force Norel to contract to pay him for protecting her store against vandalism and destruction. Norel may a. rescind the contract or refuse to comply with its terms. b. do nothing once she has agreed to pay. c. recover from her insurer for the cost. d. recover from the local police for their failure to protect her store.
a
Ruth owns Skyview, a complex under construction that will include commercial and residential suites, and a parking garage. She allows Town Contracting, the contractor, to complete a stage of the project late. This waives Ruth's right to sue for a. this delay. b. any subsequent breaches. c. any past breaches. d. none of the choices.
a
Quinn contracts to provide ten tons of scrap steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage of scrap steel suddenly develops, making it impossible for Quinn to fulfill the contract for less than $5,000 per ton. Quinn's best defense against performing the contract would be that a. performance of the contract is commercially impracticable. b. procuring the steel would force Quinn into bankruptcy. c. the law has rendered performance of the contract illegal. d. the specific subject matter of the contract has been destroyed.
a
A contract for a sale of land from Bayside Properties, Inc., to City Development Corporation contains an erroneous legal description. The most appropriate remedy for these parties is a. restitution. b. reformation. c. rescission. d. specific performance.
b
Amy and Bob enter into a contract for Bob to perform waste management services for Amy's commercial properties. Later, Bob alters a material term—increases the price—without Amy's knowledge or consent. Amy a. can alter a material term, such as the payment date, without Bob's consent. b. can treat the contract as discharged. c. must adapt his performance accordingly. d. must determine whether Bob's alteration constitutes substantial performance.
b
Berry enters into a contract with Clyde for a guided tour of Deep Canyon. Clyde represents that he is an experienced, knowledgeable guide, when in reality he has never been in the canyon. Berry is most likely a victim of a. undue influence. b. fraud. c. mistake. d. unconscionability.
b
Carlos and David contract for the sale of five hundred head of Carlos's cattle for $95 per head. Unknown to either party, an unforeseen storm has struck the herd and many of the cattle have died. David is a. entitled to recover the value of the lost cattle. b. not required to pay due to the bilateral mistake. c. not required to pay due to the unilateral mistake. d. required to pay because he assumed the risk the cattle might die.
b
Cow's Milk Creamery, Inc., needs a certain part for its pasteurizing equipment to continue its operations and orders one for $3,000 from Dairy Supplies Company. Cow's Milk tells Dairy Supplies that it must receive the part by Tuesday or it will lose $10,000. Dairy Supplies ships the part late. Cow's Milk can recover a. $13,000. b. $10,000. c. $3,000. d. $0.
b
Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corporation. Juice Smoothies does not pay for the storage. Isaac sells the fruit to Kayo Beverage Company. This sale represents a. a breach of contract. b. a mitigation of damages. c. liquidated damages. d. restitution.
b
Juan and Isidro enter into a contract to buy, restore and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is a. specific performance. b. mutual rescission. c. accord and satisfaction. d. novation.
b
Mother & Daughter Jewelers breaches its lease with Longview Mall and vacates the premises six months before the end of the term. In some states, Longview would have to a. avoid reletting the premises to recover damages. b. use reasonable means to find a new tenant to mitigate damages. c. relet the premises to recover any damages. d. sell the premises to recover any damages.
b
Oxley contracts to buy a pizza oven from Restaurant Supplies Warehouse (RSW) for $2,500, but RSW fails to deliver. Oxley buys the appliance else-where for $3,500. Oxley's measure of damages is a. $1,000. b. $1,000 plus incidental damages. c. incidental damages only. d. $0.
b
Jason and Kelly enter into a contract for Jason to renovate Kelly's house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit a. must be filed within ten to twenty years, depending on state law. b. can no longer be brought. c. can be filed within four years after Kelly decides to sue. d. must be filed between four and five years after Kelly decides to sue.
b
Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony a. agree to sign a bill of sale. b. exchange the car for the $3,000. c. sign a receipt. d. shake hands and go their separate ways.
b
Car Lot's salesperson Dick offers to sell Ernie, who is twenty years old, a car. Dick intentionally misrepresents the vehicle's use and repairs. In reliance, Ernie buys the car. To prove fraud, Ernie does not have to show that a. Dick intentionally deceived Ernie. b. Dick misrepresented material facts. c. Ernie is under twenty-one. d. Ernie justifiably relied on Dick's misrepresentations.
c
Contractors LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before construction begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation a. Contractors is in breach of contract. b. the local zoning authority is in breach of contract. c. the contract is discharged. d. Discount must compensate Contractors for its lost profit.
c
Porches & Verandas, Inc., agrees to build a screen porch for Quinn, but fails to complete the job. Quinn hires Ramadas, Inc., to finish the project. Quinn may recover from Porches & Verandas a. the contract price less costs of materials and labor. b. the contract price. c. the costs needed to complete construction. d. profits plus the costs incurred up to the time of the breach.
c
Property Management, Inc. (PMI), presents a standard-form lease for an apartment to Quentin, a potential tenant. PMI offers it on a take-it-or-leave-it basis. Quentin signs it, but later wants to withdraw from it. He is most likely to avoid enforcement of the lease on the ground of a. economic duress. b. undue influence. c. unconscionability. d. mistake.
c
Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on a. neither the accord nor the original obligation. b. the accord only. c. the accord or the original obligation. d. the original obligation only.
c
Stephanie enters into a contract to work as a lifeguard at Tim's Water Park for the summer in exchange for a weekly paycheck. If the duties under this contract are discharged like those under most contracts, the duties will be a. avoided. b. breached. c. performed. d. rescinded.
c
Global Enterprise enters into a contract with HealthCare Insurance to obtain insurance for Global employees. HealthCare breaches the contract and Global is awarded compensatory damages. The purpose is to a. establish, as a matter of principle, that HealthCare acted wrongfully. b. provide Global with funds for a foreseeable loss beyond the contract. c. provide Global with funds for its loss of the bargain. d. punish HealthCare and deter others from similar acts.
c
Tile & Grout (T&G) contracts to resurface the insides of the pools at Water Park. T&G knows that without the resurfacing, Water Park will have to delay its seasonal opening. T&G does not perform as promised. As consequential damages, Water Park can recover a. the cost of new pools. b. the difference between T&G's price and the eventual cost of resurfacing. c. the loss of profit from the delayed opening. d. nothing.
c
A contract between Rides & Games, Inc., and State Fair Corporation includes a provision excluding liability as a result of fraud. This provision is a. enforceable because the parties are protected from liability. b. enforceable because the parties consented to it. c. enforceable if the parties have equal bargaining power. d. not enforceable.
d
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. complete. c. material. d. substantial.
d
Dry Gulch Farms hires Elliot to repair its irrigation system on site on a certain date for $2,500, but Elliot does not show up as agreed. Dry Gulch hires Fernando to do the job for $2,000. Dry Gulch may recover from Elliot a. nothing. b. compensatory damages. c. consequential damages. d. nominal damages.
d
Gene, an accountant, convinces his client Hazel to sign a contract to invest her savings in 2Gether, a nonexistent social-networking Web site. There is clear and convincing evidence that Hazel did not act out of her free will. This is a. duress. b. fraud. c. mistake. d. undue influence.
d
In selling 300 acres of rural land to Organic Farms, Peyton tells the buyer that the land "will be worth twice as much by next year." This is a. adhesion. b. fraud. c. mistake. d. opinion.
d
Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in OptiBank through Newt's investment firm. Unknown to Mona, Newt realizes a commission from the investment. Most likely, Mona may rescind the contract on the basis of a. duress. b. fraud. c. mistake. d. undue influence.
d
State University (SU) provides housing on campus and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be student at SU. This requirement is a. a discharge by performance. b. a material alteration. c. an accord and satisfaction. d. a condition.
d
Ann offers to buy Beth's land only if an appraiser estimates that its current value is more than a certain price. Later, the appraiser deems the worth of the land to be less than Beth's price. Ann and Beth's obligations a. must still be performed. b. must now be renegotiated. c. are on "hold." d. are discharged.
d