ch 19

Mitigation of damages

A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.

Two possible contract provisions that limit remedies are:

Exculpatory clauses and limitation of liability clauses.

When the parties have completely and exactly expressed their agreement in writing, the equitable remedy of reformation is available.

False

Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract

Guido must return the $100 and Hal must return the bike.

Unilateral rescission is NOT available for one of the following:

Minor clerical errors

Equitable remedies do NOT include one of the following:

Monetary damages

Louis contracts with Greenfield to buy several of Greenfield's dairy cows. Greenfield deliveries the cows, but Louis doesn't pay for them. Greenfield may be able to have his cows returned if he seeks the remedy of:

Restitution

A remedy is the relief provided to an innocent contracting party when the other party breaches the contract

True

A waiver erases a past breach, and the contract continues as if that breach had never occurred.

True

A waiver prevents the nonbreaching party from declaring that the contract has terminated or been rescinded.

True

An award for damages for a breach of contract can elevate the non breaching party to a better position than they would have been in if the contract had not been breached

True

Compensatory damages are reduced by any loss that the nonbreaching party has avoided.

True

Compensatory damages replace what was lost because of what the breaching party did and for this reason are often said to "make the person whole."

True

Consequential damages are awarded for damage caused by special circumstances beyond a contract itself

True

Consequential damages are foreseeable damages that arise from a party's breach of a contract

True

Courts order reformation most often with fraud or mutual mistake is present

True

In a contract for a sale of goods, the usual measure of compensatory damages is the difference between the retail price and the wholesale price

True

In most situations, when a breach of contract occurs, the innocent injured party is held to a duty to mitigate the damages

True

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

$1,000 plus incidental damages.

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

$10,000.

Sara contracts to work exclusively for Thermal Company during July for $5,000. On June 30, Thermal cancels the contract. Sara finds a similar job for the month of July but earns only $3,000. Sara files a suit against Thermal. As compensatory damages, Sara can recover

$2,000.

Clay Pots pays Dora $25,000 to propose an online marketing campaign. Two days later, Dora tells Clay Pots that she has accepted a job with its competitor Earthenware Inc. and cannot plan the campaign. As compensatory damages, Clay Pots can recover

$25,000.

Rita contracts to work for Social Media Corporation (SMC) during April for $4,500. On March 31, SMC cancels the contract. Rita declines a job of a different type and rank with Tech Talk, Inc., which would have paid $3,500. Rita files a suit against SMC. As compensatory damages, Rita can recover

$4,500.

Kipp agrees to sell Lucio 500 copies of a book for $3.50 each. Kipp does not deliver the books. At the time of the breach, the books are available at $4.50 each. Lucio's damages are

$500

Legal obligations arise under the doctrine of quasi contract because the law considers that the party accepting the benefits has made an implied promise to pay for them.

True

Liquidated damages provisions usually are enforceable

True

Many contracts have provisions that state that the only remedy for breach is replacement, repair, or refund of the purchase price.

True

Nominal damages are awarded for the breach of a contract to nominate someone or something to a higher office, position, or category

True

Ordinarily, the remedy for a seller's breach of a contract for a sale of real estate is damages.

True

Ordinarily, the remedy for a seller's breach of a contract for a sale of real estate is specific performance

True

Punitive damages are generally not awarded in an action for breach of contract

True

Reformation is an equitable remedy that allows a court to rewrite a contract to suit itself

True

Restitution involves one party's recapture of a benefit through which another party has been unjustly enriched

True

Restitution is limited to rescission cases

True

Restitution might be available when there has been misconduct by a party in a confidential or other special relationship.

True

Specific performance will not be granted unless the party's legal remedy is inadequate

True

The failure of one party to perform a contract entitles the other party to rescind it

True

The measure of compensatory damages often varies by type of contract

True

The most common remedies available to a non breaching party include damages, rescission and restitution, and specific performance

True

Under the doctrine of mitigation of damages, the duty owed depends on the nature of the contract

True

Usually, a court will not award an equitable remedy unless the remedy at law is inadequate

True

Whether a contract's limitation-of-liability clause will be enforced depends on the type of breach that is excused by the provision

True

River Vista Inc. enters into a contract with Stable Realty Management to manage and maintain River Vista's commercial real estate. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is

a limitation-of-liability clause.

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 liquidated damages clause.

When the cost of repairing or completing the performance as required by the contract greatly outweighs the benefit to the owner, _______ occurs.

economic waste

In these situations, the nonbreaching party may ask the court for an ________ remedy.

equitable

Bread & Bagels Bakery (B&B) enters into a contract with CinePass for discounted movie tickets for B&B's employees. CinePass breaches the contract and B&B enters into a contract with Dine+View for the same service at a lower price. B&B might be awarded nominal damages to

establish, as a matter of principle, that CinePass acted wrongfully.

Leslie contracts with Remodel, Inc., to redo her living room, but she changes her mind and breaches the contract before Remodel can begin work. As a remedy for the breach, Remodel can seek

expected profits from the contract.

Equitable remedies are typically based on _______ .

fairness

Builders, Inc., agrees to construct an office building for Champ Fitness Clubs, Inc. The project proceeds according to plan, but before it is done, Champ tells Builders to quit. Builders may recover

profits plus the costs incurred up to the time of the breach.

Excavate n' Fill, Inc., enters into a contract with Fred to fill and landscape an abandoned quarry on Fred's land. Fred advances Excavate n' Fill 10 percent of its cost. The parties rescind the contract. Excavate n' Fill's refund of the payment is

restitution.

Andre enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. If Belle Vista breaches the contract, Andre's remedy would most likely be

specific performance.

Isabel orally agrees to buy a unique collection of nineteenth-century cowboy memorabilia for $10,000 from Jessie and sends $2,500 as a down payment. When Isabel pays the rest of the price, Jessie refuses to ship the collection. Isabel should seek

specific performance.

Ready Repair Service enters into a contract to fix washers and dryers in Scrub n' Dry Company's coin-operated laundries. If Ready Repair breaches the contract, Scrub n' Dry can

sue Ready Repair for damages.

Leif contracts to sell his Micro Brewery & Pub to Naomi on April 1. On March 15, Leif tells Naomi that he will not go through with the deal. Naomi can recover

the Micro Brewery & Pub.

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

the costs needed to complete construction.

In a majority of states, when a seller of a parcel of land breaches the contract and has sold the real property to someone else, the measure of consequential damages is:

the difference between the contract price and the market price of the land.

Andre enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. If Andre breaches the contract, Belle Vista's remedy would most likely be

the difference between the land's contract and market prices.

Handicrafts & Hobbies Store agrees to hire Iliana for one year at a salary of $600 per week. When Handicrafts & Hobbies cancels the contract, Iliana spends $150 to obtain a similar job that pays $450 per week for a year. Iliana is entitled to recover

the difference between the wages at the two jobs plus $150.

The party receiving the benefit would be ________ enriched if allowed to retain the benefit without paying for it.

unjustly

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

use reasonable means to find a new tenant to mitigate damages.

The party did not act as a ________ in conferring the benefit.

volunteer

A clause ________ liability for illegal acts will not be enforced.

Excluding

Why is specific performance rarely granted for personal service contracts?

Because courts rarely want to monitor contracts for personal services, which usually require the exercise of personal judgment or talent.

Which of the following types of contracts typically do NOT include a liquidated damage clause?

Contracts for college tutoring services

Which of the following is typically NOT present when the courts order reformation of a contract?

Duress

A liquidated damages provision specifies that a certain amount is to be paid on a breach of contract when the non breaching party elects to receive cash

False

A party seeking to recover in quasi contract must show that he or she acted as a volunteer in conferring a benefit to another party

False

Compensatory damages compensate a party injured by a breach of contract by punishing the party that breached the contract

False

Contracts for the sale of goods usually qualify for specific performance.

False

Damages that compensate the non breaching party for the loss of a bargain are known as consecutive damages

False

Expenses that are caused directly by a breach of a contract are known as primary damages

False

Nominal damages are designed to punish a wrongdoer and set an example to deter similar conduct in the future

False

Punitive damages are generally awarded in lawsuits for breach of contract.

False

Rescission is an equitable remedy used when the parties have imperfectly expressed their agreement in writing

False

The amount of compensatory damages is the value of a breaching party's promised performance

False

The injury suffered by a non breaching party due to the breach of a contract may be remedied by a payment of coincidental damages

False

There are rarely any good reasons to waive a breach of contract.

False

Normally a provision excluding liability for fraudulent or ________ injury will not be enforced.

Intentional

Which of the following is NOT one of the reasons that specific performance is an attractive remedy to the nonbreaching party?

No judge has to be involved.

The party has conferred a benefit on the ________ party.

Other

A clause excluding acts that are contrary to _______ policy will not be enforced.

Public

The party conferred the benefit with the _______ expectation of being paid.

Reasonable

Rhena contracts with Darrel to buy two show dogs. They agree that she will pay $2,000 for each dog. When they draw up the contract, the sales price is inadvertently changed to read "$40,000" rather than "$4,000." They can seek the remedy of __________ .

Reformation

Which of the following examples would NOT be classified as consequential damages?

The difference between the contract price and the market price of land that was sold to someone else.

A breach of contract entitles the nonbreaching party to sue for monetary damages.

True

A contract may include a clause stating that damages will be limited to a maximum amount

True

A party seeking to recover compensatory damages cannot also recover incidental damages.

True

A party seeking to recover in quasi contract must show that the other party has been unjustly enriched

True

Clauses excluding liability for _______ of law will not be enforced.

Violations

A knowing relinquishment of a legal right is called a:

Waiver

Carmen contracted with Stevenson to replace the carpets in her house, but Stevenson damaged some of the walls in so doing. Carmen does not pursue a claim against Stevenson and her actions are known as _______ .

Waiver of breach

Normally a waiver does not extend to subsequent defective performance. Under what circumstances will a waiver in fact extend to future defective performance?

When a pattern of conduct that waives a number of successive breaches occurs.

What are the circumstances under which a court will NOT use the doctrine of quasi contract?

When a well-written contract is executed.

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 mitigation of damages.

Metro Holding Company agrees to sell a vacant lot to New Town Property LLC. The contract provides that if Metro does not close the deal by October 15, it must pay New Town one-half of the contract price. This provision is not enforceable because it is

a penalty clause.

Renew Turf, Inc., enters into a contract with Sports Park to provide surface material for Sports Park's baseball fields by October 1 for a series to begin October 5. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is

a reasonable estimate of the loss on a breach.

The enforceability of a liquidated damages clause normally requires a yes answer to the following two questions.

a. When the contract was entered into, was it apparent that damages would be difficult to estimate in the event of a breach? b. Was the amount set as damages a reasonable estimate and not excessive?

Dino hires Eve to perform at Dino's Club, but Eve later breaches the agreement to accept a higher-paying job at Five Star Arena. Dino files a suit against Eve. The court will most likely

award damages to Dino.

Sometimes monetary damages are _______ for a breach of contract.

inadequate

Usually a court will not award an equitable remedy unless the remedy at law is ________

inadequate

Suppose that a buyer breaches a contract for the sale of goods that have not yet been produced. In such a situation, expenses incurred to obtain performance from another source are known as

incidental damages

A remedy is the relief provided by the __________ party when the other party has breached the contract.

innocent

Today, the remedy at law for breach of contract is normally ___________ damages.

monetary

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

nominal damages.

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

provide Global with funds for its loss of the bargain.

Meatpackers, Inc., enters into a contract with Nevada Ranch for the delivery of a certain number of beef cattle on a set schedule. The ranch delays the first delivery for five days, aware that Meatpackers loses a certain percentage of profit each day. An award to Meatpackers of consequential damages would

provide the buyer with funds for a foreseeable loss beyond the contract.

Equine World enters into a contract with FabuloSales to provide Equine World with a plan to repurpose its marketing strategy. If FabuloSales breaches the contract, Equine World has a duty to

punish FabuloSales and deter others from similar acts.

Forest Lumber Company orally contracts with Gail for the purchase of five acres of Gail's timberland. Gail makes the transfer but Forest Lumber does not pay the price. Gail could most likely recover on a theory of

quasi contract.

Ida orally agrees to pay Jim to seed and harvest a quarter of Ida's farm acreage for four hay seasons. After Jim prepares the land and plants the first crop, Ida says that their deal is off. Jim can most likely recover on a theory of

quasi contract.

Olga and Chenoa orally agree that Olga will replace Chenoa's bathroom fixtures in exchange for which Chenoa agrees to cut Olga's hair every six weeks for the next three years. Olga performs her side of the bargain but then Chenoa sells the house and moves away. Olga may seek recovery based on:

quasi contract.

Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager for two years. If Rig breaches the contract, Scott has a duty to

reduce the damages that Scott might otherwise suffer.

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

reformation.

Ricky agrees to sell his Sunrise Breakfast Café to Tia. As part of the deal, Ricky signs a covenant not to open a competing business within a hundred-mile radius for ten years. If this covenant is later determined to be unreasonable, the appropriate remedy is most likely

reformation.

Ridgeview Mining Inc. agrees to deliver a certain quantity of oil to Static Energy Corporation. The agreement states that delivery is to be within "9" days, although the parties intend "90" days. Ridgeview cannot convince Static to amend the contract. Ridgeview should seek

reformation.

When one party breaches a contract, the nonbreaching party can choose one or more of several _________

remedies

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

the loss of profit from the delayed opening.

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

this delay.