Chapters 17-19
Given the high demand for their services, Acme Cable just hired a local contractor to handle installation, reparation, and service work orders in St. Louis, Missouri. New and existing clients must contact Acme in order to request the service, but the work orders and performance are handled through the contractor. This type of arrangement is known as:
Delegation
Which of the following is true of the assignment of rights in a contract?
a. A clear and specific contractual prohibition against the assignment of rights is enforceable at common law. b. The assignment of the right to money cannot be a complete transfer of the right to the assignee. c. The assignment of the right to money cannot be held by the assignee as security for some other obligation. d. The assignment of rights in a contract are generally made to hold the assignment as security.
In a contract, sometimes a promisee's primary intent is to discharge a duty to a third party. Which of the following describes this type of contract?
a. A contract between a governmental unit and business for services to be rendered to area citizens b. A contract between an employer and a union representing the employees that is made for the benefit of the employees c. A contract between the owner of a building and the contractor stating that the contractor will pay the contractor's employees at a specified rate d. A contract where the insured names a bank with which he has a loan as the beneficiary of a life insurance policy
Logan and Josh decide to go on a river rafting trip sponsored by Big River Excursions. During the trip, Logan falls out of the canoe and breaks his arm and sues Big River for his hospital bills. The judge rules that Big River is not liable for the bills. Given this ruling, what type of clause was likely included in the contract that Logan and Josh signed prior to the excursion?
a. A liquidation of damages clause b. An exculpatory clause c. A waiver of breach clause d. An antimodification clause
What issue did the court rule in Tips v. Hartland Developers, Inc.?
a. The court examined whether the actions of the contractor created a condition precedent to the final payment under the contract. b. The court examined the amount of damages owed to a contractor upon an anticipatory repudiation of the contract. c. The court evaluated the agreement of the contract under the regulations of the Federal Aviation Administration (FAA). d. The court reviewed the workmanship of the contractor.
What issue did the court consider in the Union Pacific Railroad v. Novus International, Inc. case?
a. Whether Union Pacific Railroad (UP) experienced severe disruptions in its rail service b. Whether Union Pacific Railroad (UP) was acting in good faith under the contract c. Whether Union Carbide (UC) contracted with Union Pacific Railroad (UP) for the transportation of MMP d. Whether a third-party beneficiary must be named in writing in the contract
When the court ruled in Birznieks v. Cooper, what issue did it consider?
a. Whether it was proper to pay the attorney handling the transaction for the Birznieks instead of the Birznieks themselves b. Whether Cooper should have been in possession of the land before making full payment c. Whether the amount paid by Cooper was sufficient for the consideration received d. Whether mailing a check in payment of a debt by the due date is payment within the time frame specified
What issue did the court consider in Birkel v. Hassebrook Farm Service, Inc.?
a. Whether the cost of the bin was excessive under the terms of the contract b. Whether Birkel should have given Hassebrook his old dryer without knowing if the new equipment would work c. Whether Birkel had a right to sue the implement dealer for the costs of drying and storing grain when the installed bin did not work properly d. Whether the failure of the new bin and dryer constituted a breach of contract by Hassebrook
A contract is usually discharged by:
a. a novation or substitution of a new contract involving a new party. b. mutual rescission. c. the performance of the terms of the agreement. d. a mutual cancellation between the parties.
In the context of a contract, when the damages sustained by a plaintiff can be measured in monetary terms, specific performance will be:
a. accompanied by an order for monetary damages. b. ordered. c. refused. d. All of these choices are correct.
An offer to perform in a contract is known as a(n) __________.
a. accord b. consideration c. tender d. presentment
When the parties have differing views as to the performance required by the terms of a contract, they may agree to a different performance. Such an agreement is called a(n) __________.
a. accord b. satisfaction c. novation d. mutual rescission
Randolph enters into a contract with a contractor to build a large office building in Central City. Gas-N-Go will greatly benefit from this contract since his convenience store is adjacent to the building. Gas-N-Go in this instance is:
a. an incidental beneficiary. b. a partial beneficiary. c. a donee beneficiary. d. an implied beneficiary.
In January, Ann and Barbara enter into a contract together to open a small business on June 1. In April, Ann tells Barbara, "It's going to be impossible for me to go into business with you." This statement made by Ann is most likely a(n):
a. anticipatory repudiation. b. material alteration. c. reformation. d. accord.
In a contract, the third party to whom contract benefits are transferred is referred to as a(n) __________.
a. assignor b. debtor c. assignee d. obligor
When, after a contract is made, a party's principal goal is substantially frustrated without his or her fault by the occurrence of an event whose nonoccurrence was a basic assumption on which the contract was made, his or her remaining duties can be discharged by:
a. commercial impracticability. b. commercial impossibility. c. economic frustration. d. frustration of purpose.
Wilma has an insurance policy on the contents of her apartment, which requires that she notify the insurance company within 60 days of any loss for her to be eligible to receive payment for her loss. In this case, the notification requirement is a(n):
a. concurrent condition. b. condition precedent. c. implied-in-law condition. d. condition subsequent.
An event whose occurrence or lack thereof terminates a contract is referred to as a __________.
a. condition precedent b. condition subsequent c. concurrent condition d. parallel condition
A condition that must occur before a party to a contract has an obligation to perform under the contract is called a __________.
a. condition subsequent b. condition precedent c. concurrent condition d. parallel condition
Trent wants to buy a new car. He goes to the bank to get a loan for the purchase and signs an agreement to pay $15 per month in premiums on a term life insurance policy, which names the bank as the recipient of the policy proceeds in the event of his death before the loan is repaid. The bank is a(n):
a. creditor beneficiary. b. assignee. c. donee beneficiary. d. incidental beneficiary.
By operation of law, one might be able to discharge his or her contractual obligations by:
a. default. b. mutual rescission. c. bankruptcy. d. satisfaction.
An injured party in a contract has a duty to not permit the damages to increase if an increase can be prevented by reasonable efforts. This reflects the doctrine of:
a. exemplary damages. b. nominal damages. c. damages for consequential loss. d. mitigation of damages.
An injured party who rescinds a contract after having performed services may recover the reasonable value of the performance rendered as:
a. foreseeability. b. certainty. c. mitigation. d. restitution.
Officer Mike has a life insurance policy on his own life that provides that in the event of his death, his mother will receive the proceeds. Officer Mike's mother is a(n):
a. incidental beneficiary. b. donee beneficiary. c. creditor beneficiary. d. assignee.
An equitable rule that if a good-faith attempt to perform does not precisely meet the terms of an agreement, the agreement will still be considered complete if the essential purpose of the contract is accomplished is referred to as a(n) __________.
a. material breach b. substantial performance c. perfect tender rule d. inadequate performance
In the context of compensatory damages, damages that do not necessarily flow from the type of breach of contract involved but happen to do so in a particular case as a result of the injured party's particular circumstances are known as __________.
a. nominal damages b. consequential damages c. punitive damages d. direct damages
Damages in excess of actual loss, imposed for the purpose of punishing or making an example of the defendant, are known as __________.
a. nominal damages b. consequential damages c. punitive damages d. special damages
The parties to a contract may stipulate in their contract that a certain amount should be paid in case of a breach. This amount is known as __________.
a. nominal damages b. liquidated damages c. consequential damages d. punitive damages
Injured parties that do not sustain an actual loss because of a breach of contract are entitled to a judgment of a small sum of money such as $1; these damages are called __________.
a. nominal damages b. punitive damages c. consequential damages d. exemplary damages
When a judge enters a very small order for damages and when the plaintiff has not sustained or cannot prove any injury or loss for a breach of contract action, the plaintiff has entered an order for:
a. nominal damages. b. exemplary damages. c. mitigated damages. d. compensatory damages.
A substitution for an old contract with a new one that either replaces an existing obligation with a new obligation or replaces an original party with a new party is called a(n) __________.
a. novation b. delegation c. partial assignment d. assignment
Andrew owes Rachel $200 for a used television, which he bought last year at Rachel's yard sale. When Andrew is unable to pay, the two agree that the debt can be paid by Andrew by him typing all of Rachel's term papers for the school year. In this case, the new contract is a(n):
a. novation. b. satisfaction. c. accord. d. rescission.
A commercial building construction company and Sub Shop, Inc. have entered into a contract, which calls for the construction company to construct a building for Sub Shop by May 1. If the building is not completed by that date, the contract calls for the construction company to pay $150 per day of delay in damages. In this scenario, the $150 per day refers to:
a. punitive damages. b. liquidated damages. c. nominal damages. d. exemplary damages.
Alfie enters into a contract to give Ezra the right of first refusal on a tract of land owned by Alfie. Alfie subsequently offers the land to Frank without first offering it to Ezra. An appropriate remedy for Ezra to seek would be:
a. reformation. b. liquidated damages. c. injunction. d. punitive damages.
At times, a written contract does not correctly state the agreement already made by the parties. When this occurs, either party may seek to have the court correct the writing to state the agreement actually made. This rewriting is known as:
a. specific performance. b. injunction. c. reformation. d. rescission.
Maxine signs a contract to sell her townhouse to Jackson for $120,000. Two days later, Maxine changes her mind after discovering that she could have sold the property to another buyer for an additional $50,000. Jackson sues and asks the court to have the property conveyed to him at the price of $120,000. Jackson is seeking:
a. specific performance. b. punitive damages. c. liquidated damages. d. anticipatory repudiation.
The fact that no time is specified in a contract means that:
a. the contract is unenforceable. b. a reasonable time for performance will be implied. c. the contract is impaired on the ground that it is indefinite. d. the time for performance will be ignored by the courts.
When a contract is intended to profit a third person, such a person is a(n):
a. third-party contributory. b. third-party beneficiary. c. assignor. d. assignee.
One issue before the court in the In re Owens Corning et al., Debtors in Possession case was:
a. whether Ms. Berry was at fault for her typographical error. b. whether Owens Corning (OC) was being reasonable in refusing to accept a return in the case. c. whether the court can enter an order of reformation in a case where there is a unilateral mistake of a material fact. d. whether Ms. Berry meant to overcharge for the items in question.
One issue before the court in the Credit General Insurance Co. v. NationsBank case was:
a. whether NationsBank wrongfully paid L & S the proceeds of the certificate of deposit, which belonged to Credit General. b. whether NationsBank should have rolled the certificates of deposit (CDs) together. c. whether L & S should have turned over the proceeds of certificate of deposit (CD) 072 to Credit General. d. whether L & S had paid off all debts on the Howard Johnson project.
One issue before the court in the Copeland v. Admiral Pest Control Co. case was:
a. whether a guest in the motel was a third-party beneficiary of a contract between the motel and pest control company. b. whether it was reasonable for a hotel guest to sue a motel owner for a spider bite. c. whether Admiral Pest Control was doing a good job in pest control at the motel. d. whether Copeland was bitten by a spider that was in the motel room.
One issue before the Supreme Court of Texas in the Energy Transfer Partners L.P. v. Enter. Prods. Partners, L.P. case was:
a. whether a partnership between ETP and Enterprise was authorized by a board-of-directors approved agreement. b. whether a contract existed between Enterprise and the Canadian pipeline company Enbridge. c. whether Chesapeake Energy discharged its contract with ETP. d. whether Chesapeake Energy discharged its contract with Enterprise.
One issue before the court in the Hamill v. Cheley Colorado Camps, Inc., case was:
a. whether prospective negligent claims were waived in the risk release form. b. whether Hamill's mother should have skimmed the risk release form. c. whether Camp Cheley should have taken extra precautions. d. whether the exculpatory clause in the risk release form was reasonable.
One issue before the court in Fischer v. Heymann case was:
a. whether the electrical problem upon inspection was a major defect for the Heymanns to void the agreement. b. whether the downturn in the housing market was the reason for Fischer to not sell the condo for $240,000. c. whether the downturn in the housing market was the reason for the Heymanns' refusal to perform. d. whether the Heymanns acted unreasonably in mentioning the "major defect" clause in the agreement.
The main issue in court in the TEC Olmos, LLC v. ConocoPhillips Co. case was:
a. whether the test-drill in the land leased by ConocoPhillips was reasonable. b. whether the hindrance to TEC's compliance to the obligation of the contract was caused by an act of God. c. whether a downturn in the oil and gas market was a force majeure event. d. whether TEC could have used other sources of financing.
Karolyn agreed to sell her recording business to Chelsey for $700,000. The terms were reached with a down payment and then installment payments based on a mortgage to be executed by Chelsey. A few weeks later, Chelsey informed Karolyn that she found a smaller firm to purchase and that she was assigning her rights to buy Karolyn's company to her brother Kevin. Does Karolyn have to accept the assignment?
a. Karolyn must accept the assignment because she already had a contract with Chelsey. b. Chelsey's assignment would be upheld whether Karolyn accepts or not. c. Because Chelsey found a new buyer, the contract will continue with the assignment. d. Chelsey cannot assign any rights to Kevin in this instance.
A transfer of contractual rights is known as:
Assignment
Contract obligations are usually discharged by the following conditions except:
Breach
Debtor
A person who owes money; buyer on credit; borrower
Remedy
Action available to a non-breaching party that allows them to enforce a right or obtain damages Put the parties in the same position should the contract had been performed. i.e. Nominal, compensatory, punitive, consequential, specific performance
Assignee
Party to whom right is transferred.
Cause of action
Right to damages or other judicial relief when a legally protected right of the plaintiff is violated by an unlawful act of the defendant
Claim
Right to payment
Condition
Stipulation or prerequisite in a contract, will, or other instrument
In contracts, an offer to perform is also known as _________________________.
Tender
Condition Precedent
a condition that must be fulfilled before a party's performance can be required
Which of the following contracts will most likely be granted specific performance by a court of equity?
a. A personal services contract b. A contract in which the damages sustained by the plaintiff can be measured in monetary terms c. A contract in which the subject matter is common d. A contract for the purchase of land
Adam enters into a contract to buy a new house. Which of the following would constitute a condition subsequent and thus terminate the contract?
a. If the house does not pass an agreed upon inspection b. If Adam cannot get a loan c. If Adam pays a $500 deposit on the property d. If the interest rates are low
Patrick, the owner of a hotel, contracts with John, a craftsman, to make 100 pieces of a handicraft to decorate the hotel. The contract states that John will handcraft all the pieces. John delegates the performance of the duty to another equally skilled craftsman named Peter. Which of the following is true of this scenario?
a. John can delegate the performance of the duty without the consent of Patrick. b. John can delegate the performance of the duty solely on the basis of his judgment in the matter. c. John cannot delegate the performance of the duty because of the terms of the contract. d. Patrick cannot contest John's delegation of the performance of duty.
A discharge of a contract by the substitution of a new contract involving a new party is referred to as a(n) __________.
a. accord b. mutual rescission c. material alteration d. novation
The transfer of a contract right to a third party is known as a(n):
a. implied warranty. b. assignment. c. delegation. d. novation.
An intended beneficiary of a contract to whom the promisee's primary intent in contracting is to give a benefit is referred to as a(n) __________.
a. incidental beneficiary b. donee beneficiary c. assignor d. creditor beneficiary
Rescission
action of one party to a contract to set the contract aside when the other party is guilty of a breach of the contract
Assignment
the transfer of contractual rights to a third party Generally used in personal property rights, as rights under a contract, commercial paper, an insurance policy, a mortgage, or a lease
Third Party Beneficiary
third person whom the parties to a contract intend to benefit by the making of the contract and to confer upon such person the right to sue for breach of contract
Tender
to offer formally Goods have arrived, are available for pickup, and the buyer is notified
Delegation of duties
transfer of duties by a contracting party to another person who is to perform them
Delegation
transfer to another of the right and power to do an act
Which of the following involves a discharge of a contract by operation of law where ordinary contract claims against a debtor are eliminated?
a. Bankruptcy b. Frustration of purpose c. A contractual limitation d. The operation of a statute of limitations
The party owing a debt under a contract is the:
a. obligee. b. obligor. c. assignee. d. assignor.
Waiver
release or relinquishment of a known right or objection
Lorena was involved in a car accident that left her out of work for three months. During that time, she was unable to receive a salary and pay her monthly and mounting medical bills. The police report indicated that the other driver caused the accident and Lorena was not at fault. She sued the other driver in hopes to recover monetary damages. Can Lorena assign her right of payment from the law suit to her creditors?
Yes, a claim or cause of action against another person may generally be assigned.
Release
an instrument by which the signing party (releasor) relinquishes claims or potential claims against one or more persons (releasees) who might otherwise be subject to liability to the releasor
An order of a court of equity to refrain from doing or to do a specified act is known as a(n) __________.
a. restitution b. injunction c. specific performance d. waiver
Assignor
the party assigning the rights to a third party
Anthony contracted Nora to perform as Princess Elsa at his daughter's fifth birthday party. They agreed on the date, time, duration and scope of performance. A week before the party, Nora called Anthony to inform him that she had doubled booked events for the same date and would no longer be able to perform at Anthony's daughter's party. Anthony was furious because with a week to go, he may not find a proper Princess Elsa replacement for his daughter's party. Nora's actions are an example of:
Anticipatory repudiation
Which of the following are not assignable rights?
Assignment that increases the burden of performance Personal services Credit transaction Correct! All of the above
Operation of Law
Attaching of certain facts because of legal principles that operate automatically; as contrasted with consequences that arise because of the voluntary action of a party designed to create those consequences.
Chef Lou has entered into a lease agreement to open his new restaurant in Austin, Texas. One of the clauses in the lease read: "This lease agreement is valid and enforceable contingent the lessee obtains the corresponding permits and licenses for the lawful operation of the restaurant." This clause is an example of:
Condition Precedent
Third Party Contracts
Contracts for the benefit of a third person that can be intended or incidental Intent must be clear and the third party cannot change the terms of the original agreement
Condition Subsequent
Event whose occurrence or lack thereof terminates a contract
Breach of Contact
Failure to act or perform in the manner called for by the contract Anticipatory breach, waiver of breach, reservation of rights
Under the "American Rule" the losing party is responsible for the winning party's attorney's fees:
False
The doctrine that excuses performance if the basis for the contract no longer exists is called:
Frustration of purpose
Ally is a young actress, singer, and dancer selected for the lead role in an upcoming production of Shakespeare's Anthony and Cleopatra in her hometown. A week after the performances began; Ally received a call to audition for a musical in New York. Ally asked the theater company for a leave of absence to go audition for the musical and even found a replacement to perform for her during her absence. The director of the play agreed as long as the replacement was willing to rehearse 8-12 hours a day six days a week. Ally's rehearsal schedule was half of that four days a week. Can Ally assign this contract?
No, an assignment that increases the burden of performance is not permitted.
Implied Warranty
Warranty that was not made expressly but it is implied by law
Two years after Logan bought his life insurance policy, his wife called the company to increase the amount of the coverage on the policy. Can she do this?
No, third-party beneficiaries must take the contract as it is and abide by all its terms.
Discharged of Contracts
Performance, conditions, unilateral actions agreements, impossibility, economic disappointment, or operation of the law
The actions available for a non-breaching party to a contract in order to put them in the same position as if the contract have been performed are called:
Remedies
Tina is a collector of rare Fabergé eggs. She contacted an art dealer that specializes in Russian antiques to locate new items to add to her collection. The art dealer showed her a unique Fabergé egg he found at an auction in Germany. The item was just what Tina was looking for. They agree on the terms that included price and delivery within two weeks. Tina would tender payment at delivery of the piece. However, two days before the specified date of delivery, the dealer contacts Tina and explains that since the auction in Germany the Fabergé egg has caused so much "buzz" that he received numerous offers and opted to sold the item to another client for double what Tina had agreed to pay. Tina sued the art dealer. Based on the facts of this case, what type of remedy would a court award Tina?
Specific Performance
Novation
Substituting a new obligation for an old one or substituting new parties to an existing obligation.
In a contract, once full and adequate performance has been made, the parties are discharged from their responsibilities under the agreement.
True
Liquidated damages clauses are valid and enforceable as long as the amount to be awarded is not excessive.
True
When an assignment is made for consideration the assignor provides an implied warranty that the right is valid.
True
Logan just entered into a contract for life insurance coverage for the benefit of his wife and two children. This type of contract is called:
Third-party beneficiary contract
A contract clause that stipulates performance by a specified time is known as:
Time is of the essence clause
At the time that Logan bought his life insurance policy, he did not know that his wife was expecting a third child. The contract names as beneficiaries "insurer's wife and children under the age of 18". Is this a valid description of the beneficiaries?
Yes, third-party beneficiaries may be identified by class (e.g. children, grandchildren, wife, etc.).
Mrs. Barnes contracts with Aiden to maintain and clean her swimming pool from May until September for $1,000 per month. In June, Mrs. Barnes informs Aiden that she is canceling the contract because her neighbor is going to maintain the pool at no charge. Aiden is able to find another job cleaning Mr. Nolen's pool, but can only earn $800 a month for the remaining three months of the summer. What, if any, damages can Aiden recover?
a. Aiden is not entitled to recover any damages because he found a new job. b. Aiden can recover the entire $1000 a month from Mrs. Barnes because she was in breach. c. Aiden can recover the $200 per month from Mrs. Barnes that he lost because she cancelled the contract. d. Aiden can demand that Mr. Nolen pay the difference that Mrs. Barnes owes him.
Because of Albert's winning record at another school, Sigma High School signs a contract with Albert for him to become the wrestling coach for the school for a period of five years. After three years of coaching, he accepts an assistant coach position at Crosstown University. Sigma High sues Albert for breach of contract and asks the court to force Albert to return to Sigma High and finish his five-year term. Which of the following is true of the scenario?
a. Albert can be required to return to coach at Sigma High. b. Albert will lose both jobs as a result of the contract dispute. c. Albert cannot be required to return to Sigma High. d. Albert is free to contract with a number of parties without incurring damages.
Heather contracted with TopNotch Builders to add a room to her home. The contract did not specify a time for the completion of the project, but TopNotch started work right away. However, eight months later, the work on her room was still unfinished and there was a still a large hole in Heather's home covered only by a tarp. Heather then contracted with another firm to finish the work. TopNotch sued Heather for breach of contract, and Heather sued TopNotch for breach of contract. Considering that no time limit is set, which of the following is true of this scenario?
a. All contracts are implied to be completed within one year. b. The contract should be completed within a reasonable time frame. c. The contract is void. d. Neither party can sue the other.
Which of the following is true about the requirements for the form of an assignment?
a. An assignment may be in any form. b. Statutes may require that certain assignments be in writing or executed in a particular form. c. Any words, written or spoken, that show an intention to transfer or assign will be respected. d. All of these choices are correct.
Which of the following is true of an incidental beneficiary to a contract?
a. An incidental beneficiary is not entitled to sue as a third-party beneficiary in a contract between other persons. b. An incidental beneficiary is a third person whom the parties to a contract intend to benefit by the making of the contract. c. An incidental beneficiary is the party making an assignment in a contract. d. An incidental beneficiary is not entitled to benefit from a contract unless the performance of the contract is stalled.
Which of the following is true about the vesting of an incidental beneficiary's rights to a contract?
a. An incidental beneficiary is not meant to benefit from the contract and acquires no rights to a contract. b. States are consistent in their rules as to when vesting occurs. c. Vesting does not require the third party to change position in reliance on the promise made for his or her benefit. d. Regardless of whether an incidental beneficiary's rights to a contract are vested, the promisor and promisee can, by later agreement, vary those rights.
Alex and Pam entered into an oral contract in which Pam agreed to buy Alex's car for $8,000 with all payments to be made within one year. After six years, Pam still had only paid $5,000 of the agreed upon amount and Alex filed a lawsuit. In this scenario, will Alex be able to recover the rest of the money?
a. Based on a discharge by operation of law, Alex will be able to recover the remaining money. b. Based on condition precedent, Alex will be able to recover the remaining money. c. Based on condition subsequent, Alex will not be able to recover the remaining money. d. Based on the statute of limitations, Alex will not be able to recover the remaining money.
Madison is an injured party in a contract who is awarded a judgment of $1 in damages. What type of damages does this award represent?
a. Consequential damages b. Direct damages c. Mitigated damages d. Nominal damages
Mr. Robertson signed up for a life insurance plan at work, which required him to list a beneficiary. The contract stated that he could only change the beneficiary each year during the open window for changes, which was December 1 to December 31. Initially Mr. Robertson selected his wife Caroline as his beneficiary, but in June, they got divorced. A few days later, Mr. Robertson notified his employer in writing that he wanted to assign his son Harry as the beneficiary. The employer made note of the change. In October of the same year, Mr. Robertson passed away and the insurance company paid the claim to Mr. Robertson's ex-wife Caroline. His son Harry sued. What is the likely outcome in this case?
a. Harry should receive the money because that was his father's intention in writing. b. Caroline should receive the money because the company failed to make the authorized change. c. Harry should receive the money because the money was assigned to him. d. Caroline should receive the money because Mr. Robertson did not make the changes in the specified time period.
Which of the following is true of the doctrine of commercial impracticability?
a. It was developed to deal with the rule that a party must perform its contracts unless it is absolutely impossible. b. It was developed to relieve sophisticated business entities from their contractual obligations due to economic downturns. c. It is available only when the performance of a contract is made impractical by the subsequent occurrence of an event whose nonoccurrence was not a basic assumption on which the contract was made. d. It is only available to relieve businesses in the event of a market shift.
Blaine owns a gun shop and a shooting range. After several customers ask about providing shooting lessons, Blaine contracts with Jacob Jackson, a highly skilled, retired army marksman, to give lessons, stating that Jacob will give the lessons. After a few months, Tracy shows up and says that Jacob has delegated the job of giving lessons to her. While Tracy does know how to use a gun, she does not have the experience or background that Jacob has. Is Blaine bound by Jacob's delegation?
a. Jacob can delegate any duties from the contract. b. Blaine must accept the delegation because Tracy can actually give lessons. c. Blaine can bar this delegation because Jacob has special skills that were specifically contracted for. d. Jacob can delegate the duties because he found his own replacement and is not in violation of the contract.
Chelsey contracts with Lake Land, Inc. to build a boat dock at her lake house. Lake Land then assigns the job to Martin, a local contractor. A few days after the dock was completed, the dock and her boat float away. In addition to not having the dock, she pays someone to haul her boat back to a storage area and keep the boat there until a new dock is completed, adding to the damages. She sues Lake Land for $5,000, which includes the cost of the dock, hauling, and storage of the boat. Lake Land claims that Chelsey should sue Martin because the job was assigned to him. Which of the following is true of the scenario?
a. Lake Land, Inc. is responsible for the $5,000 because the contract was originally with Lake Land, Inc. b. Martin would be responsible for half of the money because he actually did the work, but Lake Land would be responsible for the other half because the contract was originally with Lake Land, Inc. c. Neither Lake Land, Inc. nor Martin is responsible because the dock was completed. d. Lake Land, Inc. transferred both the duties and obligations to Martin when the assignment was made.
Jason rents an apartment at Uptown Lofts and has signed a one-year lease. After six months, Jason moves out, without giving notice. What legal concept would require Uptown Lofts to try to rent the apartment to someone else as soon as possible?
a. Liquidated damages b. Mitigation of damages c. Reformation d. Material alteration
Lonnie is a landowner and contracts with Drake Construction to perform routine construction services according to the blueprints that Lonnie has provided. Drake Construction then assigns the contract to BDS Developers. As a result of this assignment:
a. Lonnie can bring suit based upon detrimental reliance. b. Drake Construction has no more rights or responsibilities with regard to the contract. c. Drake Construction has all of its rights under the contract but has no responsibility for the performance of the duties. d. Drake Construction no longer has any rights under the contract but remains responsible for the duties it agreed to perform.
Trevor contracted with his friend Margo to remodel his living room so that he got that "at the beach" feeling. When the project was completed, Trevor found that his furniture had been sold and replaced with lawn chairs and that his walls were painted ocean blue with cartoonish sea creatures painted on them. Trevor sues Margo to have the room restored to its original condition, which includes buying back his furniture. Which of the following is true of this scenario?
a. Margo was free to express her artistic vision because there were limited instructions from Trevor. b. No contract existed because the specifications were too limited to give Margo any direction. c. Trevor had no basis to sue because he did not give Margo any specific directions. d. A good-faith effort is required by Margo to provide what Trevor wants.
Lucas has a loan from City Motors for his car. He has always made his payments early or on time. However last month, Lucas was three days late in making the payment. City Motors ignored the late fee payment because of Lucas being a good customer and accepted his check for the regular payment amount. Which of the following legal concepts describes City Motors' actions in this case?
a. Mitigation of damages b. Rescission c. Waiver d. Injunction
Salvador and Jose make a contract for Salvador to manufacture five custom saddles of a specified design. Prior to the manufacture, the factory is destroyed in an accidental fire that is no one's fault. The saddles are available from other sources. Which of the following is true of the scenario?
a. Salvador must supply the saddles even if he must buy them elsewhere. b. Salvador has materially breached the contract if he fails to deliver the saddles. c. Salvador's duty to deliver the saddles is discharged by the destruction of the factory. d. Salvador would be required to supply the saddles once his facility is rebuilt.
Brianna borrows money from First City Bank to open a new shopping center in which she would rent space exclusively to businesses that provide products that are homemade, environmentally friendly, or natural. Bubbles & Suds, a company that sells homemade soaps, contracts to lease a space in the building, even though it is not yet complete. Brianna assigns the rent checks from Bubbles & Suds, once they begin paying rent, to First City Bank in repayment for the loan. Is this a legal assignment?
a. The assignment cannot be made because Bubbles & Suds has not moved into the space yet. b. The assignment can be made on future or expected rights to money. c. Bubbles & Suds can make the assignment, but Brianna cannot. d. The assignment can be made only if Bubbles & Suds agrees.
Which of the following exemplifies a situation in which there is a third-party incidental beneficiary who will be unable to enforce an agreement?
a. The buyer of a business promising the seller that he or she will pay outstanding debts to wholesalers who have supplied inventory for the business b. A subcontractor to a contract between a real estate developer and an insurance company over bonds issued in favor of a city for developing homes c. A new partner entering an accounting firm and agreeing to pay a share of debts incurred by the firm prior to his or her admission to the firm d. A contractor agreeing to post a performance bond to assure payment of workers and material men
Fabulous Florist contracts with Miller Trucking to deliver flowers to all of its customers for a set price per mile, to and from the florist. The florist asks Miller Trucking to deliver some flowers to a location about two hours away, but Miller refuses to make the delivery, stating that gas is too high and that it will be too much wear and tear on the truck to make that run. Miller Trucking says that it assumed the agreement was for local deliveries only, even though the contract does not specifically mention any driving restrictions. How would applying the common law rule affect this situation?
a. The common law rule would require Fabulous Florist to pay more if it wanted out-of-town delivery from Miller Trucking. b. The common law rule would not require Miller Trucking to make the delivery. c. The common law rule would require Miller Trucking to make all deliveries, regardless of their distance. d. The common law rule would render this contract void.
Mr. Davidson owns a development company that has built waterparks in several cities. He took a loan for $500,000 to develop a waterpark in his hometown in Florida. He made this decision based on reports that several new businesses were going to open there, including a new automobile manufacturing facility. Halfway through the construction of the waterpark, the automobile manufacturer decided to open its business elsewhere, causing a severe economic downturn in the community. How will this economic problem affect Mr. Davidson's requirement to repay the loan?
a. The economic downturn will release Mr. Davidson from having to repay the loan. b. The economic downturn will not relive his obligation to repay the loan. c. Because the waterpark was not completed, Mr. Davidson will only have to repay the part of the loan that he has spent. d. Because the economic downturn was not anticipated, he will not have to repay the loan.
Jonathan signed a one-year lease on an apartment. A clause in that lease stated that the apartment ownership could terminate the lease at any time by giving him 30 days' notice. After five months, he received a notice that the lease was being terminated and that he had to move out within 30 days because the owners were selling the apartments. How will this 30-day notice clause affect the contract?
a. The one-year lease would override the 30-day notice clause. b. The 30-day notice clause can be used to discharge the contract. c. The 30-day notice clause is illegal because a contract cannot be discharged by the action of either party alone. d. The owners can only use the 30-day notice clause at the end of the lease period.
Accord and satisfaction
agreement to substitute for an existing debt some alternative form of discharging that debt, coupled with the actual discharge of the debt by the substituted performance
Substantial Performance
equitable rule that if a good-faith attempt to perform does not precisely meet the terms of the agreement, the agreement will still be considered complete if the essential purpose of the contract is accomplished
Bankruptcy
procedure by which one unable to pay debts may surrender all assets in excess of any exemption claim to the court for administration and distribution to creditors, and the debtor is given a discharge that releases him from the unpaid balance due on most debts
Statute of Limitations
statute that restricts the period of time within which an action may be brought
