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Chapter 19
Breach of Contract and Remedies
TRUE/FALSE QUESTIONS
B1. When one party breaches a contract, the other party can only sue for damages.
B2. A remedy is the relief provided to an innocent contracting party when the other
party breaches the contract.
B3. Damages that compensate the nonbreaching party for the loss of a bargain are
known as consequential damages.
B4. A party seeking to recover compensatory damages cannot also recover in–
cidental damages.
B5. Compensatory damages compensate a party injured by a breach of contract by
punishing the party that breached the contract.
2 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B6. 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.
B7. In a contract for a sale of goods, the usual measure of compensatory damages
is the difference between the contract price and the market price.
B8. Ordinarily, the remedy for a seller’s breach of a contract for a sale of real estate
is damages.
B9. Consequential damages are foreseeable damages that arise from a party’s
breach of a contract.
B10. Punitive damages generally are awarded in lawsuits for breach of contract.
B11. Nominal damages are designed to punish a wrongdoer and set an example to
deter similar conduct in the future.
B12. In most situations, when a breach of contract occurs, the innocent injured party
is held to a duty to mitigate the damages.
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B13. A liquidated damages provision specifies that a certain amount is to be paid in
the event of a future default or breach of contract.
B14. Liquidated damages provisions usually are enforceable.
B15. Rescission is an equitable remedy used when the parties have imperfectly
expressed their agreement in writing.
B16. Restitution involves one party’s recapture of a benefit conferred on the other
party that has unjustly enriched him or her.
B17. Courts order reformation most often when fraud or mutual mistake is present.
B18. A party seeking to recover in quasi contract must show that he or she acted as
a volunteer in conferring a benefit on another party.
B19. Ordinarily, a waiver by a contracting party will not operate to waive subsequent,
additional, or future breaches of contract.
4 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B20. Whether a contract’s limitation–of-liability clause will be enforced depends on
the type of breach that is excused by the provision.
MULTIPLE CHOICE QUESTIONS
B1. Handcrafts & Hobbies Store agrees to hire Iliana for one year at a salary of
$600 per week. When Handcrafts & 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
a. the amount of the wages that Handcrafts & Hobbies promised only.
b. the difference between the wages at the two jobs only.
c. the difference between the wages at the two jobs plus $150.
d. $150 only.
B2. Meatpackers, Inc., enters into a contract with Nemiah’s Ranch for the delivery
of a certain number of beef cattle on a set schedule. Nemiah’s 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
a. establish, as a matter of principle, that Nemiah’s acted wrongfully.
b. provide Meatpackers with funds for a foreseeable loss beyond the
contract.
c. provide Meatpackers with funds for its loss of the bargain.
d. punish Nemiah’s and set an example to deter other suppliers from
similar acts.
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B3. 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.
Fact Pattern 19-B1 (Questions B4–B5 apply)
Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate
grapes and open a winery.
B4. Refer to Fact Pattern 19-B1. If Ambrose breaches the contract, Belle Vista’s
remedy would most likely be
a. a certain ratio of the amount that Ambrose expected to invest in the
project.
b. a percentage of Ambrose’s unrealized profit.
c. the difference between the land’s contract and market prices.
d. specific performance.
B5. Refer to Fact Pattern 19-B1. If Belle Vista breaches the contract, Ambrose’s
remedy would most likely be
a. a certain ratio of the amount that Ambrose expected to invest in the
project.
b. a percentage of Belle Vista’s unrealized profit.
c. the difference between the land’s contract and market prices.
d. specific performance.
6 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS
B6. Cowtown Creamery, Inc., needs a certain part for its pasteurizing equipment to
continue its operations and orders one for $3,000 from Dairy Supplies
Company. Cowtown tells Dairy Supplies that it must receive the part by
Tuesday or it will lose $10,000. Dairy Supplies ships the part late. Cowtown
can recover
a. $13,000.
b. $10,000.
c. $3,000.
d. $0.
B7. Bread & Bagels Bakery enters into a contract with Cineplex for discounted
tickets for Bread & Bagels’ employees. Cineplex breaches the contract and
Bread & Bagels enters into a contract with DigiMovies for the same service at a
lower price. Bread & Bagels might be awarded nominal damages to
a. establish, as a matter of principle, that Cineplex acted wrongfully.
b. provide Bread & Bagels with funds for a foreseeable loss beyond the
contract.
c. provide Bread & Bagels with funds for its loss of the bargain.
d. punish Cineplex and set an example to deter others from similar acts.
B8. 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.
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B9. Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corpo-
ration. 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. a quasi contract.
B10. Rashi contracts to work for Social Data Analysis Corporation during June for
$4,500. On May 31, Social Data cancels the contract. Rashi declines a job of a
different type and rank with Tech Collection, Inc., which would have paid
$3500. Rashi files a suit against Social Data. As compensatory damages,
Rashi can recover
a. $4,500.
b. $4,000.
c. $500.
d. $0.
B11. Sati contracts to work exclusively for Thermal Imaging Company during July for
$5,000. On June 30, Thermal Imaging cancels the contract. Sati finds a similar
job for the month of July but earns only $3,000. Sati files a suit against Thermal
Imaging. As compensatory damages, Sati can recover
a. $3,000.
b. $2,000.
c. $1,000.
d. $0.
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B12. 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. meant to pay for additional liquid sealant in the event of damage.
b. a reasonable estimate of the loss on a breach.
c. designed to penalize the breaching party.
d. intended to quickly provide cash to the nonbreaching party.
B13. Metro Facilities, Inc., contracts to sell a parking garage to Nouveau Property
Company. The contract provides that if Metro does not close the deal by
September 15, it must pay Nouveau one-half of the contract price. This
provision is not enforceable because it is
a. a liquidated damages clause.
b. a waiver of breach clause.
c. a limitation-of-liability clause.
d. a penalty clause.
B14. 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
a. the cost of any property that Naomi would find suitable.
b. the cost of a similar, nearby brewery and pub.
c. the Micro Brewery & Pub.
d. nothing.
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B15. Nonny agrees to buy a unique collection of Olympics memorabilia for $7,000
from Piper and sends $1,500 as a down payment. When Nonny sends Piper
the rest of the price, she refuses to ship the collection. Nonny should seek
a. damages.
b. quasi-contractual recovery.
c. rescission.
d. specific performance.
B16. Rebecca hires Samson to perform music at Becca’s Bistro, but he breaches
the agreement to accept a higher-paying job at Three Courses Dinner Theater.
Rebecca files a suit against him. The court will most likely
a. award damages to Rebecca.
b. cancel Samson and Three Courses’ contract.
c. order Samson to perform the contract with Rebecca.
d. reform Rebecca and Samson’s contract.
B17. 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. quasi-contractual recovery.
b. reformation.
c. rescission.
d. specific performance.
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B18. Ileana orally agrees to pay Jaime to plant and harvest a quarter of Ileana’s farm
acreage for four corn-planting seasons. After Jaime prepares the land and
plants the first crop, Ileana says that their deal is off. Jaime can most likely
recover
a. in quasi contract.
b. in reformation.
c. in restitution.
d. on the parties’ existing contract.
B19. Dawson owns Evergreen, a complex under construction that will include
commercial and residential suites, as well as a parking garage. Dawson allows
First Call Construction, Inc., the contractor, to complete a stage of construction
late. This waives Dawson’s right to sue for
a. this delay only.
b. any subsequent breaches by First Call.
c. any future breaches by First Call or any subcontractor.
d. none of the choices.
B20. A contract between Recreational Games & Rides, Inc., and Summer 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.
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ESSAY QUESTIONS
B1. Lunch Trucks, Inc., contracts to deliver and serve Meals Catering Service’s
products to its clients for $5,000 per event, payable in advance. Meals Catering
pays the money, but Lunch Trucks fails to perform. Can Meals Catering rescind
the contract? Can Meals Catering also obtain restitution? What does it mean to
“rescind” a contract? How is a contract rescinded? What is restitution? How is
restitution accomplished? Explain.
B2. Medical Eye Clinic Corporation enters into a contract with local musician
Natalie, who agrees to perform for a meeting of Medical Eye’s personnel to be
held in its main office building. Before the date of the meeting, Natalie refuses
to perform, citing a higher-paying gig. Meanwhile, Medical Eye contracts to sell
the building to Optical Center, Inc., but before the transaction is complete,
Perfect Vision Company offers to pay a higher price. Medical Eye refuses to
transfer the building to Optical Center. In separate suits by Medical Eye against
Natalie and by Optical Center against Medical Eye, each plaintiff seeks specific
performance. How might the court rule in each case, and why?
12 TEST BANK B—UNIT THREE: CONTRACTS AND E-CONTRACTS