The Legal Environment of Business, 8e (Kubasek)
Chapter 10 The Law of Contracts and Sales – II
1) Which of the following was the standard used by the traditional common law to determine
whether a contract has been breached?
A) substantial performance
B) perfect tender rule
C) complete performance
D) partial rule
2) ________ requires completion of nearly all the terms of the contract plus an honest effort to
complete the rest of the terms, coupled with no willful departure from any of the terms.
A) Complete performance
B) Substantial performance
C) A material breach
D) The perfect tender rule
3) Which of the following is permitted by courts today in the event of a material breach of
contract?
A) obtaining specific performance if dollar damages are practicable as compensation
B) reforming the contract to help view the breach as a minor breach of contract
C) curing the material breach if the contract’s time period has not lapsed
D) seeking an exception to the parol evidence rule
4) Which of the following statements is true about a material breach?
A) If a breach of contract is material, the injured party is entitled only to the cost of replacement.
B) Even a minor deviation from the terms of the contract is considered a material breach of
contract.
C) Courts generally allow a party to cure a material breach even if the contract’s time period has
lapsed.
D) The injured party can terminate the contract if the breach of contract is material.
5) Which of the following statements is true if substantial performance is proved?
A) The plaintiff must pay the defendant as agreed to in the contract.
B) The plaintiff cannot refuse to pay the defendant.
C) The plaintiff is entitled to recover the original price that had been agreed upon before the
defendant performed.
D) The plaintiff is entitled to recover the new price found by taking the median between the
plaintiff’s demand for recovery and the defendant’s claim of the amount of recovery.
6) Which of the following statements is true about contracts on the sale of goods?
A) The substantial performance doctrine is applied to the international sale of goods.
B) The buyer must generally give notice to the seller of any defect in the goods and then allow
the seller a reasonable time to cure the defect.
C) If the goods or tender of delivery fail to conform to the contract in any respect, the buyer
cannot accept or reject any number of units he chooses to.
D) According to the United Nations Convention on the International Sale of Goods (CISG), the
failure to deliver goods is sufficient to show an exception to the perfect tender rule.
7) Martha and Jim enter into an agreement whereby Jim agrees to paint Martha’s car. The
contract states that the car is to be painted green. Martha changes her mind and wants the car to
be painted blue instead. Jim agrees to paint the car blue. This type of discharge of contract is
described as ________.
A) accord and satisfaction
B) novation
C) condition precedent
D) condition subsequent
8) ________ is a type of discharge of contract in which new parties are substituted for the
original parties to the agreement.
A) Impossibility of performance
B) Accord and satisfaction
C) Novation
D) Condition subsequent
9) Which of the following occurs during a novation?
A) All parties agree to substitute new parties for the original parties to the agreement.
B) One of the parties to the contract names a third party as the beneficiary.
C) One of the parties to the contract assigns his contract rights to a third party without obtaining
the other parties’ consent.
D) All parties agree to lower the contract price.
10) Which of the following statements is true of novation?
A) Novation is a type of discharge of contract in which the original agreement is substituted with
a new one.
B) Novation leads to a change in the contractual duties of the new party.
C) Novation can be carried out only if all the original parties agree to the substitution of new
parties.
D) Novation refers to a particular future event that terminates the contract if it does not follow
the execution of the contract.
11) Bill enters into a contract with Simon to rework the flooring in Simon’s house. Bill later
realizes that he will be unable to fulfill the terms of the contract and communicates this to Simon.
Both parties agree that George will rework the floor instead of Bill as stated in the original
contract. This type of discharge of contract is described as ________.
A) accord and satisfaction
B) novation
C) substituted agreement
D) compromise agreement
12) ________ is a mutual agreement to rescind an original agreement and substitute a new one
for it.
A) Substituted agreement
B) Condition precedent
C) Accord and satisfaction
D) Novation
13) Which of the following is a form of discharge by mutual agreement?
A) condition subsequent
B) novation
C) condition precedent
D) impossibility of performance
14) ________ is a form of discharge by mutual agreement.
A) Rescission
B) Arbitration
C) Accord and satisfaction
D) Separation of powers
15) A ________ is a particular event that must take place to give rise to a duty of performance of
a contract.
A) condition precedent
B) condition subsequent
C) substituted agreement
D) compromise agreement
16) Which of the following is an example of a condition precedent?
A) Bill should pay Mabel $50 to purchase 10 apple pies.
B) Bill should pay Mabel $50 even if the apple pies were damaged while they were being
transported.
C) Mabel should deliver 10 apple pies to Bill only if she receives three crates of apples that day.
D) Mabel should deliver 10 apple pies to Bill, which can be rejected by him if they are damaged.
17) Mark and Roger entered into a contract in which Mark agreed to sell Roger a very rare
painting. The contract required Mark to deliver the painting to Roger and receive payment if the
appointed art expert verifies that the painting is authentic. The art expert considers the painting to
be a fake. Which of the following should be cited by Roger to discharge the contract and refuse
payment?
A) commercial impracticability
B) impossibility of performance
C) condition precedent
D) condition subsequent
18) Which of the following would be the legal result if the event contemplated by a condition
precedent failed to take place?
A) The contract may be discharged.
B) The contract is declared void.
C) The party will be given time to cure.
D) The contract will be binding on all the parties.
19) A ________ is a particular event that, when it follows the execution of a contract, terminates
the contract.
A) delegation
B) novation
C) condition precedent
D) condition subsequent
20) ________ is a situation in which a party cannot legally or physically perform the contract.
A) Impossibility of performance
B) Condition precedent
C) Condition subsequent
D) Novation
21) Which of the following correctly expresses an important difference between a condition
precedent and a condition subsequent?
A) The occurrence of a condition precedent keeps a contract alive, whereas the occurrence of a
condition subsequent terminates the contract.
B) The contract is discharged if the condition precedent occurs, whereas the parties must be
given time to “cure” if the condition subsequent occurs.
C) A condition precedent occurs before the parties reach an agreement, whereas a condition
subsequent happens after the parties reach an agreement.
D) A condition precedent is governed by the Uniform Commercial Code (UCC), whereas a
condition subsequent is governed by the Uniform Computer Information Transaction Act
(UCITA).
22) Bob signed a contract to donate to a charity every month. He included a clause that the
contract would be terminated if the charity did not function properly. What restriction has Bob
established in this contract?
A) commercial impracticability
B) condition precedent
C) condition subsequent
D) novation
23) Tom has agreed to the terms of a contract that obligates him to paint Dorothy’s house within
thirty days. Before he began painting, Dorothy’s house was destroyed by a tornado. Which of the
following statements is true about Tom’s contract obligations?
A) The contract remains valid, and Tom must paint Dorothy’s next residence.
B) The contract remains valid, but Tom must wait a reasonable time to allow Dorothy to rescind.
C) The contract is voidable as its object is illegal.
D) The contract is discharged by impossibility of performance.
24) Joe and Lucas enter into a contractual agreement in which Lucas promises to deliver a
unique antique artifact to Joe in the next ten days, but the artifact is stolen before Lucas could
fulfill his promise. Which of the following statements is true about this scenario?
A) Lucas must pay compensatory damages to Joe.
B) Lucas must pay punitive damages to Joe.
C) The contract is discharged by impossibility of performance.
D) The contract can be terminated only if both parties agree.
25) Which of the following refers to discharge of a contract due to a situation that makes
performance of that contract unreasonably expensive, injurious, or costly to a party?
A) rescission
B) commercial impracticability
C) condition precedent
D) condition subsequent
26) When a contractual agreement is formed between two parties, but if one party cannot
perform because a previously unforeseeable circumstance makes performance impossible, which
party is relieved of its duties?
A) only the party that was offering to perform
B) only the party that was receiving the performance
C) both parties, since the contractual agreement would be discharged
D) both parties, but only if the court finds substantial performance
27) Which of the following statements is true about the sovereign acts doctrine?
A) It allows one Congress to bind a later Congress.
B) It does not allow the government to pass laws that discharge its preexisting contractual
obligations.
C) It allows Congress to pass legislation deliberately targeting its existing contractual
obligations.
D) It protects the government in a subsequent suit for breach of contract if a new law of general
application indirectly affects a government contract.
28) Complete performance is the standard used by courts today to determine if a contract has
been breached.
29) In case of a material breach of contract, the injured party can terminate the contract and sue
to recover damages.
30) A material breach of contract is usually unintentional and not substantial.
31) The Uniform Commercial Code (UCC) allows a buyer to accept any number of units of the
goods and reject the rest if the goods fail to conform to the contract in any respect.
32) A failure to deliver goods is sufficient to be considered as an exception to the perfect tender
rule according to the United Nations Convention on the International Sale of Goods (CISG).
33) A party can be discharged through novation even if all parties in the contract do not provide
consent.
34) Novation changes the contractual duties of the substituted party.
35) Death or illness of a promisor whose personal performance is required to fulfill the contract
when no substitute is possible can be used as a defense to nonperformance.
36) If the subject matter of a contract is destroyed, the contract is discharged because
performance is impossible.
37) According to the sovereign acts doctrine, the government can be held liable for breach of
contract due to legislative or executive acts.
38) Explain the standard of substantial performance as it relates to contract performance and
discharge.
39) What are the conditions that must be met to show an exception to the perfect tender rule
under the United Nations Convention on Contracts for the International Sale of Goods (CISG)?
40) In terms of contract discharge, distinguish between a contract that is subject to a condition
precedent and one that is subject to a condition subsequent.
41) What does the sovereign acts doctrine state about contracts with the government?
42) Describe what is meant by contract discharge through commercial impracticability.
43) With regard to remedies for a breach of contract, which of the following is not a recognized
form of monetary damages?
A) compensatory
B) punitive
C) nominal
D) confiscatory
44) The purpose of ________ damages is to place the injured (non-breaching) party to a contract
in the position he or she would have been in had the terms of the contract been performed.
A) compensatory
B) punitive
C) nominal
D) liquidated
45) Damages in excess of compensatory damages that the court awards for the sole purpose of
deterring the defendant and others from doing the same act again are known as ________
damages.
A) non-liquidated
B) punitive
C) nominal
D) liquidated
46) Sometimes the court awards a very small sum (usually $1) in ________ damages to a party
that is injured by a breach of contract but cannot show real damages. In these cases, the court
generally enables the injured party to recover court costs, though not attorney’s fees.
A) liquidated
B) nominal
C) punitive
D) compensatory
47) Which of the following statements refers to punitive damages?
A) They are damages in excess of compensatory damages that the court awards for the sole
purpose of deterring the defendant and others from doing the same act again.
B) They are damages awarded to the party that is injured by a breach of contract but cannot
establish actual damages.
C) They are damages for nonperformance that are stipulated in a clause in the contract.
D) They are damages designed to place the non-breaching party in the position that party would
have enjoyed had the terms of the contract been performed.
48) Which of the following statements refers to nominal damages?
A) They are damages in excess of compensatory damages that the court awards for the sole
purpose of deterring the defendant and others from doing the same act again.
B) They are damages awarded to the party that is injured by a breach of contract but cannot
establish actual damages.
C) They are damages for nonperformance that are stipulated in a clause in the contract.
D) They are damages designed to place the non-breaching party in the position that party would
have enjoyed had the terms of the contract been performed.
49) Which of the following statements refers to liquidated damages?
A) They are damages in excess of compensatory damages that the court awards for the sole
purpose of deterring the defendant and others from doing the same act again.
B) They are damages awarded to the party that is injured by a breach of contract but cannot
establish actual damages.
C) They are damages for nonperformance that are stipulated in a clause in the contract.
D) They are damages designed to place the non-breaching party in the position that party would
have enjoyed had the terms of the contract been performed.
50) Compensatory damages are awarded ________.
A) to a party based on the amount stipulated in a clause in the contract
B) to place the injured party in the position it would have been in had the terms of the contract
been performed
C) to deter the defendant and others from doing the same act again
D) to help a party recover court costs if it is injured by a breach of contract but cannot show real
damages