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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
29) Part of the law's response to a breach of contract is best explained by the fact that
a. a breach of condition will usually substantially deprive the party in breach of the
expected benefit of the contract.
b. some terms cannot be classified as either a "condition" or a "warranty" at the outset.
c. a breach of a warranty will usually deprive the party in breach of the expected benefit of
the contract.
d. a breach of a condition will prevent a contract from being formed.
e. an unaccepted repudiation is effective to discharge a contract.
30) The existence of intermediate terms is best explained by the fact that
a. contractual parties sometimes do not specify whether a term should be considered a
condition precedent or a condition subsequent.
b. the innocent party sometimes should receive damages for some of its losses, but not
others.
c. some terms are more difficult to breach than warranties but easier to breach than
conditions.
d. it is sometimes appropriate to wait and see how a breach actually affects the parties
before determining whether or not the right to discharge should arise.
e. the courts are willing to mediate a dispute between some contractual parties, but not
others.
31) Which of the following sets of concepts (as discussed in Chapter 11) all represent ways
in which the terms of a contract can be varied without the supply of fresh consideration?
a. rescission and waiver
b. release and waiver
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
c. release and novation
d. variation, waiver, and novation
e. waiver, release, and rescission
32) Which of the following statements is TRUE with respect to various uses of the word
"condition" as that word was used in Chapter 11?
a. A condition subsequent suspends the creation of a contract until a certain event has
occurred.
b. A condition precedent always leads to the existence of secondary obligations.
c. If a condition subsequent is not satisfied, then the contract is rescinded.
d. A party who fails to perform a condition may be held liable for damages.
e. A contract cannot involve both a condition subsequent and a true condition precedent.
33) Which of the following statements is TRUE with respect to the word "rescission"?
a. Rescission always arises as a result of a contractual defect.
b. Rescission is the name of the process that allows a contract to be discharged after one
party has breached a serious term of the contract.
c. Depending upon the circumstances, rescission may involve either a bilateral agreement to
discharge a contract or a unilateral decision to terminate a contract.
d. Rescission eliminates the need to perform outstanding primary obligations, but it does
not affect secondary obligations.
e. Rescission always requires the supply of fresh consideration.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
34) The phrase "innominate term" is defined as a term that
a. is unimportant and, if breached, leads only to damages.
b. was not numbered, or included, with conditions and warranties among the types of terms
that courts traditionally recognized.
c. one party has nominated, or chosen, to sue upon as either a condition or a warranty.
d. is unnamed because it is not called either a condition or a warranty.
e. leads to nominal damages if it is breached.
35) Pina contractually agreed to purchase a shipment of beans from Jerry. The beans were
to be delivered on June 15. A court recently held that Pina is entitled to discharge the
contract because Jerry did not perform as required by the agreement. Assuming that the
general rules of contract are all applicable in this case, which of the following statements is
most likely TRUE?
a. Jerry breached the contract by delivering the beans on June 17.
b. Pina will rely upon the remedy of rescission.
c. Jerry breached a term that the court classified as a warranty.
d. Although Jerry was able to deliver the beans on June 15, he had announced on May 30
that he would not be able to perform on time.
e. While Pina initially decided to carry on with the contract after Jerry's anticipatory
repudiation and after Jerry did not deliver the beans on June 15, she changed her mind after
the price of beans dropped and she was able to obtain the same quantity of beans from
another supplier at a lower cost.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
36) Rande contractually agreed to purchase his electricity, for two years, from Metro Power
Inc. Six months after that contract was signed, Metro Power increased its prices by ten per
cent, as it was permitted to do under the agreement. It then insisted that Rande pay at the
new rate for the remaining time under the contract. Although Rande realized that Metro
Power had acted in accordance with the law, he is very upset about the price hike.
Assuming that the default rules of contract apply,
a. Rande is entitled to protest by paying his monthly bill with any number of bills and coins
he happens to have on hand.
b. Rande is entitled to protest by paying his monthly bill with a dozen or more cheques
which add up to the correct amount.
c. Rande is entitled to protest by paying only when a representative from Metro Power has
come to his house to collect payment on his monthly bills.
d. Rande is entitled to protest by paying his monthly bills with foreign currency.
e. Rande must pay as promised, even though he is unhappy with Metro Power's actions.
37) Brock contractually agreed to build a deck on the back of Moira's house in exchange
for $20 000. It is now two years later and that contract has been brought to court. The
judge applied the doctrine of substantial performance. This means that
a. Brock performed all of the conditions, but not all of the warranties, in the contract.
b. neither party is entitled to damages.
c. the contract has been discharged for performance.
d. Moira must pay $20 000 to Brock.
e. Brock remains obligated to perform the remainder of the contract.
38) Madeleine entered into a contract with Blue Water Inc. That contract required the
company to install a swimming pool at a price of $15 000, and to then landscape the rest of
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
Madeleine's backyard at a cost of $3000. The parties' transaction has now been brought into
court. The judge has applied the entire contract doctrine. This means that
a. the company has not performed any part of the whole agreement.
b. Madeleine may not be required to pay a cent even though she now has a swimming pool
in her backyard.
c. in order to reach a fair result, the judge ignored the parties' intentions and split the single
contract into two distinct contracts.
d. the parties rescinded the entire agreement and created a new one in its place.
e. in order to reach a fair result, the judge ignored the parties' intentions and joined two
distinct contracts into one single contract.
39) Green Thumb Inc contractually agreed to provide a "complete lawn care package" to
Benjamin. The parties' contract required the company to perform a long list of tasks on a
weekly basis during the summer months. While the company performed most of those tasks
flawlessly, Benjamin was very upset to discover that one of his seven small flower beds had
not been weeded one week. The company explained that the task had been overlooked by
an employee during her first week on the job, and offered to extend their services one week
into the fall season free of charge. Because he had come to regret entering into the contract
in the first place, Benjamin rejected the company's explanation and offer. He announced
instead that he was "terminating" the contract and that he no longer would allow company
employees on his property. Which of the following statements is most likely to be TRUE?
a. Both parties have breached conditions of the contract.
b. The company is entitled to discharge the contract.
c. Benjamin breached a warranty of the contract.
d. The company breached a condition of the contract.
e. Only one party has a right to sue for breach of contract.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
40) Samuel entered into a contract with AE Lukey Inc. That contract required both parties
to perform services. It is now six months later. The contract is executed on one side and
executory on the other. Which of the following statements may be TRUE?
a. One party must be entitled to receive damages.
b. If the parties wish to modify the terms of their contract, they may effectively do so by
using the process of accord and satisfaction but not the process of rescission.
c. One party is entitled to discharge the contract.
d. One party has signed the contractual documents, but the other party has not done so.
e. If the parties wish to modify the terms of their contract, they may effectively do so by
using the processes of variation or novation without new consideration.
41) A homebuilder, Jim, accepts an entire contract from Mark to build a house for $500 000
on his property. Half way through the job, the builder’s material and money run out and
Jim is unable to finish the job. He chooses to leave the worksite indefinitely. A year later,
Jim returns to find the house on Mark’s property fully completed. Jim then asks Mark to
pay for the work that he completed before leaving the worksite. Mark refuses to pay. Which
of the following is true?
a. Mark has to pay Jim $250 000 for the substantial performance.
b. Mark can use his discretion to decide how much to pay Jim. The payment must be under
$500 000.
c. Mark owes Jim $0 for the work he did on the house, but he may owe Jim for using his
building materials.
d. Mark has to pay Jim $500 000 for the substantial performance.
e. Mark owes Jim $0 because $500 000 would be considered an unreasonable price.
42) Malik is a professional soccer player in Canada. He is contacted by Health First
Solutions from Italy and they propose to have him endorse a new product that will boost
lung capacity and help people become better long-distance runners and quicker sprinters.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
Malik agrees subject to one condition, that the product receives approval from the Canadian
government. What kind of condition has Malik enforced?
a. A condition subsequent: a contractual term that states that an agreement will come into
existence only if the product is approved
b. A true condition precedent: a contractual term that states that an agreement will come
into existence only if and when the product is approved
c. A condition precedent: a contractual term that states that an agreement will come into
existence only if and when the product is approved
d. A condition subsequent: a contractual term that states that the agreement will be
terminated if a certain event occurs
e. A true condition precedent: a contractual term that states that the agreement will come
into existence and the enforcement of the primary obligations will be suspended, but
secondary obligations have to be performed
43) Jonathan visits Michael’s garage sale and decides to buy his computer desk and bed
frame. Michael puts the agreement into a contract and both Jonathan and Michael sign it.
After exploring some more, Jonathan wants to purchase the used laptop as well. Jonathan
creates a new contract that includes the laptop, desk, and bed frame, which Jonathan agrees
to once again. Which statement is true?
a. The two parties implied to rescind the first contract by creating a second one.
b. The two parties have not discharged the duties from the first contract by creating a
second one.
c. The first contract has been executed and the second contract is in the executory stage.
d. Both contracts have been executed.
e. The first contract has only been discharged if both parties sign a release.
44) Jerry is interested in purchasing Tom’s vinyl set. As Tom is drafting the contract, he
decides that he does not want to sell the entire set. Which discharge of agreement option
should be used to allow this?
a. Rescission
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
b. Option to terminate
c. Accord and satisfaction
d. Release
e. Novation
45) Melton enters into an agreement with Onyx Suits to purchase their latest tuxedo tailored
in his size from the online website. When Melton receives the package from Onyx in the
mail, the tuxedo is more than noticeably untailored and there appears to be a stain on the
pant leg. Which of the following is true?
a. Onyx has breached a condition and Melton is entitled to discharge himself from the
contract.
b. Onyx has breached a condition but they will not be liable for the cost of tailoring the suit
and cleaning it.
c. Onyx has breached a warranty and they will be liable for the cost of tailoring the suit and
cleaning it.
d. Onyx has breached a warranty but they will not be liable for the cost of tailoring the suit
and cleaning it.
e. Onyx has breached a warranty and Melton is entitled to discharge himself from the
contract.
46) Round About Shipments agrees to ship 5000 cartons of juice beverages for Brian. The
agreement states the following condition: the route taken will begin in Canada and go
through California to get to Mexico. Instead, Round About Shipments departs from
Canada, and goes through Florida before heading to Mexico. Does Brian have any legal
action again Round About Shipments?
a. No, the deviation would not considered substantial
b. No, Round About Shipments performed their obligation by delivering the goods to
Mexico
c. Yes, Round About Shipments committed a fundamental breach by deviating from the
proscribed voyage
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
d. No, the route to be taken is optional especially if there is opportunity for being more
efficient in how they ship
e. No, Round About Shipments can vary the terms of the contract as they wish
47) You agree to rent a venue for your party that will be held on Jan.1, 2013 from
Chauncey. On December 26th, you find out that Chauncey has gone on to rent the venue to
Darcy on the same day of your party. What action can you take?
a. Due to deviation, you are entitled to discharge the contracts and claim damages from
Darcy.
b. The contract is frustrated and both you and Chauncey are left with no action.
c. Due to self-induced impossibility, you are entitled to discharge the contract and you can
claim damages from Darcy.
d. Due to self-induced impossibility, you are entitled to discharge the contract and claim
damages from Chauncey.
e. Due to self-induced impossibility, you can receive damages from Chauncey but must
share the hall with Darcy.
48) A&F Gardening Services attend to your lawn and garden in the early spring months.
Without informing you, they add soil to your gardening areas. The soil contains a low-
grade fertilizer that damages the plants. Which statement is true?
a. This is an anticipatory breach of contract and you do not have the option of discharging
the contract.
b. Because the soil cannot be removed, you cannot discharge the contract, but you can
claim damages for the low-grade product you received.
c. You cannot discharge the contract or claim damages.
d. Because the soil cannot be removed, you can discharge the contract and claim damages
for the low-grade product you received.
e. Your only option is to get A&F to replace the plants.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
Essay Questions
1) "If a contract is discharged for breach, it no longer has any effect." Is that statement
correct? Explain your answer.
2) Thelonius agreed to purchase an antique piano from Ruby. He was required to pay the
purchase price of $100 000 by cheque on June 1, and she was required to deliver the
instrument on June 15. On June 1, Thelonius appeared at Ruby's place of business with a
cheque for $100 000. However, because she was having second thoughts about actually
delivering the piano to Thelonius, Ruby refused to accept his cheque. Explain the
consequences of that refusal in terms of Thelonius's obligation to make payment.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
3) Harlan received a bill for $500 from Oxford Power Inc, with which he had a contract for
the supply of electricity. The amount of the bill, which was much larger than Harlan
expected, was attributable to the fact that Oxford's own costs had recently increased.
Although Harlan initially refused to pay anything, he was eventually convinced by Oxford's
representative that he was contractually liable for the entire $5000. As a sign of protest, he
collected $500 in pennies, placed them in a large wheelbarrow, and proceeded to Oxford's
main office to make payment. Oxford, however, refused payment. Was it entitled to do so?
Explain your answer.
4) Identify a situation in which a party is entitled to have a contract discharged on the basis
of performance, even though that performance constitutes a breach of the contract.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
5) Explain the difference between a "condition," a "condition subsequent," a "condition
precedent," and a "true condition precedent" as those terms have been used in this chapter.
Which of those types of conditions can be breached? Explain your answer.
6) Ichiro and Emily discussed the possibility that he might buy a painting from her at a
price of $100 000. Both parties wanted the sale to occur, and both were confident that
Ichiro would be able to secure bank financing for the transaction. However, the parties also
agreed that neither should have any obligations unless and until such financing was
arranged. Explain how Ichiro and Emily can best achieve that result.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
7) "Even if the parties did not agree to such an arrangement when they created their
contract, they may agree to bring their contract to an early end without relying upon
consideration." Identify two situations in which is true.
8) Briefly describe three ways in which a contract may be discharged by operation of law.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
9) Pierette entered into a contract with Hugo. She agreed to deliver a shipment of gold to
his jewellery store each week for a year. He agreed to pay a specific price. The contract
also said: "The buyer shall have the right to terminate this contract in the event of a
substantial change in the market price of gold." After delivering gold to Hugo for several
months, Pierette refused to go on with the contract. Her decision to do so was based on the
fact that while her contract with Hugo contained a specific price, the market value of gold
had suddenly increased a substantial amount. Consequently, she realized that her contract
with Hugo no longer made good financial sense from her perspective. Would a court accept
that argument from Pierette? Explain your answer.
10) Woogles Inc manufactured widgets in Winnipeg. It contractually agreed to sell 5000
widgets to Peja in Halifax for a price of $100 000. Because the Province of Manitoba is
concerned about the export of widgets, it requires all such sales to be licenced. Such
licences are easily obtained if the seller fills out a simple application form. Because of that
requirement, the contract between Woogles and Peja contained a clause that said,
"Performance of this agreement is conditional upon the acquisition of an export licence."
Shortly after entering into its contract with Peja, Woogles received an offer from another
buyer, who was located within Manitoba, to pay $125 000 for 5000 widgets. Woogles
accepted that offer, even though it only had a total of 5000 widgets to sell. It then simply
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
refused to apply for the export licence that was necessary for its contract with Peja. Can
Woogles escape all responsibility to Peja in that way? Explain your answer.
11) Gretchen, who lived in Calgary, entered into a contract with Matt, who lives in
Edmonton. He paid $2500 to her at the outset and she promised that she would edit a book
that he was in the process of writing. After completing slightly more than half of the job,
however, Gretchen received an offer to act in a play on Broadway. Since acting had always
been her dream, she pleaded with Matt to let her go to New York without finishing her
project with him. She also pleaded with him to retain the $2500 that she had received from
him because she needed a great deal of money to make the move. Since he was fond of
Gretchen, Matt agreed. She then sold almost all of her belongings, including her computer,
and moved to New York. A week later, however, Matt changed his mind when he learned
that Gretchen was acting in Cats, a Broadway production that he disliked very much. He
therefore now insists that she must fulfill the rest of her contractual obligations. Is he
correct? Explain your answer.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
12) Describe the process of novation. Explain whether or not the process requires
consideration. If so, explain how consideration is provided.
13) Explain why a breach of contract supports the right of discharge in some situations, but
not others.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
14) As a result of her independent work as a research scientist, Zoe had confidential
information concerning a new process for manufacturing light bulbs. She entered into a
contract under which she promised to sell her information exclusively to Lampadina Inc, a
light bulb manufacturer. Under the terms of that agreement, she was to provide the
information on June 1 and Lampadina was to pay $250 000 within six weeks after that. On
March 31, however, Zoe fell in love with Hans, the president of Gluhlampe Inc, another
light bulb manufacturer. Two weeks later, she disclosed her confidential information to
Hans. She then told Lampadina that since she could no longer provide "confidential
information," their contract was at an end and she no longer owed any obligations to them.
Is she correct? Explain your answer.
15) Identify two policy reasons why contractual rights may become unenforceable under a
statute of limitation.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 11: Discharge and Breach
