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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
28) Silvio agreed to perform as a pianist with the Moose Jaw Symphony Orchestra (the
MJSO). His contract with the orchestra contained two important clauses. One required him
to perform with the MJSO four times per month for three years. The other prohibited him
from “acting in any musical capacity for any other employer” during the same period. After
a short time, Silvio grew dissatisfied with the MJSO. He therefore announced his intention
to quit the MJSO and to join the Thunder Bay Orchestra (the TBO). Which of the following
statements is TRUE?
a. Because Silvio has special skills, a court would certainly grant an order of specific
performance to the MJSO.
b. Silvio is entitled to quit the MJSO and join the TBO because a contract for personal
services is never enforceable.
c. A court might grant an injunction to the MJSO to prevent Silvio from performing for the
TBO if it is reasonably possible for Silvio to earn a living without violating the terms of his
contract.
d. Since an injunction is an equitable remedy, such relief is available only if the contract
between Silvio and the MJSO was under seal.
e. A court would not grant either specific performance or an injunction because the
requirement of mutuality could not possibly be satisfied on the facts.
29) Eleni agreed to act as an investment adviser for Gnuhigh Ltd. After completing her first
project for Gnuhigh, she asked for payment of $10 000, as calculated under the terms of the
parties’ agreement. Gnuhigh refused to pay. In support of its position, it pointed to the
Financial Industry Standards Act, which says that a contract for investment advice is
unenforceable unless it is registered with a government official. The agreement between
Eleni and Gnuhigh is not registered. Eleni is most likely entitled to receive
a. $10 000 as restitution for unjust enrichment.
b. $10 000 as reliance damages.
c. $10 000 as liquidated damages.
d. $10 000 as expectation damages.
e. an order for specific performance.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
30) Manny contractually agreed with Akio Inc to present a series of ten lectures to that
company’s employees. The total price of $5000 was to be paid after the last lecture. The
work turned out to be far more complicated and far more expensive than Manny first
expected. He nevertheless carried on with the agreement because he did not want to
damage his reputation for reliability and professionalism. Manny spent $12 000 preparing
and delivering five lectures. It would have cost the same amount to prepare and deliver the
remaining lectures. At that point, however, Akio breached the contract and prevented
Manny from completing the contract. Which of the following statements is TRUE?
a. Manny is entitled to receive $5000 as expectation damages.
b. Manny is entitled to receive $12 000 as reliance damages.
c. Manny is entitled to receive an order for specific performance.
d. Manny is entitled to receive $12 000 as restitution.
e. Manny is not entitled to any remedy.
31) Which of the following sets of remedies are both equitable?
a. punitive damages and nominal damages
b. restitution and punitive damages
c. specific performance and injunction
d. liquidated damages and rescission
e. account of profits and reliance damages
32) Which of the following concepts limits the availability of specific performance?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
a. mutuality
b. remoteness
c. mitigation
d. penalty
e. cost of cure
33) Which of the following statements is TRUE with respect to reliance damages?
a. The plaintiff is entitled to recover both reliance damages and expectation damages.
b. They are available only to the extent that the plaintiff entered into a bad bargain.
c. The plaintiff is entitled to spend the damage award as it chooses.
d. Because contractual promises look to the future, reliance damages are forward-looking.
e. They are intended to allow the plaintiff to complete any work that the defendant did not
perform.
34) Restitution is
a. a cause of action that sometimes is available in a contractual context.
b. a remedy that may require the defendant to give up a benefit that it acquired from a third
party as a result of committing a wrong against the plaintiff.
c. another appropriate name for an account of profits.
d. never able to exceed the value of expectation damages.
e. available as a remedy for unjust enrichment.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
35) On May 1, George contractually agreed to purchase a painting from Laura for $50 000.
On that date, George prepaid half of the purchase price and promised to pay the other half
upon delivery. Laura promised to deliver the painting to George on June 1. In anticipation
of receiving the painting, George spent $10 000 building a special display case in his home.
On May 15, the artist who created the painting died and the value of the painting
immediately increased to $75 000. Laura therefore refused to deliver the painting to
George. George is entitled to receive
a. no more than $10 000 as reliance damages.
b. $25 000 in expectation damages.
c. $50 000 in expectation damages.
d. $75 000 in expectation damages.
e. $35 000 in expectation damages.
36) On August 1, Brian contractually agreed to purchase a diamond from Mila for $100
000. On that date, Brian prepaid half of the purchase price and promised to pay the other
half upon delivery. Mila promised to deliver the diamond to Brian on October 1. The
diamond has a unique size and shape. In anticipation of receiving it, Brian spent $25 000 on
a custom-made ring that could accommodate the diamond. On September 1, political
revolutions in several diamond producing countries disrupted the flow of diamonds. The
diamond that was the subject of Brian and Mila’s contract consequently increased in value
to $150 000. Mila therefore refused to deliver the diamond to Brian. Brian is entitled to
receive
a. restitution of $100 000.
b. restitution of $150 000.
c. reliance damages of no more than $25 000.
d. reliance damages of no more than $75 000.
e. expectation damages of $150 000.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
37) On March 1, Joe contractually agreed to purchase an antique family heirloom from his
third cousin, Maureen, for $40 000. Joe paid half of that price immediately and promised to
pay the other half upon delivery. Maureen promised to deliver the heirloom on May 1. On
April 1, another member of the family discovered that the heirloom had not belonged to a
famous ancestor, as everyone had believed, but rather to that person’s half-brother. The
market value of the heirloom consequently dropped to $10 000. Maureen nevertheless
refuses to deliver it as promised. Joe is entitled to
a. expectation damages of $40 000.
b. expectation damages of $10 000.
c. expectation damages of $30 000.
d. reliance damages of $20 000.
e. restitution of $20 000.
38) Munchable Catering Company contractually agreed to cater Indira’s wedding for a price
of $25 000. Because Indira was anxious for everything to go just right on her wedding day,
she insisted that the agreement contain a clause that said that, if Munchable breached the
contract, it would be required to pay damages of $250 000. Tarik, the owner-operator of
Munchables, agreed to the insertion of that clause because he was (1) new to the business,
(2) very confident that he would perform exactly as required, and (3) easily persuaded. Two
weeks before the wedding, however, disaster struck. Tarik was hospitalized with a
mysterious illness. He immediately called Indira and explained that he would not be able to
fulfill the contract. Indira became hysterical and demanded payment of $250 000. She
eventually calmed down and was able to hire a replacement caterer at a price of $35 000.
The wedding then occurred precisely as Indira had long hoped. She nevertheless still wants
to sue Tarik for as much money as possible. Which of the following statements is most
likely to be TRUE if a judge decides the case?
a. If Indira paid $25 000 to Tarik at the outset, she is now entitled to receive $35 000.
b. Indira is entitled to receive $250 000 from Tarik.
c. Tarik merely has to repay $25 000 to Indira.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
d. Tarik is liable for punitive damages.
e. The judge will classify the contractual clause that requires the payment of $250 000 as a
nominal damages clause.
39) Mountain City Construction Company (MCCC) contractually agreed to build a
recreational complex for Valley City. The City agreed to pay $2 million upon completion
of the project. Shortly after starting the project, MCCC realized that it had entered into a
very bad bargain. It would have to provide $4 million in services and materials in order to
build the recreational complex. It decided to nevertheless fulfill its obligations. After
MCCC had finished 75 per cent of the project, at a total cost of $3 million, a new mayor
was elected. True to the new mayor’s campaign promise, the City immediately locked
MCCC out of the work site. The City then hired Valley City Construction Incorporated
(VCCI) to complete the recreational complex at a cost of $1 million. The City refuses to
pay anything to MCCC. MCCC therefore has discharged the contract and taken its case to
court. A judge most likely would award
a. expectation damages worth $4 million.
b. reliance damages worth $3 million.
c. restitution worth $3 million.
d. an account of profits worth $1 million.
e. expectation damages worth $3 million.
40) Alpha Corp has sued Beta Inc for breach of contract. The judge imposed liability as a
result of relying upon the concept of a fundamental breach. The case must have dealt with
a. punitive damages.
b. unjust enrichment.
c. an exclusion clause.
d. liquidated damages.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
e. an injunction
41) Yuri enters into a contact for the purchase of an antique table for $300. He has a buyer
willing to pay $2000 for the same table. Yuri pays before receiving the table. The seller
breaches the contract when he realizes the table is worth more. Yuri can recover
a. $300.
b. $1700.
c. $2000.
d. $2300.
e. $0.
42) Irma was in a contract for the purchase of two tickets to Disneyland for which she had
already paid. The contract was breached the day before she was supposed to leave and
caused Irma to buy another set of tickets for twice the price, as well, her mother, who was
supposed to come as well, could not. Irma could not receive damages for
a. the cost of buying the new tickets.
b. the amount she paid for the original tickets.
c. the intangible loss caused by her disappointment.
d. the amount she spent on new holiday clothes.
e. the expected amount she may have won from a contest she and 3 others entered that
would take place during the trip.
43) Wendy was fired from her job for reasons that violated her contract. She began a
process of suing her employer for breach of contract and does not attempt to find a new job.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
Wendy made approximately $3000 a month and the case is decided 6 months after her
termination. Which of the following is true?
a. Wendy is entitled to $18 000 in damages.
b. Wendy may be denied damages based on lost wages because she did not try to mitigate
her loss.
c. Wendy is entitled to damages from intangible losses.
d. Wendy is entitled to her monthly wage until the date the trial begins.
e. Wendy is entitled to the cost of suing her employer (the cost of the cure).
44) Remington Construction enters into a contract with Royal Condominiums to build a
new apartment building. Before receiving payment, Remington puts $100 000 into pouring
the foundation. Royal breaches the contract by missing a payment. Which of the following
is true?
a. Remington will be able to receive reliance damages.
b. Remington will be able to receive an account for profits.
c. Remington can only receive nominal damages.
d. Remington’s expectation damages will be limited to $100 000.
e. Remington will not be able to recover the $100 000 because it is too remote.
45) Judy is suing Craig because she believes she suffered a wrong when he did not
contribute to her fundraiser. She did not necessarily lose anything monetarily, but she is
suing for the symbolic purpose. The damages she hopes to receive are referred to as
a. liquidated damages.
b. punitive damages.
c. nominal damages.
d. reliance damages.
e. account for profits.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
46) Millennium Properties enter into a contract to purchase land from Oxford Management.
Because Millennium wants to avoid the risk of a timely and complicated lawsuit in the case
of a breach of contract, they input a clause stating the following, “If either party breaches
their side of the agreement, the innocent party is entitled to $650,000.” Following this,
Oxford breaches the agreement and it costs Millennium $1.2 million. What action can
Millennium take?
a. Millennium is entitled to $1.2 million in damages.
b. Millennium is entitled only to $650 000 in liquidated damages.
c. Millennium is entitled to $1.2 million in penalties.
d. Millennium is entitled to $650 000 in penalties.
e. Millennium is entitled to $650 000 in liquidated damages and $1.2 million in punitive
damages.
47) On April 1st Ken entered into a contract with John to buy a rare 1983 L3 Corvette (the
only one ever built) for a price of $500 000 to be picked up on April 15. On that same date,
Ken paid a deposit of $100 000 with the balance due upon delivery. In preparation for the
transportation of the Corvette, Ken spent $50 000 on a special cargo container. On April 5,
the Arab Prince Alwaheed offered John $1 million for the Corvette, stating that the
Corvette is worth at least $750 000 and to sell it for $500 000 would be foolish. John sold
the Corvette to Prince Alwaheed and is refusing to release the vehicle to Ken. Ken’s best
course of action is to
a. sue for reliance damages in the amount of $150 000.
b. sue for expectation damages in the amount of $500 000.
c. sue for expectation damages in the amount of $1 million.
d. sue for reliance damage in the amount of $150 000 and expectation damages in the
amount of $350 000.
e. sue for specific performance.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
48) You deliver the final payment of rent to your landlord, Jimmy. Because of a post office
error, the money ends up next door at Fred’s house. Fred refuses to give the money back.
What action do you have against Fred?
a. Restitution because there is no contract between you and Fred, but he has been unjustly
enriched
b. The court can order an injunction against Fred to return the money since there is an
implied contract that has been enforced
c. Restitution because there is a contract between you and Fred and he has been unjustly
enriched
d. The court can order an injunction against Fred to return the money since there is an
expressed contract that has been enforced
e. You have no action against Fred and your only option is to repay your landlord
Essay Questions
1) Provide two reasons as to why courts generally award monetary damages, rather than
specific performance, if one party breaks a sales contract by refusing to make delivery.
2) “Reliance damages cannot be used to escape the consequences of a bad bargain.”
Explain the meaning of that statement. Explain the justification for that rule. Provide an
example that illustrates your answers.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 12: Contractual Remedies
3) “The idea of compensation usually means that the plaintiff is entitled to get back
something that it previously enjoyed, but that it lost because of the defendant’s bad conduct.
Although they are considered compensatory, expectation damages do not work in exactly
the same way.” Explain the meaning of that statement. Provide a justification for awarding
expectation damages to the victim of a breach of contract.
