1
Chapter 14
Performance and Discharge
N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.
N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank,
= A question included in the previous edition of the Test Bank.
TRUE/FALSE QUESTIONS
1. The most common way to discharge one’s contractual duties is by breach of
contract.
2. The only way that a party can discharge a contract is by performance.
3. In most contracts, promises of performance are not expressly conditioned.
4. In all contracts, absolute promises are expressly conditioned.
5. A condition that must be fulfilled before a party’s performance can be required is a
subsequent condition.
2 UNIT TWO: CONTRACTS
6. In most contracts, promises of performance are expressly qualified.
7. Performance can be accomplished by tender.
8. Tender is a timely offer or expression of willingness to pay a debt or perform an
obligation.
9. When each party’s performance is conditioned on the other party’s
performance, concurrent conditions are present.
10. A contract comes to an end when both parties fulfill their respective duties by
performing the acts they have promised.
11. When a party’s performance is perfect, it is said to be complete.
12. A party who in good faith performs substantially all of the terms of a contract
can enforce the contract against the other party.
13. Most contracts need to be performed only to the satisfaction of a reasonable
person unless they expressly state otherwise.
14. If one party’s performance is substantial, the other party’s duty to perform
remains absolute.
15. Performance that provides a party with most of the benefits of a contract, in
spite of a deviation from the terms, is substantial performance.
16. A breach of contract occurs only when a party fails to perform all of his or her
duties under a contract.
17. A material breach occurs when performance is substantial, but not complete.
18. A party is entitled to cancel a contract based on the other party’s material
breach.
19. Any breach excuses the nonbreaching party’s duty to perform.
20. Any breach allows the nonbreaching party to sue for damages.
21. Anticipatory repudiation discharges a contract.
22. When an anticipatory repudiation occurs, it is treated as a material breach of a
contract.
23. Only personal contracts can be discharged by agreement of the parties.
24. A novation occurs when there is a substitution, by agreement, of a new
contract for an old one, with the rights under the old one being terminated.
25. A novation requires the existence of a previous, valid obligation.
26. A contractual obligation may not be discharged through novation.
27. The law allows an innocent party to be discharged when the other party has
materially altered a written contract without consent.
28. Objective impossibility discharges a contract.
29. A discharge in bankruptcy will ordinarily prevent creditors from enforcing most
of the debtor’s contracts.
30. A contract is discharged when a change in the law renders the performance
illegal.
31. A contract will be discharged if reasonably foreseeable circumstances make it
impossible to attain the contract’s purpose.
32. After a contract is made, a supervening event may make performance
impossible in an objective sense.
33. An occurrence or event that makes performance temporarily impossible
operates to discharge the parties’ contractual duties.
34. A condition is a qualification in a contract based on a future event that is certain
to occur.
35. To rescind a contract, the parties must make a second agreement that satisfies
the legal requirements for a contract.
MULTIPLE CHOICE QUESTIONS
1. Valley View Farms enters into a contract to sell Sarah’s Corner Shop a
truckload of eggs from free range chickens. Valley View then fails to deliver the
eggs to Sarah’s Corner Shop. Sarah
a. must still pay for the eggs or she will be in breach of contract.
b. does not have to pay for the eggs because Valley View failed to perform.
c. must still pay for the eggs, but can file suit against Valley View for
breach of contract.
d. does not have to pay for the eggs, but cannot file suit against Valley
View for breach of contract.
2. Dylan enters into a contract to manage the operations of Cash’s accounting office
for one year, renewable for subsequent one-year terms. If this contract is discharged
like most contracts, it will be
a. breached.
b. rescinded.
c. altered.
d. performed.
3. Kathleen offers to buy Richard’s prize stallion for $10,000 only if a licensed
veterinarian certifies that the horse is sound for breeding. After inspecting the
stallion, the veterinarian concludes that the stallion is sterile and thus not fit for
breeding. Kathleen
a. must still buy the stallion.
b. does not have to buy the stallion.
c. must still buy the stallion, but may pay a lower price.
d. does not have to buy the stallion, but must buy another horse of similar
value from Richard.
4. Jen agrees to buy Kev’s Dirt Bike business on the express condition that Valley
Credit Union approves the financing. This approval is
a. a concurrent condition.
b. a condition precedent.
c. a condition subsequent.
d. an implied condition.
5. Emil enters into a contract to buy Foley’s cultivated bottomland and hill and
bench acreage if County AgriCredit will lend Emil the funds to pay for the land.
Emil’s duty to perform is
a. absolute.
b. conditional.
c. manifest.
d. irresolute.
6. Elton and Florida sign a contract by which Elton agrees to deliver and install a utility
sink on May 15 in exchange for Florida’s promise to pay the $250 price on May 15.
The delivery and installation of the sink and the payment of the price are examples
of
a. conditions precedent.
b. concurrent conditions.
c. conditions subsequent.
d. implied conditions.
7. CrossCountry Trucking & Transport enters into a contract with Discount Outlet
Stores to load, transport, deliver, and unload the cargo that Discount
designates. CrossCountry’s offer to perform, when the company is ready,
willing, and able to do so, is
a. complete.
b. substantial.
c. tender.
d. absolute.
8. Even-Bilt Construction contracts to build a warehouse for Discount E-Sales
Company. Even-Bilt completely performs. Discount E-Sales is entitled to
a. an accord.
b. rescission.
c. novation.
d. nothing more.
9. Restoration, Inc., contracts to repair a crack in a supporting beam for
Stagecraft Theater for $10,000. If Restoration does not perform, Stagecraft
must pay
a. $10,000.
b. $5,000.
c. $1,000.
d. $0.
10. Bernadette enters into a contract to operate a Caramel Coffee franchise, which
Caramel Coffee agrees to support as long as Bernadette maintains her
business license. Caramel Coffee’s duty to perform is
a. not a condition.
b. a condition precedent.
c. a concurrent condition.
d. a condition subsequent.
11. Hilton enters into a contract to erect a fence around Irene’s cattle pasture.
When the fence is built, Hilton’s performance will be
a. absolute.
b. complete.
c. conditional.
d. substantial.
12. Kali contracts to sell Leony her car for $3,000. This contract will be fully
discharged when Kali and Leony
a. agree to sign a bill of sale.
b. exchange the car for the $3,000.
c. sign a receipt.
d. shake hands and go their separate ways.
13. Herb’s Hot Dog Vending, Inc., enters into a contract to pay Idris for a business
survey and review of Herb’s competitors, which Idris delivers on August 1.
Herb’s offer, on the same date, to pay Idris is
a. a concurrent condition.
b. a novation.
c. tender.
d. mutual rescission.
14. Carpets n’ Rugs, Inc., agrees to carpet Downtown Realty’s offices, using a
particular brand of durable carpet. Carpets n’ Rugs completes the job but uses
a different brand of wear- and weather-resistant carpeting. This is most likely
a. a good-faith reason for Downtown Realty to rescind the contract.
b. a material breach.
c. complete performance.
d. substantial performance.
15. Phil enters into a contract to hire Bob’s Building Business to build a warehouse
for Phil. The contract specifies that the warehouse should be built with
HighQual Bricks. When construction starts, HighQual Bricks cannot provide
enough bricks for the warehouse. Bob’s Building Business substitutes Big Red
Bricks, which are comparable in quality and price to HighQual Bricks. This
deviation from the contract
a. discharges Phil from the contract.
b. has no effect on the contract.
c. increases Bob’s Building Business’s duties under the contract.
d. suspends Bob’s Building Business’s duty to perform.
16. Carol enters into a contract to hire Joanne to paint a portrait of Carol’s favorite
cat. Joanne agrees to do the portrait to Carol’s satisfaction for $100. When
Joanne finishes the portrait, Carol announces that she is not satisfied with the
portrait because it does not look like her cat. Carol
a. must accept the portrait and pay Joanne $100.
b. must accept the portrait and pay Joanne $50.
c. must accept the portrait and pay Joanne $25.
d. does not have to accept the portrait or pay Joanne any money.
17. Red’s Plumbing Service substantially performs its contract with Shady Grove
Condominiums, Inc. Shady Grove is entitled to
a. damages.
12 UNIT TWO: CONTRACTS
b. nothing more.
c. repudiation.
d. alteration.
Fact Pattern 14-1 (Questions 18–19 apply)
Moses sells an apartment building to Noelle with a promise to install a new heating
and air conditioning system , before September 1. The following February 1, Moses
sends Ollie, an HVAC technician, to begin the installation. Noelle orders Ollie to leave
and refuses to make further payments to Moses, who files a suit against Noelle.
18. Refer to Fact Pattern 14-1. Moses’s late attempt to install the ventilation system
is most likely
a. a material breach.
b. complete performance.
c. excused by Noelle’s refusal to make further payments.
d. substantial, but not complete, performance.
19. Refer to Fact Pattern 14-1. Noelle’s refusal to make further payments is most
likely
a. a material breach.
b. complete performance.
c. excused by Moses’s failure to timely install the ventilation system.
d. substantial, but not complete, performance.
CHAPTER 14: PERFORMANCE AND DISCHARGE 13
Fact Pattern 14-2 (Questions 20–21 apply)
Medical Accounts Collection enters into a contract to employ Natalie as a billing and
credit manager for two years. During the first year, Natalie is often absent without
explanation and when present fails to adequately do her job.
20. Refer to Fact Pattern 14-2. Natalie’s performance most likely
a. discharges Medical Accounts from the contract.
b. has no effect on Medical Accounts’s performance.
c. undercuts Medical Accounts’s duties under the contract.
d. suspends Medical Accounts’s duty to perform.
21. Refer to Fact Pattern 14-2. Natalie’s performance is most likely
a. a material breach.
b. a minor breach.
c. a reasonable breach.
d. no breach.
Fact Pattern 14-3 (Questions 22–23 apply)
Business Computer Solutions Education Service enters into a contract to employ
Chandra as an instructor for two years to begin June 1. One month before the term
begins, Business Computer is underbid by a competitor and loses a major client, Debt
Consolidation Corporation. Business Computer now refuses to hire Chandra.
22. Refer to Fact Pattern 14-3. Under the circumstances, with respect to damages,
Chandra can
a. bring an action immediately.
b. bring an action only after the contract’s two-year term begins.
c. bring an action only after the contract’s two-year term ends.
d. do nothing.
23. Refer to Fact Pattern 14-3. Business Computer’s repudiation of its contract to
employ Chandra is most likely
14 UNIT TWO: CONTRACTS
a. a material breach.
b. a minor breach.
c. a condition subsequent.
d. not a breach.
24. Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They
subsequently agree that High Riders Inc. should take Gliding Light’s place and
assume all of its rights and duties under the contract. This is
a. a mutual agreement to rescind.
b. an accord and satisfaction.
c. a novation.
d. a settlement agreement.
25. Barbara and Johann are parties to a contract. They agree on a novation. The
novation requires
a. the existence of a previous, valid obligation.
b. consideration greater than $5,000.
c. performance of the original contract by all of the parties.
d. an accord and satisfaction.
26. Ben and Andrew are parties to a contract. They agree on a novation. The
novation does not require
a. the existence of a previous, valid obligation.
b. agreement by all the parties to a new contract.
c. performance of the original contract by all of the parties.
d. a new, valid contract.
27. Juan and Isidro enter into a contract to buy, restore, and reopen the Coastal
Park Carousel. Before either party begins to perform, they agree to cancel their
deal. This is
a. substantial performance.
b. mutual rescission.
c. accord and satisfaction.
d. novation.
28. Hal contracts with Credit Services, Inc. (CSI), to pay $500 for its services. After
CSI performs, they sign an accord, in which Hal promises to pay $400 within
ten days instead of the $500. Hal does not pay. CSI can sue Hal under
a. neither the accord nor the contract.
b. the accord only.
c. the accord or the contract.
d. the contract only.
29. Wilson owes Shelby $5,000 for repairs on Wilson’s Bobcat Skidsteer. Wilson
has financial troubles and he and Shelby sign an accord, in which Wilson
promises to pay $4,000 and give Shelby his mountain bike within thirty days
instead of the $5,000. Wilson’s delivery of the bike and $4,000 to Shelby is
a. an accord.
b. satisfaction.
c. substantial performance.
d. novation.
30. Rocko owes Sybil $1,000 for yard work Sybil performed for Rocko. The money
is due on May 1. On April 30, Rocko goes to the bank to get the money and
discovers that the bank will be closed until May 2. Rocko
a. will be in breach of contract when he fails to pay Sybil on May 1.
b. will not be in breach of contract when he fails to pay Sybil on May 1 due
to objective impossibility.
c. is discharged from any contractual liability to Sybil.
d. will not be in breach of contract when he fails to pay Sybil on May 1 as
long as he pays the $1,000 plus ten percent interest on May 2.
31. Ruth contracts to provide Stan with fifty hours of telepathic personal coaching.
The state legislature subsequently passes a law making telepathic personal
coaching illegal. This law will
a. discharge the contract.
b. fulfill the contract.
c. not affect the contract.
d. require immediate performance of the contract.
CHAPTER 14: PERFORMANCE AND DISCHARGE 17
Fact Pattern 14-4 (Questions 32–34 apply)
Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell
Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for
three months.
32. Refer to Fact Pattern 14-4. If bad weather destroys Flora’s crops, the obligation to
deliver produce to Harvesters is most likely
a. breached.
b. discharged.
c. not affected.
d. suspended.
33. Refer to Fact Pattern 14-4. If the market price for organic produce exceeds the price
in the contract with Harvesters, and Flora decides not to deliver the order. her
contract with the grocery is most likely
a. breached.
b. discharged.
c. not affected.
d. suspended.
34. Refer to Fact Pattern 14-4. If a strike delays delivery of the produce beyond the
time for performance, Flora’s contract with Harvesters is most likely
a. breached.
b. discharged.
c. not affected.
d. suspended.
35. Raphael agrees to lease an apartment from Suzanne for one day to see
Thomas, the president of the United States, deliver a speech in the street
below. The speech is canceled three days before its scheduled date. The con-
tract
a. is discharged.
b. is not affected.
c. is postponed until another event is scheduled.
d. must be performed immediately.
ESSAY QUESTIONS
1. Ellen contracts to buy six cases of vintage Fertile Valley wine from Grapes &
Vines Winery for $1,200. The contract states that delivery is to be made at
Ellen’s residence “on or before May 1, to be used for daughter’s wedding
reception on May 2.” On May 1, Grapes & Vines’s delivery van is involved in an
accident, no wine is delivered that day, and no one from Grapes & Vines tells
Ellen. On the morning of May 2, Ellen buys the wine from Happy Hill Winery.
That afternoon, just before the reception, Grapes & Vines tenders delivery of
the wine at Ellen’s residence. She refuses tender. Grapes & Vines sues her for
breach of contract. How is the court most likely to rule?
2. Floors n’ More, Inc., hires Gordon to renovate Floors n’ Mores showroom.
Gordon submits plans that Floors n’ More approves. Gordon completes the
major reconstruction, paints the interior, and buys the fixtures and furnishings.
Floors n’ More rejects some of these items because they do not match the
plans, and subsequently refuses to allow Gordon to finish the work or to collect
payment. Could Gordon sue successfully for payment for the entire contract?