Business Law, 8e (Cheeseman)
Chapter 16 Remedies for Breach of Traditional and E-Contracts
1) Strict performance by a party discharges that party’s duties under the contract.
2) Tender of performance discharges a party’s contractual obligations.
3) Minor breach occurs when a party renders substantial performance of his or her contractual
duties.
4) When there is substantial performance of a contract, the nonbreaching party may sue to
recover the cost to repair the defect.
5) Material breach of a contract occurs when a party renders considerable performance of his or
her contractual obligations.
6) A nonbreaching party cannot rescind the contract in the event of a material breach.
7) In the event of material breach, the nonbreaching party is discharged from further
performance under the contract.
8) Anticipatory repudiation occurs when one contracting party informs the other that he or she
will not perform his or her contractual duties when due.
9) In an anticipatory breach, the nonbreaching party does not have the right to sue the breaching
party until performance is due.
10) Monetary damages can be recovered only for material breach.
11) The amount of compensatory damages that will be awarded for breach of contract depends
on which party breached the contract.
12) A contractor cannot recover the profits he or she would have made on the contract if the
owner breaches the construction contract before construction begins.
13) If the builder breaches a construction contract either before or during construction, the owner
can recover the increased cost above the contract price that he or she has to pay to have the work
completed by another contractor.
14) If the employee breaches the contract, the employer can recover the costs to hire a new
employee.
15) Consequential damages are unforeseeable damages.
16) Consequential damages arise from circumstances outside a contract.
17) To be liable for consequential damages, the breaching party need not know nor have reason
to know that the breach will cause special damages to the other party.
18) Disclaimer of consequential damages is unlawful in the United States.
19) Nominal damages are awarded when no financial loss resulted from the breach.
20) Mitigation of damages is a nonbreaching party’s legal duty toward avoiding or reducing
damages caused by a breach of contract.
21) If an employer breaches an employment contract, the employee owes a duty to mitigate
damages by trying to find substitute employment.
22) Parties to a contract agree upon liquidated damages after the contract has been breached.
23) Liquidated damages are awarded only if actual damages are precisely determined.
24) Restitution is an action to undo a contract.
25) To rescind a contract, the parties must make restitution of the consideration they received
under the contract.
26) The return of goods or property received from the other party to rescind a contract is known
as restitution.
27) Writ of garnishment is an order of the court that enables a government officer to seize
property of the breaching party and sell it at auction to satisfy a judgment.
28) Specific performance is awarded if the subject matter of the contract is unique.
29) Specific performance is not awarded in contracts for the sale of land.
30) Specific performance of personal service contracts is not granted.
31) An injunction is an equitable doctrine that permits the court to rewrite a contract to express
the parties’ true intentions.
32) To obtain an injunction, the requesting party must show that he or she will suffer irreparable
injury if the injunction is not issued.
33) An unconditional and absolute offer by a contracting party to perform his or her obligations
under the contract is known as an injunction.
34) Intentional interference with contractual relations arises when a third party induces a
contracting party to breach the contract with another party.
35) The recovery for breach of contract includes tort damages.
36) Which of the following statements is a true of a breach of contract?
A) Strict performance by a party discharges that party’s duties under the contract.
B) Inferior performance constitutes a minor breach of contract.
C) Substantial performance constitutes a material breach.
D) The most common remedy for a breach of contract is an award of equitable remedies.
37) ________ is a situation in which a party to a contract renders performance exactly as
required by the contract.
A) Substantial performance
B) Strict performance
C) Anticipatory repudiation
D) Restitution
38) Which of the following terms refers to an unconditional and absolute offer by a contracting
party to perform his or her obligations under a contract?
A) injunction
B) writ of garnishment
C) tender of performance
D) writ of attachment
39) Poole Contractors makes a contract with Delta Resources to pay $50,000 for the supply of
500 truckloads of sand within next week. Delta Resources delivers the sand in two days after the
contract was made. Poole Contractors pays the $50,000 promised in the contract. This is an
instance of ________.
A) substantial performance
B) material breach
C) minor breach
D) strict performance
40) Which of the following statements is true of discharge of contracts?
A) Anticipatory breach discharges the breaching party’s obligations to the contract.
B) Substantial performance is sufficient to discharge a contract.
C) Tender of performance discharges a party’s contractual obligations.
D) Tender is a conditional offer by contracting party to perform his or her obligations under the
contract.
41) When does a minor breach occur?
A) when a party rescinds the contract before actual work on the contract has commenced
B) when a party renders substantial performance of his or her contractual duties
C) when the party who is being offered goods or services rescinds the contract
D) when the party who is offering goods or services rescinds the contract
42) Nett Labs orders 30 desktop computers from iDeal, a local computer dealer. Nett Labs
requires that each computer has a 2.6 GHz processor, 500 GB hard disk and Windows operating
system. iDeal supplies 30 desktop computers, each with a 2 GHz processor, 500 GB hard disk
and Windows operating system. Which of the following terms hold true for iDeal’s performance?
A) complete performance
B) material breach
C) substantial performance
D) anticipatory breach
43) A(n) ________ breach of a contract occurs when a party renders inferior performance of his
or her contractual obligations.
A) material
B) minor
C) anticipatory
D) defensive
44) Which of the following constitutes material breach?
A) inferior performance
B) substantial performance
C) anticipatory repudiation
D) rescission without notification
45) ________ occurs when one contracting party informs the other that he or she will not
perform his or her contractual duties when due.
A) Restitution
B) Rescission
C) Anticipatory repudiation
D) Material breach
46) Which of the following constitutes a case of anticipatory breach?
A) It occurs when a contracting party fails to inform the other party in advance about non-
performance of his or her contractual duties when due.
B) In case of anticipatory breach, nonbreaching party’s obligations under the contract are not
discharged.
C) The nonbreaching party must wait till performance is due to sue the breaching party.
D) Anticipatory breach can be derived from the conduct of the breaching party without being
expressly stated by that party.
47) When a party commits an anticipatory breach, the nonbreaching party ________.
A) must wait until the performance was due before suing
B) is immediately discharged from his or her own duties
C) cannot seek damages because he or she received advance notice of the breach
D) loses his or her right to sue after the due-date for performance is reached
48) Which of the following is true of monetary damages?
A) Nominal damages are paid once the nonbreaching party has suffered a financial loss.
B) Anticipatory breaches cannot be awarded monetary damages.
C) Liquidated damages are set by the court towards the breaching party.
D) Consequential damages are considered as monetary damages.
49) ________ place the nonbreaching party in the same position as if the contract had been fully
performed.
A) Tort damages
B) Compensatory damages
C) Nominal damages
D) Consequential damages
50) Kinlin, a furniture retailer has a contract with William Luellin, a carpenter. The agreement
states that Luellin must deliver five tables and that Kinlin would pay $2,000 per table. However,
Luellin manages to deliver only four tables and Kinlin needs to buy the fifth table from another
supplier for $3,000. How much money can Kinlin recover from Luellin?
A) $10,000
B) $2,000
C) $3,000
D) $1,000
51) Mary buys a new toaster for $500. The toaster’s label bears a disclaimer stating that the
manufacturer is not liable for consequential damages. On Monday morning, while Mary is using
the toaster, it emits sparks and damages the electric wiring in the kitchen. The electrician tells
Mary that the toaster malfunctioned and that the cost of repairs in her kitchen would come up to
$2,000. What can Mary recover from the manufacturer of the toaster?
A) $500
B) $2,500
C) $2,000
D) No damages can be recovered.
52) ________ damages are awarded when the nonbreaching party sues the breaching party even
though no financial loss has resulted from the breach.
A) Consequential
B) Compensatory
C) Nominal
D) Liquidated
53) Which of the following statements is true of nominal damages?
A) They are also known as compensatory damages.
B) Only damages above $1,000 can qualify as nominal damages.
C) Most courts favor nominal damages lawsuits.
D) They are awarded even when a breach did not result in financial loss.
54) QuickClicks, an online advertising company makes a contract to purchase six computers
from Comptail, a local retailer, for $20,000. However, Comptail breaches the contract by not
delivering the computers on time. The next day, QuickClicks manages to purchase six computers
from another retailer for $18,000 and receives immediate delivery. QuickClicks can bring a
lawsuit against Comptail to recover ________ damages.
A) consequential
B) compensatory
C) nominal
D) liquidated
55) Which of the following terms refers to a nonbreaching party’s legal duty to avoid or reduce
damages caused by a breach of contract?
A) tender of performance
B) mitigation of damages
C) liquidation of damages
D) disclaimer of consequential damages
56) Which of the following statements is true of mitigation of damages?
A) The breaching party must make efforts to mitigate damages resulting from the breach of
contract.
B) If an employer breaches an employment contract, he or she owes a duty to mitigate damages
by trying to find substitute employment for the employee.
C) The extent of mitigation of damages required is common to all kinds of contracts.
D) If an employer breaches a contract, the employee is only required to accept comparable
employment.
57) Rudy was working as an applications developer in a software firm in San Jose. His
employment contract was for three years at $100,000 a year. Two years into the contract, Rudy’s
employer fired him as a part of downsizing. Which of the following jobs could Rudy take in
order to mitigate damages?
A) Any job that offers $100,000 or more a year.
B) Another software applications developer job, irrespective of the salary.
C) A job in any software firm in any part of the country.
D) An applications developer job in San Jose for $100,000 a year or more.
58) An employee who has been dismissed improperly accepts a job that is less comparable.
Which of the following is a subsequent course of action?
A) The employee can sue the prior employer for damages.
B) The previous employer must offer salary compensation on a monthly basis, until the
employee’s new salary becomes comparable to that offered by the previous job.
C) The employee can sue the former employer to recover his or her salary for one year.
D) The employee can take no legal action against his or her formal employer after accepting a
different job.
59) Andrew is employed as a Chief Financial Officer of EasyMoney firm in New York City, for
a salary of $200,000 per year on a three-year contract. His employer terminates Andrew with two
years left in the contract. Andrew accepts employment as a financial analyst at a different firm
that pays $150,000 per year. Which of the following hold true in this scenario?
A) Andrew cannot take any legal action against his formal employer after accepting another job.
B) Andrew’s former employer must pay Andrew two years’ worth of his former salary.
C) Andrew can only sue to receive nominal damages.
D) Andrew can sue his prior employer and recover $100,000.
60) Parties to a contract agree in advance to pay ________ damages if the contract is breached.
A) nominal
B) compensatory
C) liquidated
D) consequential
61) Which of the following hold true in case of liquidated damages?
A) For liquidated damages to be lawful, the actual damages must be precisely determined.
B) Liquidated damages are enforceable even if actual damages are later determined to be
different.
C) A liquidated damages clause is considered a penalty if actual damages are not determinable in
advance.
D) If a liquidated damages clause is found to be a penalty, it continues to be enforceable.
62) ________ is an action to undo a contract.
A) Rescission
B) Recession
C) Restitution
D) Retribution
63) ________ is a term that denotes the return of goods or property received from the other party
to undo a contract.
A) Rescission
B) Recession
C) Restitution
D) Retribution
64) Jenson and Johnson enter into a contract that involves Johnson paying Jenson $1,000 for
shoveling the snow from his driveway throughout winter. Jenson, who was paid before work
commenced, breached the contract on the very first day. He should refund $1,000 to Johnson as
________.
A) compensatory damages
B) restitution
C) liquidated damages
D) consequential damages
65) A ________ is an order of the court that enables a government officer to seize property of the
breaching party and sell it at auction to satisfy a judgment.
A) writ of attachment
B) writ of garnishment
C) specific performance
D) liquidation of damages
66) A ________ is an order of the court that orders that wages, bank accounts, or other property
of the breaching party held by third persons be paid to the nonbreaching party to satisfy a
judgment.
A) writ of attachment
B) writ of garnishment
C) specific performance
D) liquidation of damages
67) Which of the following is used in case of a breach of contract that cannot be adequately
compensated through a legal remedy?
A) mitigation of damages
B) liquidation of damages
C) equitable remedies
D) tort remedies
68) An award of ________ orders the breaching party to perform the acts promised in a contract.
A) reformation
B) injunction
C) restitution
D) specific performance
69) Which of the following is true of specific performance?
A) Specific performance of personal service contracts is not granted.
B) Specific performance is not awarded if the subject matter of the contract is unique.
C) Works of art, antiques and heirlooms are exempted as subject matter for specific performance.
D) Specific performance is not available to enforce land contracts.
70) ________ refers to an equitable doctrine that permits the court to rewrite a contract to
express the parties’ true intentions.
A) Reformation
B) Injunction
C) Conjunction
D) Garnishment
71) A court order that prohibits a person from doing a certain act is termed as a(n) ________.
A) rescission
B) reformation
C) injunction
D) restitution
72) Kimberly Inc., a jewelry store, and JKCent, a retailer, draft a contract that permits JKCent to
retail Kimberly’s jewelry in its stores. However, the parties discover a minor clerical error six
months into the contract and the court rewrites their contract. This is an instance of ________.
A) restitution
B) rescission
C) injunction
D) reformation
73) Kinetosphere Automation Inc. (K.A.) makes a mandatory employment contract with all its
employees. The contract states that K.A.’s employees are not to work for any other organization
while they are employed by K.A. If K.A. finds an employee who is also serving another
company, it can approach the court to obtain a(n) ________ to prevent the employee from
working in the other company.
A) restitution
B) rescission
C) injunction
D) subjugation
74) Which of the following torts arises when a third party induces a contracting party to breach
the contract with another party?
A) intentional interference with contractual relations
B) breach of the covenant of good faith and fair dealing
C) tort of bad faith
D) malicious breach of contractual relations
75) Alan is a subject matter expert for First University, with an employment contract of three
years. Two years into the contract, Second University—fully aware of Alan’s contract—offers
him twice the money he currently makes for a similar post. Alan takes the job. First University
can recover damages from Second University for which of the following torts?
A) malicious breach of contractual relations
B) malicious inducement of contractual breach
C) intentional interference with contractual relations
D) breach of the covenant of good faith and fair dealing
76) Distinguish minor breach from material breach.
77) Harold and Ali enter into a contract where Ali has to ship goods within six weeks of signing
the contract. Two weeks later, Ali informs Howard that he cannot provide the shipment in time.
What type of contractual breach does this constitute? Suggest Howard’s course of action
following the breach of contract.
78) How are compensatory damages awarded for construction contracts?
79) As a part of downsizing, Richmond and Sons fired an employee before his employment
contract had lapsed. Is the employee obliged to mitigate damages? Explain.
80) How are liquidated damages awarded?