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1. Injunctions are frequently used by courts to force employees to complete their contractual obligations with their
employers.
a.
True
b.
False
False
2. Expectation interest can best be described as money spent in reliance upon the agreement.
a.
True
b.
False
False
3. Damages must be estimated with reasonable certainty.
a.
True
b.
False
True
4. Most courts hold that a seller of goods is not entitled to consequential damages.
a.
True
b.
False
True
5. Dr. Gonzalez ordered specialized surgical equipment from Physician’s Supply Co., but his order was not delivered by
the agreed date. Gonzalez is under no obligation to minimize damages since the contract was breached by Physician’s
Supply, not Gonzalez.
a.
True
b.
False
False
6. The Milicic v. Basketball Marketing Company, Inc. case illustrated the proper use of a preliminary injunction.
a.
True
b.
False
True
7. Tess, a tenant, moves from her apartment in breach of the lease agreement. The landlord, Lenny, may not attempt to
rent the apartment until the date of the lease expiration, and so has no recourse to minimize damages.
a.
True
b.
False
False
8. Liquidated damages are awarded to parties who have experienced an injury to their legal rights but have no actual loss.
a.
True
b.
False
False
9. Carswell, a contractor, enters into a contract with Helen, a homeowner, to remodel her bathroom. The contract provides
a specific completion date. The contract provides that if Carswell does not have the job finished by the date, Helen may
deduct $200 per day from the contract price until the job is finished. This is an example of liquidated damages.
a.
True
b.
False
True
10. Ernest operates an ice cream stand during the months of May, June, July, and August. Ernest’s ice cream machine is
broken and needs a new part to run. He contracts to have the part shipped to him by special carrier. Ernest emphasizes that
the part needs to be delivered by April 25 and the carrier agrees, knowing that Ernest intends to open his stand May 1. If
the shipper fails to deliver the part on April 25, Ernest will be able to recover consequential damages caused by the delay.
a.
True
b.
False
True
11. Specific performance is available when the subject matter of the contract is unique.
a.
True
b.
False
True
12. Under the UCC, the buyer is entitled to consequential damages if the seller could have reasonably foreseen them.
a.
True
b.
False
13. Nominal damages are awarded in contract cases in which a damage amount was named in the contract.
a.
True
b.
False
False
14. Banner enters into a contract with Sylvia to buy her house for $150,000. Sylvia decides later not to sell because she is
so emotionally attached to the house. Banner insists that he is entitled to the house. Banner can successfully sue for
specific performance.
a.
True
b.
False
True
15. Marvin contracts with House Painters R Us to paint the interior of his house lemon yellow throughout. The total
contract price is $7,000. House Painters R Us’s anticipated profit on the job is $4500. If Marvin breaches the contract
before House Painters R Us has begun work on the job and has not incurred any expenses, then its damages will be $7000.
a.
True
b.
False
False
16. Specific performance may be available for the breach of a contract to sell:
a.
an original painting.
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b.
20 shares of WalMart stock.
c.
a Nintendo WII video game system.
d.
a 2007 Mustang in mint condition.
ANSWER:
17. Mulligan Domestics Co. breached a contract by refusing to accept its order for 60 bolts of fabric from Wellington
Mills, although the fabric met the contract specifications. Wellington:
a.
has at least four remedies under the UCC.
b.
may resell the goods to someone else and, if it sues Mulligan, Wellington will be assured of being awarded the
difference between the original contract price with Mulligan and the price received from the resale.
c.
may choose not to resell the fabric and settle for the difference between the contract price and the market
value.
d.
would be awarded consequential damages by most courts.
ANSWER:
18. A contract clause which specifies the amount of damages to be paid in the event of a breach is called:
a.
a covenant of damages clause.
b.
a reliance interest of damages clause.
c.
a liquidated damages clause.
d.
an incidental damages clause.
ANSWER:
19. The concept that an injured party may recover consequential damages only if the breaching party should have foreseen
them was established in:
a.
Bi-Economy Market, Inc. v. Harleysville Ins. Co. of New York.
b.
Putnam Construction & Realty Co. v. Byrd.
c.
Hadley v. Baxendale.
d.
Toscano v. Greene Music.
ANSWER:
20. Costs to store a vehicle for a short period of time after an auto dealer fails to complete the contract to purchase the
vehicle would be:
a.
compensatory damages.
b.
incidental damages.
c.
consequential damages.
d.
punitive damages.
ANSWER:
21. The first step a court takes in choosing a remedy is to determine:
a.
what interest it is trying to protect.
b.
if the damages can be quantified with reasonable certainty.
c.
if punitive damages should be awarded.
d.
whether the injured party mitigated its damages.
ANSWER:
22. In a promissory estoppel case, a court will generally award:
a.
only reliance damages.
b.
specific performance.
c.
both reliance and punitive damages.
d.
only nominal damages.
23. Generally, reasonable liquidated damage clauses will be enforced:
a.
when actual damages are easily determined.
b.
when actual damages are difficult to determine.
c.
almost always.
d.
only in real estate sales contracts.
24. Under the UCC, if a seller of goods breaches the contract, the buyer:
a.
must “cover.”
b.
may receive only the current market value of the goods.
c.
may “cover” and then receive the difference between the original contract price and the “cover” price.
d.
will be awarded the difference between the original contract price and the market value of the goods if the
buyer chooses to “cover.”
25. The remedy of reformation:
a.
applies only when money damages are inadequate.
b.
can be used to correct mistakes in the original contract
c.
is available if fraud is involved.
d.
is a commonly used remedy.
26. Mercury Motors inadvertently mixes up a work order on Peter’s car. Peter brought the car in to have the tires rotated.
Mercury tuned up the motor by mistake, conferring a benefit on Peter. If Mercury Motors insists that Peter pay for the
price of the tune-up, Mercury Motors:
a.
can recover its reliance interest.
b.
cannot recover its expectation interest because there was no enforceable agreement.
c.
will win based on breach of contract.
d.
will lose because a personal service contract was involved.
27. In breach of the partnership agreement, Trimble, a partner in the partnership of Morris, Newt, and Oppie, Ltd. quits
the partnership and goes to work for a competitor. The former partners may ask the court for:
a.
specific performance requiring Trimble to return to work for Morris, Newt, and Oppie, Ltd.
b.
an injunction to prevent Trimble from working in competition with the former partners.
c.
special damages under the rule of Hadley v. Baxendale.
d.
liquidated damages as compensation for the breach.
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b
28. All Seasons, Inc. ordered $5,000 worth of Christmas decorations from Santa, Inc. The shipment of decorations was to
arrive no later than October 1, but did not arrive until December 1. All Seasons was able to purchase some of the
unfulfilled order through other suppliers, but had to pay 15% more than the price under contract with Santa, Inc. As a
result of the delay, All Seasons’ sales were down 25%. All Seasons can recover:
a.
punitive damages.
b.
nominal damages.
c.
compensatory damages and consequential damages.
d.
compensatory damages, consequential damages, and punitive damages.
29. Solomon breaches his contract with Neal to purchase the 500 pairs of socks he had promised to buy. Neal is able to
sell the 500 pairs to Renny for a much lower amount. Neal then sues Solomon for damages. Neal will be able to recover:
a.
the amount in the liquidated damages clause.
b.
the difference between Solomon’s contract price and the amount paid by Renny.
c.
Solomon’s contract price.
d.
an amount which depends on whether Solomon intentionally breached because he found cheaper socks
somewhere else.
b
30. Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. The total price of the construction is
$100,000, $20,000 of which will be Bob’s profit. After Bob has put $10,000 worth of materials into the house, Ollie
wrongfully refuses to let him finish the house. If Bob sues for damages, he will be able to collect:
a.
$10,000.
b.
$20,000.
c.
$30,000.
d.
$100,000.
31. Which of the following statements is incorrect concerning liquidated damages?
a.
A liquidated damages clause will be enforced if, when the contract was made, it was difficult to estimate
actual damages.
b.
The amount of liquidated damages must be a reasonable estimation of the actual harm resulting from a breach.
c.
Nominal damages are not the same thing as liquidated damages.
d.
Liquidated damages are enforceable even if the amount is considered to be a penalty on the breaching party.
d
32. Ralph is a professional football player. He signs a valid contract with the Jets. Later, the Giants offer him more
money, so he signs a contract with them. If the Jets sue Ralph, the most likely result would be?
a.
The court will order Ralph to play with the Jets.
b.
The court will order Ralph to play with the Jets, but Ralph is entitled to be paid the amount he negotiated
under the Giants contract.
c.
The court will enjoin Ralph from playing with any team other than the Jets.
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d.
The court will order Ralph to pay compensatory damages in the amount of the difference between the two
contracts.
33. Which of the following is an example of incidental damages you might be awarded if you are wrongfully terminated
from your job?
a.
The costs of psychological counseling.
b.
The costs of mailing resumes to prospective employers.
c.
The costs of a new wardrobe for future interviews.
d.
The costs of cosmetic surgery.
b
34. If a court orders rescission and restitution of a contract under which Nala sold a baseball card to Shirley in exchange
for $450:
a.
Shirley must return the baseball card.
b.
Nala must return the $450.
c.
Both a and b.
d.
Neither a nor b.
35. Rich and Archie sign an agreement in which Archie agrees to deliver ten cases of champagne in 5 days. The parties
negotiated and meant to say in the written agreement, delivery in 50 days. If the two cannot settle this dispute, and Archie
still wants to deliver the champagne, then Archie should sue for the remedy of:
a.
reformation.
b.
rescission.
c.
restitution.
d.
reliance.
36. Reformation is:
a.
a type of restitution
b.
a form of quantum meruit.
c.
a form of quasi-contract.
d.
uncommon.
d
37. Larry purchased a Leisure Lawnmower because the company salesperson intentionally misled him by assuring him
that the mower was self-propelled, had a mulching feature, and had a five-year unlimited manufacturer’s warranty. When
Fred finds out that his new Leisure Lawnmower is not self-propelled, does not mulch, and has a 90-day warranty, he may
successfully sue for:
a.
reformation of the contract only.
b.
restitution only.
c.
restitution and possibly punitive damages.
d.
compensatory damages only.
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38. Farmer Elvin is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract
by failing to pay for the potatoes. The potatoes are beginning to rot. If Farmer Elvin sells the potatoes to a local diner to
make potato soup and salad, then this action would be considered:
a.
a reasonable mitigation of damages.
b.
an attempt to maximize damages.
c.
an attempt to realize an unwarranted profit.
d.
conversion.
39. If a court awards nominal damages it will generally:
a.
award compensatory damages as well.
b.
not make a determination as to whether there has been a breach of the contract.
c.
award punitive damages for the intentional breach of the contract.
d.
award a very small amount of money.
d
40. Compensatory damages are typically assessed against the breaching party:
a.
as a penalty for breaching the contract.
b.
only under the UCC when the sale of goods is the subject of the contract.
c.
to put the non-breaching party in the position it would have been in had the contract never been formed.
d.
to put the non-breaching party in the position it would have been in if the contract hadn’t been breached.
d
41. Identify and describe the four principal contract interests a court may seek to protect.
include compensatory, consequential, and incidental damages.
if the parties had never entered into a contract.
also in cases of quasi-contract.
equitable remedy, such as specific performance or an injunction, may be ordered.
42. Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson. Larry entered into a contract with the owner
agreeing to pay $102,000. The owner subsequently changed his mind. If Larry sues, what remedies are potentially
available?
assuming he could establish an amount with reasonable certainty.
43. Identify the considerations the United States Supreme Court outlined for calculating punitive damages.
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1.
the reprehensibility of the defendant’s conduct.
2.
the ratio between the harm suffered and the award.
3.
the difference between the punitive award and any civil penalties in similar cases.
unreasonably high amount.
Although the Court has not given a definitive ratio between compensatory and punitive damages, the Court
44. In a construction contract, there is a $1000 per day estimate of damages for each day that the contract runs over the
completion date. The contractor is 30 days late when the job is completed, resulting in a prospective damage award of
$30,000. What is this type of clause, and when will it be enforced?
45. Abigail signed a contract to purchase a new car from Wolf’s Auto Sales Company. The seller breached its agreement
by not delivering the car. Abigail went to another car dealer and purchased the same model of car at the same price.
Although she had experienced a legal injury, Abigail has no actual financial or other damages as a result of the breach. If
Abigail sues and wins, what type of damages will she be awarded?
entitled to a judgment for her court costs.
46. Discuss the purpose of an injunction and how the two types of injunctions covered in the textbook are used.
block employees from leaving to work somewhere else. Injunctions may be preliminary, which are issued
injunction, the court will make its order a permanent injunction.