1. The most common way to discharge a contract is by breach.
1. In most contracts, promises of performance are expressly qualified.
1. A buyer’s duty to pay becomes absolute once a contract is formed.
1. Performance can be accomplished by tender.
1. Complete performance occurs when conditions in a contract are fully
satisfied.
1. Anything less than complete performance is a material breach of
contract.
1. Anticipatory repudiation is a material breach of a contract.
1. A contractual obligation may not be discharged through novation.
1. Performance of an accord discharges an original contractual obligation.
1. A contract is discharged when its specific subject matter is destroyed.
1. If a party breaches a contract, the other party can choose one or more
of several remedies.
1. The measurement of compensatory damages for breach of contract is
the same for all types of contracts.
1. Punitive damages are almost never available in contract disputes.
1. Nominal damages normally establish that the defendant acted wrongly.
1. Consequential damages are foreseeable damages that arise from a
party’s breach of a contract.
1. Liquidated damages provisions are usually not enforceable.
1. Rescission advances the contracting parties to the position they would
have been in if the contract had been fully executed.
1. Reformation allows a court to rewrite a contract to reflect the parties’
true intentions.
1. A party who knowingly accepts defective performance of a contract
thereby acknowledges the breach and can take later action on it.
1. Whether a contract’s limitation–of-liability clause will be enforced
depends on the type of breach that the clause excuses.
1. 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. canceled.
b. compromised.
c. altered.
d. performed.
1. Juana contracts to sell Ignacio her MP3 player for $30. This contract
will be fully discharged when Juana and Ignacio
a. agree to sign a bill of sale.
b. exchange the player for the $30.
c. sign a receipt.
d. shake hands and go their separate ways.
1. Candace enters into a contract to pay Parker for a business survey
and review of Candace’s competitors, which Parker delivers on June 1.
Candace’s offer, on the same date, to pay Parker is
a. tandem.
b. tonnage.
c. tender.
d. tinder.
1. Red’s Plumbing Service substantially performs its contract with Shady
Grove Condominiums, Inc. Shady Grove is entitled to
a. damages.
b. nothing more.
c. repudiation.
d. alteration.
1. Building Restoration, Inc. (BRI), enters into a contract to refurbish an
old train depot for Casual Dining, Inc., to open as Eat Up Restaurant.
If BRI completes most of the work promised in the contract, its
performance will be
a. absolute.
b. complete.
c. material.
d. substantial.
1. Bell Medical Education Service enters into a contract to employ Chris
as an instructor for two years to begin May 1. One month before the
term begins, Bell is underbid by a competitor and loses a major client,
Delta Hospital Center. Bell now refuses to hire Chris.Refer to Fact
Pattern 10-1. Under the circumstances, with respect to damages, Chris
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.
1. Bell Medical Education Service enters into a contract to employ Chris
as an instructor for two years to begin May 1. One month before the
term begins, Bell is underbid by a competitor and loses a major client,
Delta Hospital Center. Bell now refuses to hire Chris.Refer to Fact
Pattern 10-1. Bell’s repudiation is most likely
a. a material breach.
b. a minor breach.
c. Chris’s breach.
d. no breach.
1. Straitedge Toolmakers, Inc., contracts to sell its assets to Trulevel
Hardware Corporation. Before either party has performed, rescission of
this contract requires
a. a mutual agreement to rescind.
b. an accord and satisfaction.
c. a novation.
d. commercial impracticability.
1. 3D FX, LLC, and Vivid Star CG, Inc., are parties to a contract. They
subsequently agree that Pixellated Inc. should take 3D’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. commercial impracticability.
1. On April 1, KO Contractors, Inc., contracts to build a store for Lo-Cost
Housewares at a specific location in Metro City. On May 1, Metro
changes its zoning law to prohibit the construction of a commercial
building at that location. Lo-Cost files a suit against KO. In this
situation
a. KO is in breach of contract.
b. Lo-Cost is in breach of contract.
c. the contract is discharged.
d. the contract is suspended.
1. Handy Hardware Store agrees to hire Ilsa for one year at a salary of
$500 per week. When Handy cancels the contract, Ilsa spends $100 to
obtain a similar job that pays $450 per week for a year. Ilsa is entitled
to recover
a. the amount of the wages that Handy promised only.
b. the difference between the wages at the two jobs only.
c. the difference between the wages at the two jobs plus $100.
d. $100 only.
1. GroundSwell Pools, Inc., agrees to build a swimming pool for Francis,
but fails to complete the job. Francis hires EquiAqua, Inc., to finish the
project. Francis may recover from GroundSwell
a. the contract price less costs of materials and labor.
b. the contract price.
c. the costs needed to complete construction.
d. profits plus the costs incurred up to the time of the breach.
1. Lava Excavators, Inc., needs a drill to continue its operations and
orders one for $3,000 from Mining Supplies Company. Lava tells Mining
that it must receive the drill by Tuesday or it will lose $10,000. Mining
ships the drill late. Lava can recover
a. $13,000.
b. $10,000.
c. $3,000.
d. $0.
1. Erte holds 1,000 pounds of perishable fruit in storage for Fresh Stuff
Corporation. Fresh Stuff does not pay for the storage. Erte sells the
fruit to Green Grocers, Inc. This sale represents
a. a breach of contract.
b. a mitigation of damages.
c. rescission and restitution.
d. specific performance.
1. Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site
project manager for two years. If Rig breaches the contract, Scott has
a duty to
a. do nothing.
b. reduce the damages that Scott might otherwise suffer.
c. rescind the contract with Rig.
d. sue Rig to deter others from similar acts.
1. Drew contracts to sell a house to Evan. The contract provides that if
Drew does not close the deal by February 10, he must pay Evan one–
half of the contract price. This provision is not enforceable because it is
a. a liquidated damages clause.
b. a material breach.
c. a mitigation of damages.
d. a penalty clause.
1. Ralph contracts to sell his Double-R Ranch to Samantha on May 1. On
April 20, Ralph tells Samantha that he will not go through with the
deal. Samantha can recover
a. the cost of any property that Samantha would find suitable.
b. the cost of a similar, nearby ranch.
c. the Double-R Ranch.
d. nothing.
1. Tristan hires Stefani to perform at Tristan’s Club, but she breaches the
agreement to accept a higher-paying job at Rock Star Arena. Tristan
files a suit against her. The court will most likely
a. award damages to Tristan.
b. cancel Stefani and Rock Star’s contract.
c. order Stefani to perform the contract.
d. reform Tristan and Stefani’s contract.
1. A contract for a sale of land from Evergreen Properties, Inc., to
Longlife Investment Corporation contains an erroneous legal description.
The most appropriate remedy for these parties is
a. damages.
b. reformation.
c. rescission.
d. specific performance.
1. A contract between E-Debits, Inc., and First Credit Corporation includes
a provision excluding liability as a result of fraud. This provision is
a. enforceable because the parties are protected from liability.
b. enforceable because the parties consented to it.
c. enforceable if the parties have equal bargaining power.
d. not enforceable.
1. Quicksilver Delivery Service contracts to deliver Pete’s Pizza Parlor’s
products to its customers for $5,000, payable in advance. Pete’s pays
the money, but Quicksilver fails to perform. Can Pete’s rescind the
contract? Can Pete’s also obtain restitution? What does it mean to
“rescind” a contract? How is a contract rescinded? What is restitution?
How is restitution accomplished? Explain.
1. General Equity Corporation enters into a contract with Honi, who agrees
to create artwork for General’s main office building. Honi delays and
eventually refuses to perform. Meanwhile, General contracts to sell the
building to Ideal Investments, Inc., but before the transaction is
complete, Jewel Funds Company offers to pay a higher price. General
refuses to transfer the building to Ideal. In separate suits by General
against Honi and by Ideal against General, each plaintiff seeks specific
performance. How might the court rule in each case, and why?
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