Deck 18: Contract Remedies

Question 1

The majority of states allow the injured party who has been induced to enter into a contract by fraud to recover only "out-of-pocket" damages equal to the difference between the value of what she has received and the value of what she has given for it.

Answer 1

False

Question 2

Equitable remedies are available any time the plaintiff chooses them over money damages.

Answer 2

False

Question 3

Specific performance is the usual judicially granted remedy for breach of contract.

Answer 3

False

Question 4

The costs or losses an injured party avoids by not having to perform are not figured in the computation of damages.

Question 5

The remedy for misrepresentation is specific performance of the contract.

Question 6

Restitution requires a return of value to the aggrieved party.

Question 7

Where a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in reliance on the contract.

Question 8

If the parties to a contract stipulate an amount that will be paid in the event of a breach, the courts will always enforce it.

Question 9

Under the rule in Hadley v. Baxendale , only damages foreseeable at the time of entering into the contract can be recovered.

Question 10

Incidental damages include lost profits and injury to person or property resulting from defective performance.

Question 11

A plaintiff who has not sustained any loss resulting from the defendant's breach of contract cannot recover any damages.

Question 12

To fully compensate a plaintiff for losses suffered for a breach of contract, punitive damages are always awarded.

Question 13

Consequential damages include lost profits and injury to person or property.

Question 14

Punitive damages are not always awarded as a deterrent in breach of contract cases.

Question 15

Sean breaches an agreement in his employment contract with Inmett Corporation by also working for Inmett's major competitor. Sean's promise to Inmett of his exclusive personal services may be enforced by injunction.

Question 16

Where a party has been induced by fraud to enter a contract, the Restatement of Torts permits the injured party to recover out-of-pocket damages but expressly excludes recovery of benefit-of-the-bargain damages.

Question 17

Equitable remedies result in money awards to the plaintiff.

Question 18

A liquidated damage clause that represents a reasonable approximation of the damages where the actual amount would be very difficult to determine will usually be upheld.

Question 19

If Nioma cannot prove a particular element of her loss with reasonable certainty, she is barred from recovering any of the loss arising from breach of contract by the other party.

Question 20

Courts of equity will grant specific performance of contracts for personal services.

Question 21

Arlene signs an employment contract to work for a local business, Davis Restoration, for one year but is wrongfully discharged after three months. In order to recover from Davis full pay for the remaining nine months of her contract, Arlene:

A) must accept employment 60 miles away if that is the only available similar job.
B) must use reasonable efforts to mitigate her damages by seeking other employment, even if she does not find another job.
C) need only file suit against Davis Restoration since they are contractually bound to pay Arlene for one year of employment.
D) must accept a radically different type of job if that is all she can find.

Question 22

The usual remedy for breach of contract is:

A) injunction.
B) specific performance.
C) punitive damages.
D) money damages.

Question 23

If no performance is rendered at all under a contract, then the damages will be the loss of value of the promised performance.

Question 24

Which of the following is NOT true regarding specific performance?

A) It will not be granted if money damages would be adequate to compensate the injured party.
B) It is granted in contracts involving unique items of personal property.
C) It will be granted frequently in contracts involving the sale of goods.
D) The courts will not order directly the specific enforcement of contracts for personal services.

Question 25

Miller made a contract to sell his condominium to Jefferson for $80,000. Two days later Miller changed his mind after discovering that he could have sold the property to another buyer for an additional $20,000. Jefferson sues and asks the court to have the property conveyed to him at the price of $80,000. Jefferson is seeking:

A) restitution.
B) punitive damages.
C) specific performance.
D) valid tender.

Question 26

Delay will have no effect on the power of avoidance.

Question 27

When a breach of contract occurs, the nonbreaching party is required to take reasonable steps to lessen or mitigate the damages that he may sustain.

Question 28

Marcella pays $12,000 down on a houseboat which Hugh had agreed to sell to her for $64,000. Marcella then repudiates the contract. Hugh sells the houseboat to Lloyd in good faith for $60,000. Marcella may recover from Hugh:

A) nothing, since she was the one who repudiated the contract.
B) her $12,000 down payment since Hugh's contract with Lloyd created a novation and discharged any duty Marcella had to pay anything toward the houseboat.
C) $8,000 in restitution, which represents Marcella's $12,000 down payment less the $4,000 in damages Hugh sustained because of Marcella's breach.
D) only a nominal amount.

Question 29

The purpose of reliance damages is to place the injured party in a position as good as he would have held if the contract had not been made.

Question 30

A small breach of contract damage amount fixed without regard to the amount of loss is known as:

A) reliance damages.
B) out-of-pocket damages.
C) nominal damages.
D) None of these.

Question 31

Restitution can be obtained where a voidable contract is avoided.

Question 32

A contractor and Southampton, Inc. have a contract, which calls for the contractor to build a building with the completion by June 15. If the building is not completed by that date, the contract calls for the contractor to pay $100 per day in damages. The $100 per day is:

A) punitive damages.
B) nominal damages.
C) liquidated damages.
D) an illegal penalty.

Question 33

Incidental damages are those that arise directly out of the breach.

Question 34

Even if a party has the power to avoid a contract for lack of capacity, duress, or undue influence, the party will lose that power by affirming the contract.

Question 35

Deanne contracts with Leonard to paint her barn in two weeks. If Leonard breaches the contract, Deanne can elect the remedy of damages or the remedy of injunctive relief to prevent Leonard from providing his painting services for anyone else until he paints her barn.

Question 36

In the Arrowhead School District No. 75, Park County, Montana, v. James A. Klyap, Jr. case, the court found the liquidated damages clause was void as a penalty because it was unreasonable and unduly oppressive.

Question 37

The test of foreseeable damages is subjective.

Question 38

If West and Burton designated in their contract an amount to be paid in the event of a breach and the amount is found to be so high it is considered a penalty, the injured party will be left without a remedy.

Question 39

At its discretion, a court of equity may grant an injunction against breach of a contractual duty when damages for a breach would be inadequate.

Question 40

According to the "American Rule," when contracting parties litigate over a breach:

A) each party pays its own attorney fees, regardless of who wins.
B) attorney fees are considered consequential damages.
C) the losing party has to pay the winner's attorney fees.
D) a provision for attorney fees in the written contract will not be given effect.

Question 41

Busby contracts to build a house for Connell. Busby finishes approximately half of the house and quits. Connell files suit against Busby. Which remedy is not available?

A) Compensatory damages.
B) Specific performance.
C) Reformation.
D) Nominal damages.

Question 42

What principle did the court apply in the case of Madison Square Garden Corp., Ill. v. Carnera ?

A) When damages are not adequate, an injunction may be used to enforce a negative covenant regarding exclusive services that are unique and extraordinary.
B) When services contracted for are unusual or extraordinary, the injured party cannot obtain injunctive relief.
C) An injured party's damages may not be reduced by mitigation for his failure to accept or seek other employment of a different or inferior kind.
D) Damages are recoverable only if they were foreseeable at the time of entering into the contract.

Question 43

Barbara, an antique dealer, intentionally misrepresents the value of an antique chest of drawers, as $6,000 when she has reason to know the value is considerably less. Margaret agrees to buy it for $5,500. It is worth $2,500. In a state that uses the "out-of-pocket" rule, Margaret's damage award would be:

A) $3,500.
B) $3,000.
C) $500.
D) $2,500.

Question 44

Contract damages that put the injured party in as good a position as if the other party had performed are:

A) compensatory damages.
B) incidental damages.
C) consequential damages.
D) liquidated damages.

Question 45

In which of the following situations will a court grant specific performance?

A) In a case involving breach of contract for the sale of real property.
B) In contracts for personal services.
C) Where goods are unique or rare.
D) Both in cases involving breach of contract for the sale of real property and w here goods are unique or rare .

Question 46

Bob's brother, Steve, planned to visit over Labor Day weekend. Together they planned to build a deck in Bob's backyard. Bob ordered the lumber, concrete, nails, and other supplies to be delivered on Friday. He also arranged to rent a saw for the weekend (Sat., Sun., and Mon.) at a cost of $20 a day. When he went to pick up the saw, the store had already rented it. He drove all over town trying to borrow another but could only get one for Sunday, Monday, and Tuesday at a cost of $50 per day. Because they couldn't work on Saturday without a saw, Bob had to hire Mac at a cost of $80 to work with him on Tuesday and, of course, Bob had to take off from work. Calculate the damages to which Bob is entitled. Why? Explain.

Question 47

Scott, a minor, sells his digital camera to Megan, who then sells it to Sherry. Under these circumstances:

A) Scott retains the power of avoidance of the contract, since he is a minor, even after the property is sold to Sherry.
B) if Sherry is a good faith purchaser for value and she buys the camera before Scott elects to rescind, no rescission is permitted.
C) Megan and Sherry both received a voidable title regardless of whether they contracted in good faith.
D) if Scott wants to rescind the transaction after the sale to Sherry, a good-faith purchaser for value, he has no remedy or recourse.

Question 48

Damages for reliance include expenses for:

A) lost profits.
B) injury to the person.
C) preparing to perform.
D) punishment of the breaching party.

Question 49

In the case of Hadley v. Baxendale , the plaintiff was seeking damages for:

A) restitution.
B) lost profits.
C) failure to convey land.
D) failure to specifically perform a contract.

Question 50

Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, "My truck will pull a 2,000 pound trailer with ease." Relying on Gordon's statement, Howard buys the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive and Howard sues for nonfraudulent misrepresentation, he can ask for:

A) punitive damages, but not out-of-pocket damages.
B) out-of-pocket damages, plus consequential damages.
C) out-of-pocket damages plus punitive damages.
D) nominal damages because Howard should have known the capacity of the truck.

Question 51

A power of avoidance held by a party may be lost if:

A) the contract is affirmed.
B) there are unreasonable delays in exercising the power.
C) the rights of third parties intervene.
D) All of these.

Question 52

Carolyn agrees to sell Marianne an antique handmade lace tablecloth for $1,500. When Carolyn discovers that her cousin wants it too, she breaks the contract with Marianne. Marianne can ask the court to order:

A) injunctive relief.
B) specific performance.
C) restitution.
D) equitable rescission.

Question 53

Lynne agrees to buy Harriette's farm for $200,000 and puts $20,000 down. Then Lynne learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm in a good faith transaction for $190,000 a month later, she may:

A) keep Lynne's $20,000.
B) keep $10,000 of Lynne's down payment.
C) not keep any of the down payment money.
D) sue for specific performance.

Question 54

To accomplish the basic purposes of contract remedies, which of the following limitations have not been imposed upon monetary damages?

A) Foreseeability.
B) Certainty.
C) Mitigation.
D) Restitution.

Question 55

David enters into a contract giving Edward the right of first refusal on a tract of land owned by David. David subsequently offers the land to Fred without first offering it to Edward. An appropriate remedy for Edward to seek would be:

A) an injunction.
B) liquidated damages.
C) reformation.
D) punitive damages.

Question 56

Vladimir entered into a contract to buy Daniel's collection of rare stamps. Vladimir mailed payment of $10,000 for the stamps to Daniel, but now Daniel tells Vladimir, "I'll never part with these stamps." Are the following remedies available to Vladimir?

A) Restitution: Yes; Specific Performance: Yes
B) Restitution: Yes; Specific Performance: No
C) Restitution: No; Specific Performance: Yes
D) Restitution: No; Specific Performance: No

Question 57

Bartow signed a contract to coach baseball for Washington High for a period of three years. After two years he is offered and accepts an assistant coaching position at State University. Contract law will not allow Washington High to ask for:

A) specific performance of his contract.
B) payment of compensatory damages.
C) an injunction against coaching at the university.
D) liquidated damages.

Question 58

In which of the following situations is restitution available as a remedy?

A) As an alternative remedy for a party injured by breach.
B) For a party in default.
C) For a party who may not enforce the contract because of the statute of frauds.
D) All of these are situations in which restitution is available.

Question 59

Harry said to Marge, "I have a ring once owned by Marilyn Monroe. Would you like to buy it for $500?" Marge pays for the ring, but the next day a friend tells her that Harry had recently purchased the ring at a local store. Marge enjoys wearing the ring and wears it constantly for twelve months. Finally, she goes to Harry and says, "Here is the ring you lied about. Give me my $500." Most likely Marge will:

A) get her money back since Harry's statement was fraudulent.
B) not get her money back since she should have investigated the facts about the ring more carefully.
C) not get her money back since she is a good faith purchaser of merchandise.
D) not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

Question 60

Which of the following is correct with respect to election of remedies?

A) The Code follows the doctrine of election of remedies with respect to contracts for the sale of goods.
B) The remedy of specific performance is consistent with that of restitution.
C) A person who seeks an injunction may also seek incidental damages for the breach.
D) All of these are correct.

Question 61

Wayne breaches a contract with Tim causing damages of $25,000 in lost profits, when damages under ordinary circumstances would be $17,000. Explain under what circumstances a court would award $25,000.

Question 62

Explain consequential damages. Give an example.

Question 63

Explain three limitations on monetary damages.

Question 64

Eve agrees to sell her boutique to Shelley for $150,000. Shelley spends $60,000 on inventory and fixtures for the store, but then Eve repudiates the contract. Shelley is able to sell the inventory and fixtures for $45,000. Since Shelley cannot establish her lost profits with reasonable certainty, discuss what damages she should seek for Eve's breach of contract.

Question 65

When will a court enforce a liquidated damage clause? When will a court refuse to enforce one?

Question 66

What interests of injured parties are protected by remedies for a breach of contract?

Question 67

a. When is specific performance available to enforce a contract?
b. Under what circumstances will a court grant specific performance to enforce a contract involving personal services?
c. What remedy did the court award in the Madison Square Garden case? Explain why the court chose this remedy.