Deck 18: Discharge of Contracts

Question 1

A person who substantially performs a contract is liable for damages to the other party.

Answer 1

True

Question 2

The parties may agree that the adequacy of performance under a contract is to be determined by a third party.

Answer 2

True

Question 3

The federal Consumer Credit Protection Act gives the debtor the right to rescind a credit transaction within three (3) business days when the transaction would impose a lien on the debtor's home.

Answer 3

True

Question 4

In most bilateral contracts, the performances of the parties are concurrent conditions.

Question 5

A condition precedent must occur before a party to a contract has an obligation to perform.

Question 6

Payment by check is a conditional payment.

Question 7

A party who in good faith has provided substandard performance of a contract may sue to recover the payment specified in the contract.

Question 8

The time for performance is typically essential in a contract for the sale of perishable property.

Question 9

A condition subsequent can alter but not terminate a contract.

Question 10

Contracts may be discharged by the joint action of both contracting parties or, in some cases, by the action of one party alone.

Question 11

There is no exact standard or test by which to determine whether contractual performance is substantial.

Question 12

A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.

Question 13

Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time is sufficient.

Question 14

A valid tender of payment consists of an unconditional offer of the exact amount due on the date when due.

Question 15

Generally, contracts are discharged by the performance of the terms of the contract.

Question 16

An agreement that does not specify the time for performance is not binding because it is too indefinite.

Question 17

All courts hold that when an agreement requires satisfaction of the other party regarding the acceptance of an act, a reasonable person standard is used.

Question 18

If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified.

Question 19

The doctrine of substantial performance is concerned with the issue of whether an imperfect performance will be considered adequate to discharge one's responsibilities under a contract.

Question 20

When a building contractor has substantially performed a contract to construct a building, the contractor is entitled to recover the full contract price.

Question 21

A contract may be discharge in all of the following scenarios except:

A) death or disability
B) destruction of subject matter
C) commercial impracticability
D) weather conditions

Question 22

When parties contract expressly for a particular subject matter, the contract is discharged if the subject matter is destroyed through no fault of either party.

Question 23

For the parties to enter into an accord and satisfaction that discharges the original obligation, there must be a bona fide dispute.

Question 24

A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.

Question 25

A contract can be discharged by impossibility in all the following scenarios except:

A) destruction of subject matter in a sales contract.
B) performance under the contract becomes 25% more expensive due to currency fluctuations in construction contract.
C) when the law changes.
D) death of obligee in a personal services contract.

Question 26

A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.

Question 27

A contract may be discharged under the frustration of purpose doctrine if the event which frustrated the purpose was foreseeable.

Question 28

Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.

Question 29

A Federal Trade Commission regulation gives a buyer three (3) business days in which to cancel a home-solicited sale of goods or services costing more than:

A) $25.
B) $50.
C) $100.
D) $500.

Question 30

In most bilateral contracts, the performances of the parties are __________.

A) conditions precedent
B) conditions subsequent
C) recurrent conditions
D) concurrent conditions

Question 31

An offer to perform is known as a(n) __________.

A) rendering
B) offering
C) tinder
D) tender

Question 32

In the absence of an agreement to the contrary, weather conditions constitute a risk that is assumed by a contracting party.

Question 33

If no time period for performance is specified in a contract:

A) the contract is unenforceable.
B) time shall be of the essence.
C) a reasonable time for performance will be implied.
D) the time for performance will be ignored by the courts.

Question 34

Commercial impracticability discharges a party's contractual obligations when the contract becomes more expensive to perform due to drastic and severe economic downturns.

Question 35

When a debtor makes a payment to a creditor specifying how it should be applied, the creditor must apply the payment:

A) as directed by the debtor.
B) to the oldest outstanding debt.
C) to the most recent outstanding debt.
D) to the largest outstanding debt.

Question 36

A homeowner who refinances her home mortgage may cancel the transaction:

A) if the terms of the contract were less favorable than anticipated.
B) within three business days.
C) only if she was the victim of fraud.
D) upon payment of a $1,000 penalty, as required by a Federal Trade Commission rule.

Question 37

The phrase "time is of the essence" means that:

A) the court is in a hurry to dispose of the case.
B) performance under the contract at the times specified in the contract is vital or essential.
C) the contract expressly states that time is of the essence.
D) the price stated in the contract is subject to change without notice.

Question 38

In a mutual rescission, both parties, acting in good faith, renew their commitment to perform all obligations set forth in their original agreement.

Question 39

A seller's inability to obtain from any supplier the goods called for by the contract generally discharges the contract for impossibility of performance.

Question 40

By operation of law, a party can be discharged in bankruptcy from debts.

Question 41

A change of law discharges a contract if the new law:

A) requires a license and none was required before.
B) requires the use of fireproof materials.
C) requires the use of antipollution devices.
D) prohibits the act called for by the contract.

Question 42

Which of the following is not an element of an accord and satisfaction?

A) a bona fide dispute
B) a proposal to settle the dispute
C) performance of the agreement to settle the dispute
D) reservation of rights under the federal Consumer Credit Protection Act

Question 43

A discharge by agreement can occur in any of the following situations except:A discharge by agreement can occur in any of the following situations except:

A) death of the obligor.
B) accord and satisfaction.
C) release.
D) mutual rescision.

Question 44

A discharge by operation of law occurs in all of the following situations except:

A) accord and satisfaction.
B) material changes by a party.
C) bankruptcy.
D) statute of limitations.

Question 45

To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called __________ clauses, and they are generally enforced by courts as written.

A) delta force
B) force majeure
C) magnum force
D) force corporeal

Question 46

Kentucky Lumber and Millwork Company contracted to supply Rommell Company millwork for use in the construction of a school building. While the work was in progress, the Kentucky Lumber mill was destroyed by fire. For two months thereafter, Kentucky Lumber and Millwork supplied Rommell with millwork purchased from a third party. Kentucky Lumber and Millwork did not wish to continue this plan and declared that the contract was ended. Rommell brought an action against Kentucky Lumber and Millwork to enforce the contract. How will the court decide?

Question 47

Bankruptcy results in a discharge of contractual obligations by __________.

A) default
B) equity
C) operation of law
D) oath or affirmation

Question 48

If the parties to a contract agree to undo the agreement and return any consideration involved, the contract is discharged by:

A) mutual cancellation
B) mutual rescission.
C) novation
D) accord and satisfaction

Question 49

In which case will performance on the exact date specified in the contract most likely be deemed essential?

A) a sale of goods that fluctuate rapidly in value.
B) a sale of goods that remain stable in value.
C) a sale of real estate.
D) a sale of goods where no harm results from a delay in performance.

Question 50

Sam Student had borrowed $1,000 from his cousin. Sam and the cousin became involved in a heated disagreement when the cousin began to press Sam for repayment of the loan. Finally, Sam wrote a check for $190 to the cousin and conspicuously wrote on the check in big letters that it was full and final payment of the $1,000 loan. In need of money, the cousin cashed the check and demanded the remaining $810 from Sam. Sam refused to pay, claiming that they had entered into an accord and satisfaction that discharged Sam's obligation to pay anything more. The cousin sued Sam. Discuss the probable outcome.

Question 51

The parties may decide that their contract is not the one they want. They may then replace it with another contract. If they do, the original contract is discharged by __________.

A) solution
B) elocution
C) retribution
D) substitution

Question 52

When performance is impeded due to the occurrence of an event whose nonoccurrence was a basic assumption of the contract, the contract may be discharged on the grounds of:

A) commercial impracticability.
B) commercial impossibility.
C) economic frustration.
D) economic stability.

Question 53

Sales of goods transactions are subject to a statute of limitations period of:

A) one (1) year.
B) two (2) years.
C) three (3) years.
D) four (4) years.

Question 54

An art collector commissioned an artist to create a sculpture for the collector. The artist wanted a substantial amount of money for the sculpture. This caused the collector some worry regarding possible dissatisfaction with the artwork once it was completed. To ensure that payment would be made only if the collector was satisfied with the sculpture, a condition was written into the commission contract. It required that the collector would have to be satisfied with the artwork, relying on the collector's taste and judgment, before an obligation of payment would be created.??The artist never imagined that a collector could possibly refuse a creation of his and allowed the condition to be placed within the contract. At the completion of the sculpture, the collector claimed that she did not care for the artwork and therefore refused to pay. Can the artist force payment in this situation? Would it help if the artist could establish that the collector actually approves of the sculpture but has temporarily run short on funds, and that this is the true motivating factor in refusing to accept the sculpture?

Question 55

V3 was a successful singing group that contracted to perform at the "Metalsubstance" rock concert. V3 was aware that the promoter would sustain a substantial loss if the group failed to perform. The members of the group were stricken with a virus that confined them to their beds. The promoter sued for breach of contract. What is the probable result?

A) V3 is liable for damages for breach of contract.
B) The contract was discharged by impossibility of performance.
C) In order to avoid liability for breach of contract, V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date.
D) V3 will be deemed to have substantially performed the contract.

Question 56

Which of the following events excuses a promisor from performing his or her contractual obligations?

A) a riot
B) a shortage of materials necessary for production of goods and/or provision of services called for under the contract
C) an unanticipated increase in the cost of performance
D) destruction of the subject matter through no fault of either party

Question 57

The death or disability of a party to a contract discharges the contract when:

A) personal services requiring peculiar skill are involved.
B) the payment of money is involved.
C) a house is to be painted.
D) all of these.