Question 1

Which of the following statements refers to nominal damages?

Accepted Answer

Nominal damages are a small amount of money awarded to the plaintiff when no actual harm or financial loss has been suffered, but the plaintiff's legal rights have been violated. Option B fits this definition as it refers to damages awarded when a party is injured by a breach of contract but cannot establish actual damages.

Question 2

Pattaern Inc. enters into a contract to deliver 10,000 units of raw materials to Phobas Inc. Pattaern delivers the raw materials two days after the delivery date. Pattaern offers to pay damages based on a clause in the contract. What type of damages is being paid by Pattaern?

Accepted Answer

Pattaern offering to pay damages based on a clause in the contract suggests that the parties agreed upon a fixed amount of damages that Pattaern would be liable for if they failed to deliver the raw materials on time. Such pre-agreed damages are known as liquidated damages.

Question 3

When a contractual agreement is formed between two parties, but if one party cannot perform because a previously unforeseeable circumstance makes performance impossible, which party is relieved of its duties?

Accepted Answer

If an unforeseeable circumstance makes performance impossible, both parties are relieved of their duties because the contractual agreement would be discharged. This concept is known as frustration of purpose or impossibility of performance. It is a defense to a breach of contract claim.

Question 4

Emerold Inc. enters into a contract to purchase 3,000 chipsets from Atlaes Inc. It agrees to pay $10 for each chipset. Atlaes manages to deliver only 2,700 chipsets on the stipulated day, leading to a loss in profit for Emerold. The contract did not include a clause about the damages to be paid. If a court decides that Atlaes must pay monetary damages, which of the following types of damages will be awarded by the court?

Accepted Answer

Compensatory damages are awarded to compensate the affected party for the loss they have suffered as a result of another party's breach of contract. In this case, Emerold Inc. suffered a loss in profit due to Atlaes' failure to deliver the agreed-upon number of chipsets, so compensatory damages would be awarded to compensate for that loss. Liquidated damages refer to a specific amount of damages agreed to in the contract, nominal damages are a small amount awarded when no actual loss has been suffered, and punitive damages are awarded to punish the breaching party for particularly egregious behavior. None of these options fully apply to this situation.

Question 5

Bob signed a contract to donate to a charity every month. He included a clause that the contract would be terminated if the charity did not function properly. What restriction has Bob established in this contract?

Accepted Answer

Bob has established a condition subsequent in the contract. This means that if the charity does not function properly, the contract will be terminated. It is a condition subsequent because it does not affect the formation of the contract, but rather the continuation of it.

Question 6

Blue Scaeles Inc. entered into a contract to purchase 20,000 units of raw materials from Scorpeo Inc. If Scorpeo fails to deliver on its obligations, which of the following statements is true?

Accepted Answer

If Scorpeo fails to deliver the raw materials, it will be considered a breach of contract. In such a situation, Blue Scaeles has the right to purchase the raw materials from another supplier at a higher price. Scorpeo will be held responsible for paying the price difference as well as any court costs incurred by Blue Scaeles. Therefore, option D is the correct choice. Options A, B, and C are incorrect as they do not reflect the correct legal remedies available to Blue Scaeles in case of breach of contract.

Question 7

Compensatory damages are awarded ________.

Accepted Answer

Compensatory damages are awarded to place the injured party in the position it would have been in had the terms of the contract been performed. This means that the damages are intended to compensate the injured party for their losses resulting from the breach of contract. The amount of damages awarded is typically calculated based on the actual losses incurred by the injured party.

Question 8

Joe and Lucas enter into a contractual agreement in which Lucas promises to deliver a unique antique artifact to Joe in the next ten days, but the artifact is stolen before Lucas could fulfill his promise. Which of the following statements is true about this scenario?

Accepted Answer

The scenario involves a situation where the contract becomes impossible to perform due to an unforeseen event, i.e., theft. In this case, the contract is discharged by impossibility of performance, and neither party can be held liable for non-performance. Therefore, Lucas is not responsible for delivering the antique artifact, and Joe cannot claim compensatory or punitive damages against Lucas.

Question 9

Which of the following statements refers to punitive damages?

Accepted Answer

Punitive damages are awarded by a court to punish a defendant for intentional, malicious, or outrageous conduct and to deter the defendant and others from engaging in similar conduct in the future. They are awarded in addition to compensatory damages, which are designed to compensate the plaintiff for actual losses suffered as a result of the defendant's conduct.

Question 10

Which of the following is true of rescission?

Accepted Answer

Rescission is a legal remedy where a contract is cancelled and the parties are restored to the position they were in before entering into the contract. It is typically sought by plaintiffs who wish to undo a contract due to misrepresentation, mistake, fraud, or other factors that invalidate the consent or agreement of the parties. Option A refers to specific performance, not rescission. Option C refers to reformation, not rescission. Option D refers to injunction, not rescission.

Question 11

Which of the following correctly expresses an important difference between a condition precedent and a condition subsequent?

Accepted Answer

A condition precedent is a condition that must be fulfilled before the contract becomes binding, whereas a condition subsequent is a condition that terminates the contract if it occurs. Therefore, the occurrence of a condition precedent keeps the contract alive, while the occurrence of a condition subsequent terminates the contract.

Question 12

Which of the following refers to discharge of a contract due to a situation that makes performance of that contract unreasonably expensive, injurious, or costly to a party?

Accepted Answer

This is referring to the concept of commercial impracticability, where a contract is discharged due to unforeseen circumstances that would make performance of the contract unreasonably expensive or difficult for one party.

Question 13

Tom has agreed to the terms of a contract that obligates him to paint Dorothy's house within thirty days. Before he began painting, Dorothy's house was destroyed by a tornado. Which of the following statements is true about Tom's contract obligations?

Accepted Answer

The contract is discharged by impossibility of performance, as the destruction of the house due to a natural disaster was an unforeseen event beyond Tom's control that made it impossible for him to fulfill his obligation to paint the house. Therefore, the contract is no longer enforceable.

Question 14

Which of the following statements best describes reformation?

Accepted Answer

Reformation is the correction of the terms in an agreement so that they reflect the true understanding of the parties. This may occur when there is a mistake or misunderstanding in the contract. The courts may reform the contract to reflect the actual intention of the parties, rather than enforcing the written terms as they appear.

Question 15

Which of the following statements best describes specific performance?

Accepted Answer

Specific performance is a court order compelling a party to perform their obligations under a contract to meet the terms agreed upon. It is often used when monetary damages are not sufficient to remedy a breach of contract.

Question 16

To obtain an injunction, the plaintiff must show the court that ________.

Accepted Answer

The plaintiff must show the court that dollar damages are inadequate and that irreparable harm will be done if the injunction is not granted. The other choices are not the basis for obtaining an injunction.

Question 17

Which of the following statements is true about the sovereign acts doctrine?

Accepted Answer

The sovereign acts doctrine protects the government in a subsequent suit for breach of contract if a new law of general application indirectly affects a government contract. It does not allow one Congress to bind a later Congress or allow Congress to pass legislation deliberately targeting its existing contractual obligations.

Question 18

Jennifer enters into a contract to purchase one of Richard's sculptures. Richard is known for his own unique style of sculpting. Due to time constraints, Richard refuses to create a sculpture for Jennifer. If Richard breaches the contract, which of the following equitable remedies is the court likely to order?

Accepted Answer

The court is likely to order specific performance, which requires Richard to complete the sculpture that was contracted for. This is because the sculpture is unique and cannot be easily replaced.

Question 19

Which of the following statements refers to liquidated damages?

Accepted Answer

Liquidated damages are damages that are agreed upon and stipulated in a clause in the contract. They are typically set at the time the contract is formed and are intended to compensate the nonbreaching party for the harm caused by a breach of contract, such as nonperformance or delay.

Question 20

A court is likely to order specific performance when ________.

Accepted Answer

Specific performance is ordered when monetary damages are not enough to compensate for the breach of contract. Therefore, option C is the correct choice. Option A talks about restitution, which is not specific performance. Option B talks about reformation, which is also not specific performance. Option D talks about injunctive relief, which is a different legal remedy.

Quiz 10: The Law of Contracts and Sales—II