Question 1

Excavate n' Fill, Inc., enters into a contract with Fred to fill and landscape an abandoned quarry on Fred's land. Fred advances Excavate n' Fill 10 percent of its cost. The parties rescind the contract. Excavate n' Fill's refund of the payment is

Accepted Answer

Restitution is the act of returning a payment or something of value back to the party who made it in the event of a rescinded contract. Since Excavate n' Fill did not complete its obligations under the contract, it must return the advance payment made by Fred. It is not a penalty, as this suggests a punishment for breaking the contract. It is also not liquidated damages, as this refers to a pre-determined amount of compensation in the event of a breach of contract. Reformation is not applicable, as this involves adjusting the terms of the contract rather than simply rescinding it.

Question 2

Fact Pattern 15-1
Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery.
-Refer to Fact Pattern 15-1. If Ambrose breaches the contract, Belle Vista's remedy would most likely be

Accepted Answer

If Ambrose breaches the contract, Belle Vista's remedy would most likely be the difference between the land's contract and market prices, as this is a common measure of damages in real estate transactions. Specific performance is typically not awarded in contracts for the sale of land unless the land is unique or damages are inadequate.

Question 3

Renew Turf, Inc., enters into a contract with Sports Park to provide surface material for Sports Park's baseball fields by October 1 for a series to begin October 5. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is

Accepted Answer

A liquidated damages clause is a provision in a contract that specifies a predetermined amount of damages to be paid in the event of a breach of the contract. The purpose of such a clause is to provide certainty and avoid disputes over the amount of damages in the event of a breach. To be enforceable, the amount specified must be a reasonable estimate of the actual damages that would be incurred by the nonbreaching party as a result of the breach. Therefore, option B is correct as it specifies that the amount is a reasonable estimate of the loss on a breach. Option A is incorrect as it is not related to a liquidated damages clause. Option C is incorrect as such clauses are not intended to penalize the breaching party. Option D is also incorrect as the purpose of such clauses is not to provide cash quickly, but rather to provide certainty and avoid disputes.

Question 4

Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract​

Accepted Answer

Rescinding a contract means undoing the agreement as if it never happened. Therefore, both parties must return what they received under the contract. Guido must return the $100, and Hal must return the bike. This restores them to their original positions before the contract was made.

Question 5

Tile & Grout (T&G) contracts to resurface the insides of the pools at WaterWorld Park. T&G knows that without the resurfacing, WaterWorld will have to delay its seasonal opening. T&G does not perform as promised. As consequential damages, WaterWorld can recover

Accepted Answer

Consequential damages are damages that occur as a result of the breach of contract and are not a direct result of the breach. In this case, the loss of profit from the delayed opening is an indirect result of T&G's failure to perform as promised. Therefore, WaterWorld can recover the loss of profit from the delayed opening as consequential damages. The cost of new pools (A) and the difference between T&G's price and the eventual cost of resurfacing (B) would be considered direct damages and may be recoverable if they were included in the contract as liquidated damages or if they were reasonably foreseeable at the time of the contract. However, this information is not given in the scenario, so these choices are not the best answer. Option (D) is incorrect because WaterWorld can recover consequential damages.

Question 6

Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corporation. Juice Smoothies does not pay for the storage. Isaac sells the fruit to Kayo Beverage Company. This sale represents

Accepted Answer

The answer of Isaac holds one ton of perishable fruit...

Question 7

Mother & Daughter Jewelers breaches its lease with Longview Mall and vacates the premises six months before the end of the term. In some states, Longview would have to​

Accepted Answer

In some states, Longview Mall would have the duty to mitigate damages by using reasonable means to find a new tenant to lease the premises, rather than just letting it sit empty and waiting for the lease term to end. Therefore, choice B is the correct answer.

Question 8

Dry Gulch Farms hires Elliot to repair its irrigation system on site on a certain date for $2,500, but Elliot does not show up as agreed. Dry Gulch hires Fernando to do the job for $2,000. Dry Gulch may recover from Elliot

Accepted Answer

The answer of Dry Gulch Farms hires Elliot to repair...

Question 9

Builders, Inc., agrees to construct an office building for Champion Fitness Clubs, Inc. The project proceeds according to plan, but before it is done, Champion tells Builders to quit. Builders may recover

Accepted Answer

Builders, Inc. is entitled to recover the costs needed to complete construction as Champion Fitness Clubs, Inc. breached the contract by telling Builders to quit before the project was completed. The costs needed to complete construction would enable Builders to recover their losses and also compensate them for the work already completed. Options A and B do not take into account the costs incurred by Builders and therefore do not provide full compensation. Option D includes profits, which may not be recoverable as they are dependent on the completion of the project.

Question 10

Cowtown Creamery, Inc., needs a certain part for its pasteurizing equipment to continue its operations and orders one for $3,000 from Dairy Supplies Company. Cowtown tells Dairy Supplies that it must receive the part by Tuesday or it will lose $10,000. Dairy Supplies ships the part late. Cowtown can recover

Accepted Answer

Cowtown can recover the $10,000 it lost due to Dairy Supplies' late shipment, but it cannot recover the full $13,000 as it still received the part and can continue its operations. Therefore, the best choice is B.

Question 11

Porches & Verandas, Inc., agrees to build a screen porch for Quinn, but fails to complete the job. Quinn hires Ramadas, Inc., to finish the project. Quinn may recover from Porches & Verandas

Accepted Answer

Quinn may recover the costs needed to complete construction from Porches & Verandas because they failed to complete the job as agreed. This is the amount that Quinn had to spend to hire another contractor to finish the project due to Porches & Verandas' breach of contract. The other options do not fully compensate Quinn for the damages suffered from the breach.

Question 12

Handcrafts & Hobbies Store agrees to hire Iliana for one year at a salary of $600 per week. When Handcrafts & Hobbies cancels the contract, Iliana spends $150 to obtain a similar job that pays $450 per week for a year. Iliana is entitled to recover

Accepted Answer

Iliana is entitled to recover the amount she would have earned under the original contract, minus any amount she earned or could have earned through reasonable efforts to find a similar job. Here, she spent $150 to obtain a similar job that pays $450 per week, so she is entitled to the difference between that and what she would have earned with Handcrafts & Hobbies ($600 per week), which is $150 per week. Therefore, she is entitled to recover the difference between the wages at the two jobs ($150 per week) plus the $150 she spent to obtain the similar job, for a total of $3300 ($150 x 52 weeks + $150).

Question 13

Fact Pattern 15-1
Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery.
-Refer to Fact Pattern 15-1. If Belle Vista breaches the contract, Ambrose's remedy would most likely be

Accepted Answer

Ambrose's remedy would most likely be specific performance, which is a court order requiring Belle Vista to fulfill its contractual obligation to sell the land to Ambrose. This is because the land is unique and money damages may not adequately compensate Ambrose for the harm caused by the breach. The other options (A, B, and C) are not appropriate remedies in this situation.

Question 14

Meatpackers, Inc., enters into a contract with Nemiah's Ranch for the delivery of a certain number of beef cattle on a set schedule. Nemiah's delays the first delivery for five days, aware that Meatpackers loses a certain percentage of profit each day. An award to Meatpackers of consequential damages would

Accepted Answer

Consequential damages are damages that go beyond the direct harm caused by a breach of contract and arise because of special circumstances of the victim. Here, the delayed delivery caused a loss of profit for Meatpackers that goes beyond the direct harm caused by the breach of contract. Therefore, the award of consequential damages would provide Meatpackers with funds for a foreseeable loss beyond the contract.

Question 15

Equine World enters into a contract with FabuloSales to provide Equine World with a plan to repurpose its marketing strategy. If FabuloSales breaches the contract, Equine World has a duty to

Accepted Answer

If FabuloSales breaches the contract, Equine World has a duty to mitigate or reduce the damages that it might otherwise suffer. This means that Equine World must take reasonable steps to minimize its losses resulting from the breach.

Question 16

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

Accepted Answer

If Rig breaches the contract, Scott has a duty to mitigate his damages, meaning he must take reasonable steps to reduce the harm he will suffer as a result of Rig's breach. He cannot sit back and do nothing, but neither can he punish Rig or rescind the contract on his own.

Question 17

Oxley contracts to buy a pizza oven from Restaurant Supplies Warehouse (RSW) for $2,500, but RSW fails to deliver. Oxley buys the appliance else-where for $3,500. Oxley's measure of damages is

Accepted Answer

Oxley's measure of damages will be the difference between the contract price ($2,500) and the cost of obtaining a substitute ($3,500). Therefore, Oxley's damages are $1,000. Additionally, Oxley may also be entitled to recover any incidental damages that he incurred as a result of RSW's breach (e.g. additional delivery costs to obtain the substitute oven).

Question 18

Copper Conduit, Inc., and Dependable Electric Company sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This is​

Accepted Answer

This is a liquidated damages clause because it specifies a predetermined amount of damages to be paid in the event of a material breach.

Question 19

Metro Facilities, Inc., contracts to sell a parking lot to Nouveau Property Company. The contract provides that if Metro does not close the deal by September 15, it must pay Nouveau one-half of the contract price. This provision is not enforceable because it is

Accepted Answer

The provision in question is a penalty clause because it seeks to punish Metro for failing to close the deal on time by requiring it to pay Nouveau an excessive amount that is not related to Nouveau's actual damages or costs. Penalty clauses are generally unenforceable under contract law.

Question 20

Bread & Bagels Bakery (B&B) enters into a contract with Cineplex for discounted tickets for B&B's employees. Cineplex breaches the contract and B&B enters into a contract with DigiMovies for the same service at a lower price. B&B might be awarded nominal damages to

Accepted Answer

Nominal damages are awarded when a plaintiff has suffered no or minimal loss, but the defendant is still found to be in breach of contract or committed a wrongful act. In this case, B&B has found a new and cheaper service provider for their employees' discounted tickets, so they have not suffered any loss beyond the contract. However, they can still seek nominal damages to establish, as a matter of principle, that Cineplex acted wrongfully in breaching the initial contract.

Quiz 15: Breach and Remedies