Question 1

Most contracts are discharged by mutual agreement of the parties.

Accepted Answer

Most contracts are discharged by performance, meaning that the parties fulfill their respective obligations as outlined in the contract.

Question 2

Abdulla hired Granite Construction to build an addition onto his home. Granite Construction dug the foundation but then abandoned the project. Granite Construction is entitled to receive the full contract price minus the value of the defects.

Accepted Answer

If Granite Construction abandoned the project, they are in breach of contract and would not be entitled to receive the full contract price. Furthermore, if there are defects in the work that was completed, the cost to correct those defects would likely be deducted from any payment owed to Granite Construction.

Question 3

In negotiating the purchase of a vehicle, the sales representative told Karla, "I guarantee that you will be personally satisfied with this car." The guarantee was written on the contract when Karla purchased the car. If a controversy arises over Karla's satisfaction, the court will apply a subjective standard, which means Karla's judgment must be reasonable.

Accepted Answer

The subjective standard in this context means the court will consider Karla's personal satisfaction, not whether her judgment is considered reasonable by an objective standard. The focus is on whether Karla herself is satisfied with the car, not on what a reasonable person would think.

Question 4

Carswell, a contractor, enters into a contract with Helen, a homeowner, to remodel her bathroom. The contract provides a specific completion date. The contract provides that if Carswell does not have the job finished by the date, Helen may deduct $200 per day from the contract price until the job is finished. This is an example of liquidated damages.

Accepted Answer

The provision in the contract provides a specific dollar amount that can be deducted per day as a remedy for a breach of contract, which is a characteristic of liquidated damages.

Question 5

Generally, a "time is of the essence" clause will not be recognized by the courts because these types of clauses are seen as a violation of public policy.

Accepted Answer

A "time is of the essence" clause is generally recognized and enforced by courts, as it specifies that timely performance is an essential element of the contract, and failure to perform by the specified time can be considered a breach of contract. This clause does not violate public policy but rather ensures that parties to a contract understand the importance of deadlines within their agreement.

Question 6

Liquidated damages are awarded to parties who have experienced an injury to their legal rights but have no actual loss.

Accepted Answer

Liquidated damages are awarded when there is a pre-determined amount agreed upon in a contract for damages that may result from a breach of the contract. These damages are meant to compensate the non-breaching party for actual losses incurred as a result of the breach, not for injuries to their legal rights with no actual loss.

Question 7

Ramon purchased 5,000 pounds of coffee from Quick Jump Coffee. The coffee was to be delivered on September 1. Since the contract included a date for performance, time is of the essence and the delivery date is strictly enforceable.

Accepted Answer

The answer of Ramon purchased 5,000 pounds of coffee from...

Question 8

Assume that Jessie and Lester have formed a contract whereby Jessie agrees to deliver 10,000 dozen "Grade A Large Eggs" to be shipped in paper cartons. A shortage of paper makes paper cartons much more expensive, so Jessie uses styrofoam cartons and ships the eggs. Lester is entitled to cancel the contract based on a material breach of the contract.

Accepted Answer

The answer of Assume that Jessie and Lester have formed...

Question 9

Ernest operates an ice cream stand during the months of May, June, July, and August. Ernest's ice cream machine is broken and needs a new part to run. He contracts to have the part shipped to him by special carrier. Ernest emphasizes that the part needs to be delivered by April 25 and the carrier agrees, knowing that Ernest intends to open his stand May 1. If the shipper fails to deliver the part on April 25, Ernest will be able to recover consequential damages caused by the delay.

Accepted Answer

Since the carrier was aware of the specific need for the part to be delivered by April 25 to ensure the ice cream stand could open on time, and agreed to this timeline, Ernest would be entitled to recover consequential damages for the losses incurred due to the delay in opening his stand.

Question 10

A wholesaler of coffee notifies a retailer that it cannot fulfill its contractual obligation to deliver 1,000 pounds of coffee at the agreed upon price of $2.00 per pound next month because of recent price increases in coffee. The retailer may treat the wholesaler as having breached the contract and sue for damages even though the wholesaler's performance is not due until next month.

Accepted Answer

The wholesaler has already notified the retailer that it cannot fulfill its contractual obligation, which constitutes a breach of contract. The retailer can sue for damages even though the performance is not due until next month.

Question 11

Commercial impracticability means some event has occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party.

Accepted Answer

This is the correct definition of commercial impracticability.

Question 12

Tess, a tenant, moves from her apartment in breach of the lease agreement. The landlord, Lenny, may not attempt to rent the apartment until the date of the lease expiration, and so has no recourse to minimize damages.

Accepted Answer

The landlord can attempt to rent the apartment before the expiration of the lease, but they have a duty to mitigate damages by making reasonable efforts to find a new tenant.

Question 13

Dr. Gonzalez ordered specialized surgical equipment from Physician's Supply Co., but the company informed Dr. Gonzalez that it would not be able to meet his order by the agreed date. Even if Dr. Gonzalez does nothing to secure equipment from another source, he will be able to recover damages since the contract was breached by Physician's Supply, not Gonzalez.

Accepted Answer

The answer of Dr. Gonzalez ordered specialized surgical equipment from...

Question 14

Expectation interest can best be described as money spent in reliance upon the agreement.

Accepted Answer

Expectation interest is best described as the benefit that the injured party would have received had the contract been fully performed, not merely money spent in reliance on the agreement.

Question 15

A court may, at times, discharge a party who has not performed.

Accepted Answer

This is true. A court may discharge a party who has not performed their obligations under a contract, releasing the other party from further obligation. This is typically done when it is clear that the non-performing party has no intention or ability to fulfill their obligations.

Question 16

Injunctions are frequently used by courts to force employees to complete their contractual obligations with their employers.

Accepted Answer

Injunctions are typically used to prevent actions, such as stopping employees from violating non-compete clauses, rather than to force them to perform their contractual duties.

Question 17

The legal right to sue for a breach of contract is subject to a statute of limitations.

Accepted Answer

The statute of limitations sets a time limit within which a party to a contract must file a legal claim for breach of contract. Once the statute of limitations has expired, the legal right to sue for breach of contract is no longer available.

Question 18

Monumental, Inc. contracts with Champion Builders to erect a three-story office building on a parcel of land it has purchased. Before construction begins, the local zoning board changes the zoning of the parcel and those adjoining it to residential use only. Monumental's contract with Champion is discharged.

Accepted Answer

The contract between Monumental, Inc. and Champion Builders is discharged due to frustration of purpose, as the unforeseen zoning change to residential use only prevents the intended commercial construction, making the contract's original purpose impossible to fulfill.

Question 19

Alice signs a contract with Bob to buy Bob's house for $150,000, with the clause, "if I am able to obtain a mortgage loan for $125,000, at no more than 7% interest, payable over 15 years." Assume that Alice tries but is unable to obtain the described loan, and therefore refuses to proceed with the purchase. Alice is in breach of the contract.

Accepted Answer

The clause in the contract stating "if I am able to obtain a mortgage loan for $125,000, at no more than 7% interest, payable over 15 years" is a condition precedent. This means that Alice's obligation to buy the house is only triggered if she is able to obtain the specified loan. If Alice is unable to obtain the loan, she is not in breach of the contract because the condition precedent was not met.

Question 20

To win expectation damages, the injured party must prove the breach of contract caused damages that can be quantified with reasonable certainty.

Accepted Answer

This is the general requirement for recovering expectation damages in a contract case. The injured party must show that the breach caused damages that can be calculated with reasonable certainty, such as lost profits or costs incurred due to the breach.

Quiz 12: Performance, Discharge, and Remedies