Question 1

Home Built LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases-in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is​
A) ​breached.
B) ​discharged.
C) ​rescinded.
D) ​suspended.

Accepted Answer

Home Built LLC's obligation to perform is breached because they have unilaterally decided not to fulfill their contractual obligations due to a change in market conditions, which does not legally excuse them from performing.

Question 2

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is​
A) ​a mutual agreement to rescind.
B) ​an accord and satisfaction.
C) ​a novation.
D) ​a settlement agreement.

Accepted Answer

This is a novation, as Gliding Light is being replaced by High Riders Inc. and assuming all of its rights and duties under the contract. This requires the consent of all parties involved, and results in the discharge of Gliding Light from their obligations under the contract.

Question 3

Delany & Sons, Inc., owes Evermore Bank $50,000. Delany enters into a contract with Floyd under which Delany promises to manage and oversee Floyd's Seaside Marina. Under the contract, Floyd promises to pay Evermore the amount that will be due Delany until his debt to Evermore is paid. Delany performs as promised, but Floyd does not pay the bank. Can Evermore succeed in a suit against Floyd? Why or why not?​

Accepted Answer

The answer of Delany & Sons, Inc., owes Evermore Bank...

Question 4

Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this contract requires​
A) ​a mutual agreement to rescind.
B) ​an accord and satisfaction.
C) ​a novation.
D) ​a settlement agreement.

Accepted Answer

Rescission of a contract before any party has performed requires a mutual agreement to rescind. This means that both parties must agree to cancel the contract.

Question 5

Floors n' More, Inc., hires Gordon to renovate Floors n' Mores showroom. Gordon submits plans that Floors n' More approves. Gordon completes the major reconstruction, paints the interior, and buys the fixtures and furnishings. Floors n' More rejects some of these items because they do not match the plans, and subsequently refuses to allow Gordon to finish the work or to collect payment. Could Gordon sue successfully for payment for the entire contract?​

Accepted Answer

The answer of Floors n' More, Inc., hires Gordon to...

Question 6

Quality Scrap Company contracts to provide ten tons of steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage occurs suddenly, making it impossible for Quality to fulfill the contract for less than $5,000 per ton. The firm's best defense against performing the contract is that​
A) ​performance of the contract is commercially impracticable.
B) ​procuring the steel would force the company into bankruptcy.
C) ​the law has rendered performance of the contract illegal.
D) ​the specific subject matter of the contract has been destroyed.

Accepted Answer

The best defense in this situation would be that performance of the contract is commercially impracticable due to the unforeseen shortage causing a significant increase in cost. This defense falls under the doctrine of commercial impracticability or frustration of purpose, which excuses a party's performance if an unforeseen event has rendered performance commercially impracticable or frustrated the purpose of the contract. The other options (B, C, and D) do not apply to this situation.

Question 7

Carol and Bob enter into a contract for Bob to perform waste management services for Carol's commercial properties. Later, Bob alters a material term-increases the price-without Carol's knowledge or consent. She​
A) ​can alter a material term, such as the payment date, without Bob's consent.
B) ​can treat the contract as discharged.
C) ​must adapt her performance accordingly.
D) ​must determine whether Bob's alteration constitutes substantial performance.

Accepted Answer

When Bob alters a material term of the contract without Carol's knowledge or consent, she has the option to treat the contract as discharged. This means that she can consider the contract void and look for a new waste management services provider. This is because Bob has breached the original contract by changing a significant term without her agreement. Carol is not obligated to adapt her performance to the new terms, nor can she unilaterally alter a material term without Bob's consent. Additionally, determining whether the alteration constitutes substantial performance is not relevant in this case because the contract has already been breached.

Question 8

Construction LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before the work begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation​
A) ​Construction is in breach of contract.
B) ​the local zoning authority is in breach of contract.
C) ​the contract is discharged.
D) ​Discount must compensate Construction for its lost profit.

Accepted Answer

The change in the zoning law makes the contract impossible to perform and therefore discharged. Neither Construction nor Discount Retail, Inc. are in breach of contract as the change in law is beyond their control. Compensation for lost profit would only be applicable if one party breaches the contract.

Question 9

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre with her payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation​
A) ​Dierdre's bank is liable to Contractors Service.
B) ​Dierdre is in breach of contract.
C) ​the contract is discharged.
D) ​the contract is suspended.

Accepted Answer

Dierdre is in breach of contract as she did not make the payment on the agreed-upon date. The fact that her bank was closed is not a valid excuse for non-payment unless it was an unforeseeable event beyond her control.

Question 10

Jason and Kelly enter into a contract for Jason to renovate Kelly's house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit​
A) ​must be filed within ten to twenty years, depending on state law.
B) ​can no longer be brought.
C) ​can be filed within four years after Kelly decides to sue.
D) ​must be filed between four and five years after Kelly decides to sue.

Accepted Answer

The applicable limitations period has already passed, which means that the time limit for filing the suit has expired. Therefore, Kelly can no longer bring a suit against Jason for breach.

Question 11

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on​
A) ​neither the accord nor the original obligation.
B) ​the accord only.
C) ​the accord or the original obligation.
D) ​the original obligation only.

Accepted Answer

The accord is a valid contract between Renee and Scott, but Renee failed to perform her promise of paying $21,000 within thirty days. Therefore, Scott can sue Renee for either the original obligation of $25,000 or the accord of $21,000, depending on which one he chooses to enforce.

Question 12

Planners & Builders, Inc., enters into a contract with O'Reilly to refurbish a garage on his property as an auto repair shop. O'Reilly's neighbor Nora challenges the project as a violation of the local zoning laws. A court orders a halt to the project. O'Reilly's contract with Planners & Builders is​
A) ​breached.
B) ​discharged.
C) ​not affected.
D) ​suspended.

Accepted Answer

The contract is discharged because a legal intervention (court order based on zoning laws) has made it impossible to fulfill the contract's terms, thus releasing the parties from their obligations.

Quiz 11: Third Party Rights and Discharge

Home Built LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases-in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is​

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is​

Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this contract requires​

Quality Scrap Company contracts to provide ten tons of steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage occurs suddenly, making it impossible for Quality to fulfill the contract for less than $5,000 per ton. The firm's best defense against performing the contract is that​

Carol and Bob enter into a contract for Bob to perform waste management services for Carol's commercial properties. Later, Bob alters a material term-increases the price-without Carol's knowledge or consent. She​

Construction LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before the work begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation​

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre with her payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation​

Jason and Kelly enter into a contract for Jason to renovate Kelly's house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit​

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on​

Home Built LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases-in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is

Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this contract requires

Quality Scrap Company contracts to provide ten tons of steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage occurs suddenly, making it impossible for Quality to fulfill the contract for less than $5,000 per ton. The firm's best defense against performing the contract is that

Carol and Bob enter into a contract for Bob to perform waste management services for Carol's commercial properties. Later, Bob alters a material term-increases the price-without Carol's knowledge or consent. She

Construction LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before the work begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre with her payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation

Jason and Kelly enter into a contract for Jason to renovate Kelly's house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on