Question 1

Fact Pattern 18-1
Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job.
-Refer to Fact Pattern 18-1. ​Natalie's performance most likely
A) ​discharges Medical Accounts from the contract.
B) ​has no effect on Medical Accounts' performance.
C) ​undercuts Medical Accounts' duties under the contract.
D) ​suspends Medical Accounts' duty to perform.

Accepted Answer

Natalie's failure to adequately perform her job and frequent unexplained absences constitute a breach of her employment contract. Medical Accounts is likely entitled to discharge Natalie and terminate the contract due to her failure to fulfill her duties.

Question 2

Ann offers to buy Beth's land only if an appraiser estimates that its current value is more than a certain price. Later, the appraiser deems the worth of the land to be less than Beth's price. Ann and Beth's obligations
A) ​must still be performed.
B) ​must now be renegotiated.
C) ​are on "hold."
D) ​are discharged.

Accepted Answer

The obligations are discharged because the condition (the land being appraised for more than a certain price) was not met, thus nullifying the agreement.

Question 3

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre's Soup Spoons Bistro with Dierdre's 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 for failing to make payment on the due date. The fact that her bank was closed is not a valid excuse unless it was due to some unexpected event or natural disaster. The contract is not discharged or suspended unless the parties agree to modify it or terminate it. Dierdre's bank is not liable unless they committed some form of negligence or misconduct that caused the payment issue.

Question 4

Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be
A) ​absolute.
B) ​complete.
C) ​material.
D) ​substantial.

Accepted Answer

If BRI completes most of the work promised in the contract, its performance will be considered substantial. This means that while there may be some minor details left unfinished, the overall scope of the work has been completed to a significant degree.

Question 5

​Amy and Bob enter into a contract for Bob to perform waste management services for Amy's commercial properties. Later, Bob alters a material term-increases the price-without Amy's knowledge or consent. Amy
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 his performance accordingly.
D) ​must determine whether Bob's alteration constitutes substantial performance.

Accepted Answer

Bob's alteration of a material term without Amy's knowledge or consent constitutes a breach of contract. As a result, Amy has the option to treat the contract as discharged and seek damages for any losses she incurs as a result of Bob's breach.

Question 6

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, which occurs when a new party takes over the rights and obligations of one of the parties to a contract, thereby releasing that original party from further liability. It differs from a mutual agreement to rescind, which cancels the contract altogether, and from an accord and satisfaction, which is a settlement agreement in which one party agrees to accept something other than what was originally due to them in satisfaction of the contract.

Question 7

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

Scott can sue Renee on both the accord and the original obligation as the accord created a new agreement to pay him a reduced amount within a shorter period of time, but it did not replace the original obligation entirely. Therefore, Scott can choose to sue on either the original obligation or the accord depending on which one would be more beneficial to him in terms of time and cost.

Question 8

Barbara and Johann are parties to a contract. They agree on a novation. The novation requires
A) ​the existence of a previous, valid obligation.
B) ​consideration greater than $5,000.
C) ​performance of the original contract by all of the parties.
D) ​an accord and satisfaction.

Accepted Answer

Novation is the substitution of a new contract for an existing one, with the agreement of all parties involved. Therefore, it requires the existence of a previous, valid obligation that will be discharged or canceled with the formation of the new contract. The other options are not necessarily required for a novation to be valid.

Question 9

Oren and Pat are parties to a contract for the management of Oren's residential rental properties. A dispute arises between them over the obligations due under the contract. They negotiate a compromise and form a different agreement to substitute for the original one. This settlement agreement does not require
A) ​the existence of a previous, valid obligation.
B) ​the agreement by the parties to the new contract.
C) ​a third party.
D) ​a new, valid contract.

Accepted Answer

A settlement agreement does not require a third party; it involves only the original parties agreeing to a new contract to replace the previous one.

Question 10

Lew's Landscaping Service substantially performs its contract with Metro Office Park. Metro's duty to perform
A) ​remains absolute.
B) ​is discharged.
C) ​is excused.
D) ​is suspended.

Accepted Answer

Lew's Landscaping Service substantially performing its contract does not discharge Metro Office Park's duty to perform. Metro's duty remains absolute unless there is an agreement between the parties that excuses or suspends the duty.

Question 11

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.

Question 12

Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez
A) ​must pay Josh the contract price.
B) ​must pay Josh half of the contract price as a compromise.
C) ​must pay Josh only the cost of his materials.
D) ​does not have to pay Josh.

Accepted Answer

The answer of Inez hires Josh to paint her portrait...

Question 13

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 limitations period has already passed, meaning that the time within which Kelly was supposed to bring a suit against Jason has elapsed. Thus, Kelly can no longer bring a suit against Jason for breach of contract.

Question 14

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 is the cancellation or revocation of a contract by the mutual agreement of the parties involved. Therefore, A) a mutual agreement to rescind is the correct choice for rescinding this contract. B, C, and D are not appropriate for this situation as they involve different legal concepts.

Question 15

Fact Pattern 18-1
Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job.
-Refer to Fact Pattern 18-1. Natalie's performance is most likely​
A) ​a material breach.
B) ​a minor breach.
C) ​a reasonable breach.
D) ​no breach.

Accepted Answer

Natalie's repeated absences and failure to perform her job adequately would likely be considered a material breach of her contract. A material breach is a breach that is serious enough to go to the heart of the contract and deprive the non-breaching party of the benefit they bargained for. In this case, Medical Accounts Collection hired Natalie to perform a specific job and her actions have prevented them from receiving the benefits of that bargain.

Question 16

Khan offers to buy Lonnie's 1967 Mustang only if an appraiser estimates that it can be restored for less than a certain price. This requirement is
A) ​an implied condition.
B) ​a concurrent condition.
C) ​a condition subsequent.
D) ​a condition precedent.

Accepted Answer

This requirement is a condition precedent because it is a condition that must be met before the contract can be formed. Khan's offer to buy Lonnie's Mustang is contingent upon the appraisal meeting a certain condition, and until that condition is met, there is no binding contract between the parties.

Question 17

Home Construction 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 Construction LLC's obligation to perform is breached because they notified Irene that they will not fulfill the contract due to increased market prices, which does not discharge their obligation.

Question 18

Ed's Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to
A) ​damages.
B) ​nothing more.
C) ​to be excused from performance.
D) ​suspend performance.

Accepted Answer

When a party substantially performs their contract, the other party is entitled to damages for the part of the contract that was not fully performed. This is to compensate for the slight deviation from the agreed terms.

Question 19

Juan and Isidro enter into a contract to buy, restore and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is
A) ​specific performance.
B) ​mutual rescission.
C) ​accord and satisfaction.
D) ​novation.

Accepted Answer

Mutual rescission occurs when both parties agree to cancel a contract before any performance has taken place. This is the case in the scenario given, where Juan and Isidro agree to cancel their deal before beginning to perform. Specific performance refers to a court order requiring a party to perform a specific action under the terms of a contract. Accord and satisfaction refers to an agreement between parties to settle a debt for less than the full amount owed. Novation refers to the substitution of a new contract or party for an existing one. None of these apply to the scenario described.

Question 20

Leah and Mason are parties to a contract for the sale of Mason's day care facility to Leah. Before the deal closes, they agree to substitute Nell for Leah as a party to the deal. This novation does not require
A) ​the existence of a previous, valid obligation.
B) ​the agreement by all of the parties to the new contract.
C) ​performance of the original contract by all of the parties.
D) ​a new, valid contract.

Accepted Answer

A novation requires a previous valid obligation, agreement by all parties, and a new valid contract, but it does not require performance of the original contract by all parties.

Quiz 18: Performance and Discharge

Ann offers to buy Beth's land only if an appraiser estimates that its current value is more than a certain price. Later, the appraiser deems the worth of the land to be less than Beth's price. Ann and Beth's obligations

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre's Soup Spoons Bistro with Dierdre's 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

Building Restoration, Inc. (BRI) , enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be

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

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

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

Barbara and Johann are parties to a contract. They agree on a novation. The novation requires

Lew's Landscaping Service substantially performs its contract with Metro Office Park. Metro's duty to perform

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

Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez

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

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

Khan offers to buy Lonnie's 1967 Mustang only if an appraiser estimates that it can be restored for less than a certain price. This requirement is

Home Construction 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

Ed's Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to

Juan and Isidro enter into a contract to buy, restore and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is

Leah and Mason are parties to a contract for the sale of Mason's day care facility to Leah. Before the deal closes, they agree to substitute Nell for Leah as a party to the deal. This novation does not require