Question 1

Beachside Pools, Inc., agrees to build a swimming pool for Candy, but fails to build it according to the contract specifications. Candy hires Do-We Fix-It Company to finish the project. Candy may recover from Beachside
A) the contract price less costs of materials and labor.
B) the contract price.
C) the costs needed to complete construction.
D) profits plus the costs incurred up to the time of the breach.

Accepted Answer

Candy may recover the costs needed to complete the construction from Beachside Pools, Inc. This is because Beachside failed to build the pool according to the contract specifications, and Candy had to hire Do-We Fix-It Company to finish the project. Candy should not be responsible for any additional costs beyond what was necessary to complete the project as originally agreed upon in the contract.

Question 2

Fashion Retail Center enters into a contract with Great Promotions, Inc., to provide Fashion with a plan to retool its merchandising strategy. If Great Promotions breaches the contract, Fashion has a duty to
A) reduce the damages that Fashion might otherwise suffer.
B) reduce the loss that Great Promotions might otherwise suffer.
C) punish Great Promotions and deter others from similar acts.
D) take no action.

Accepted Answer

If Great Promotions breaches the contract, Fashion has a duty to mitigate (reduce) the damages that would be suffered. This means that Fashion must take reasonable steps to minimize the losses it suffers as a result of the breach. Simply taking no action or punishing the breaching party would not be a practical or effective solution.

Question 3

Lava Excavators, Inc., needs a drill to continue its operations and orders one for $3,000 from Mining Supplies Company. Lava tells Mining that it must receive the drill by Tuesday or it will lose $10,000. Mining ships the drill late. Lava can recover
A) $13,000.
B) $10,000.
C) $3,000.
D) $0.

Accepted Answer

Lava made it clear to Mining that timely delivery was essential for them to continue operations and that failure to receive the drill by Tuesday would result in a $10,000 loss. Mining failed to meet this deadline, which caused Lava to suffer a loss. Therefore, Lava can recover the amount it lost as a result of Mining's breach, which is $10,000. However, they cannot recover the full cost of the drill because they still received the physical item. Therefore, the correct answer is B.

Question 4

Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corpo?ration. Fresh Food does not pay for the storage. Earl sells the fruit to Green Grocers, Inc. This sale represents
A) a breach of contract.
B) a mitigation of damages.
C) rescission and restitution.
D) specific performance.

Accepted Answer

Earl selling the fruit to Green Grocers, Inc. can be considered as a mitigation of damages since Fresh Food Corporation did not pay for storage and Earl can recover some of the costs by selling the fruit. It is not a breach of contract since there is no indication that there was a contract between Earl and Fresh Food Corporation. It is not rescission and restitution or specific performance since there is no indication of a contract being voided or needing to be fulfilled.

Question 5

Development Associates (DA) agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through with the deal on the agreed date, when the market price of the land is $17,000. DA may recover
A) $17,000.
B) $15,000.
C) $2,000.
D) $0.

Accepted Answer

Since Eastside failed to go through with the deal, DA can recover the difference between the contract price and the market price of the land, which is $2,000. They are not entitled to the full market price of the land or the contract price, but only the damages resulting from the breach of the contract.

Question 6

Kris contracts to work exclusively for Little Manufacturing Company during May for $5,000. On April 30, Little cancels the contract. Kris finds another job dur?ing May but earns only $3,000. Kris files a suit against Little. As compen?satory damages, Kris can recover
A) $3,000.
B) $2,000.
C) $1,000.
D) $0.

Accepted Answer

Kris can recover the difference between what was promised ($5,000) and what was actually earned from the other job ($3,000), which is $2,000.

Question 7

Hybrid Corporation enters into a contract with Insure Service, Inc. (ISI), to obtain health insurance for Hybrid employees. If ISI breaches the contract and Hybrid is awarded compensatory damages, the purpose would be to
A) establish, as a matter of principle, that ISI acted wrongfully.
B) provide Hybrid with funds for a foreseeable loss beyond the contract.
C) provide Hybrid with funds for its loss of the bargain.
D) punish ISI and set an example to deter others from similar acts.

Accepted Answer

Compensatory damages aim to cover the loss of the bargain, putting the injured party in the position they would have been in if the contract had been fulfilled.

Question 8

Fact Pattern 18-B1 
A enters into a contract to buy 132 acres from B to subdivide and sell in quarter-acre lots for C Acres, a residential development.
-Refer to Fact Pattern 18-B1. If B breaches the contract, A's remedy would most likely be
A) a certain ratio of the amount that A has in liquid funds.
B) a percentage of A's unrealized profit.
C) the difference between the land's contract and market prices.
D) specific performance.

Accepted Answer

A's main purpose in entering into the contract with B was to use the land for a specific purpose, i.e. to subdivide and sell in quarter-acre lots. Therefore, A's most likely remedy for B's breach of contract would be specific performance, which would require B to deliver the 132 acres as promised in the contract. Other remedies such as monetary damages would not be sufficient as they would not allow A to achieve their original purpose for purchasing the land.

Question 9

Bret contracts to work for City Construction Corporation (CCC) dur?ing July for $4,500. On June 30, CCC cancels the contract. Bret declines a similar job with Downtown Builders, Inc., which would have paid $4,000. Bret files a suit against CCC. As compensatory damages, Bret can recover
A) $4,500.
B) $4,000.
C) $500.
D) $0.

Accepted Answer

Bret can only recover the difference between what he would have earned under the CCC contract and what he actually earned with alternative employment or what he could have earned with reasonable effort, in this case $500 ($4,500 - $4,000) from CCC. He cannot recover the full $4,500 because he had the opportunity to mitigate his damages by accepting the job with Downtown Builders, Inc.

Question 10

Even-Flo Hydraulics enters into a contract to repair valves and fittings in Fiesta Company's plant. If Even-Flo breaches the contract, Fiesta can
A) do nothing but make a deal with .a different service provider.
B) do nothing but temporarily suspend operations and wait.
C) file a criminal complaint against Even-Flo.
D) sue Even-Flo for damages.

Accepted Answer

If Even-Flo breaches the contract, the appropriate action for Fiesta Company would be to sue Even-Flo for damages. This is the common legal remedy for a breach of contract.

Question 11

Carol pays Dick $10,000 to design an ad campaign for Carol's Coffee Stand chain. The next day, Dick tells Carol that he has accepted a job in New York and cannot design her campaign. Carol files a suit against Dick. As compensatory damages, Carol can recover
A) $100,000.
B) $10,000.
C) $1,000.
D) $0.

Accepted Answer

Carol can recover the $10,000 she paid to Dick as compensatory damages for breach of contract. Carol cannot recover more than the amount of money she actually lost as a result of the breach. Since there is no evidence that Carol suffered any additional damages beyond the $10,000 payment, she cannot recover more than that amount. Therefore, option B is the best choice.

Question 12

A, Inc., enters into a contract with B Service to fix A's precisely engineered molding equipment. If B delays the repair for five days, knowing that A will lose a certain percentage of profit for the delay, A might be awarded consequential damages to
A) establish, as a matter of principle, that B acted wrongfully.
B) provide A with funds for a foreseeable loss beyond the contract.
C) provide A with funds for its loss of the bargain.
D) punish B and set an example to deter others from similar acts.

Accepted Answer

Consequential damages are intended to compensate the non-breaching party for a loss beyond the contract, which was reasonably foreseeable at the time of the contract. In this case, the delay caused A to lose a certain percentage of profit, which was a foreseeable consequence of B's breach of contract. Therefore, A may be awarded consequential damages to cover this loss of profit. Choice A is incorrect because consequential damages are not meant to establish wrongdoing, but rather to compensate for losses. Choice C is incorrect because the loss of the bargain refers to lost economic value from paying too much for a product or service, which is not applicable in this scenario. Choice D is incorrect because the purpose of consequential damages is to compensate for losses, not to punish the breaching party.

Question 13

Handy Hardware Store agrees to hire Ilsa for one year at a salary of $500 per week. When Handy cancels the contract, Ilsa spends $100 to obtain a similar job that pays $450 per week for a year. Ilsa is entitled to recover
A) the amount of the wages that Handy promised only.
B) the difference between the wages at the two jobs only.
C) the difference between the wages at the two jobs plus $100.
D) $100 only.

Accepted Answer

Ilsa is entitled to recover the damages suffered due to the breach of contract by Handy. This includes the difference between the wages at the two jobs which is $50 per week ($500 - $450) for 52 weeks, i.e., $2,600. In addition, Ilsa also spent $100 to obtain a similar job, which is a consequential loss caused by Handy's breach. Therefore, she is entitled to recover the difference in wages plus the $100 spent, which is a total of $2,700 (i.e., $2,600 + $100).

Question 14

Fact Pattern 18-B1 
A enters into a contract to buy 132 acres from B to subdivide and sell in quarter-acre lots for C Acres, a residential development.
-Refer to Fact Pattern 18-B1. If A breaches the contract, B's remedy would most likely be
A) a certain ratio of the amount that A has in liquid funds.
B) a percentage of A's unrealized profit.
C) the difference between the land's contract and market prices.
D) specific performance.

Accepted Answer

If A breaches the contract, B's remedy would most likely be the difference between the land's contract and market prices, as this compensates B for the loss of the bargain due to A's breach.

Question 15

A enters into a contract with B Fitness Club for discounted memberships for A's employees. If B breaches the contract and A enters into a contract with D Sports for the same service at a lower price, A might be awarded nominal damages to
A) establish, as a matter of principle, that B acted wrongfully.
B) provide A with funds for a foreseeable loss beyond the contract.
C) provide A with funds for its loss of the bargain.
D) punish B and set an example to deter others from similar acts.

Accepted Answer

Nominal damages are awarded to recognize that a breach occurred, even if no actual financial loss resulted from the breach.

Question 16

Pam contracts to buy a Quotient-brand computer set-up from Regal Systems for $5,000, but Regal fails to deliver. Pam buys the computer else?where for $6,500. Pam's measure of damages is
A) $1,500 only.
B) $1,500 plus incidental damages.
C) incidental damages only.
D) $0.

Accepted Answer

Pam's measure of damages is the difference between the contract price and the cost of obtaining a similar computer elsewhere, which is $1,500. In addition to this, she may be entitled to incidental damages such as the cost of arranging for the purchase of the computer elsewhere. Therefore, B is the correct choice.

Question 17

Rite Contractors, Inc., agrees to build a motel for Sleep Inn Corporation. The project proceeds according to plan, but before it is done, Sleep tells Rite to quit. Rite may recover
A) the contract price less costs of materials and labor.
B) the contract price.
C) the costs needed to complete construction.
D) profits plus the costs incurred up to the time of the breach.

Accepted Answer

The answer of Rite Contractors, Inc., agrees to build a...

Question 18

Office Accounting, Inc., hires Perry to repair a computer on site for $400, but Perry does not show up as agreed. Office Accounting hires Raul to do the job for $350. Office Accounting may recover from Perry
A) compensatory damages.
B) consequential damages.
C) nominal damages.
D) punitive damages.

Accepted Answer

The answer of Office Accounting, Inc., hires Perry to repair...

Question 19

Mona contracts to repair a computer for NuData, Inc. (NDI). Mona knows that without the computer, NDI will lose a sale. Mona does not perform as promised. NDI files a suit against Mona. As consequential damages, NDI can recover
A) the cost of a new computer.
B) the difference between Mona's price and the actual cost of repair.
C) the loss of profit from the lost sale.
D) nothing.

Accepted Answer

Consequential damages are losses that do not flow directly from the breach itself, but arise from the special circumstances of the aggrieved party. Here, NDI lost a sale because of Mona's failure to repair the computer, which is a special circumstance that qualifies as consequential damages. Therefore, NDI can recover the loss of profit from the lost sale. The cost of a new computer or the difference between Mona's price and the actual cost of repair are not consequential damages in this scenario. Mona's failure to perform as promised creates a liability, so NDI is entitled to recover damages. Option D is incorrect.

Question 20

Pure Oil Company enters into a contract with QuikBilt, Inc., to construct an oil pipeline to withstand specific conditions. If QuikBilt fails to meet this standard, which is construed as a breach of contract and a breach of a duty of care, Pure might be awarded punitive damages to
A) establish, as a matter of principle, that QuikBilt acted wrongfully.
B) provide Pure with funds for a foreseeable loss beyond the contract.
C) provide Pure with funds for its loss of the bargain.
D) punish QuikBilt and deter others from similar acts.

Accepted Answer

Punitive damages are awarded to punish the wrongdoer and deter others from similar acts. They go beyond compensating for the actual loss and are meant to serve as a deterrent. In this case, if QuikBilt failed to meet the agreed standard, it would be considered a breach of contract and a breach of a duty of care. As a result, punitive damages may be awarded to Pure to punish QuikBilt and deter others from similar behavior.

Quiz 18: Breach of Contract and Remedies

Beachside Pools, Inc., agrees to build a swimming pool for Candy, but fails to build it according to the contract specifications. Candy hires Do-We Fix-It Company to finish the project. Candy may recover from Beachside

Fashion Retail Center enters into a contract with Great Promotions, Inc., to provide Fashion with a plan to retool its merchandising strategy. If Great Promotions breaches the contract, Fashion has a duty to

Lava Excavators, Inc., needs a drill to continue its operations and orders one for $3,000 from Mining Supplies Company. Lava tells Mining that it must receive the drill by Tuesday or it will lose $10,000. Mining ships the drill late. Lava can recover

Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corpo?ration. Fresh Food does not pay for the storage. Earl sells the fruit to Green Grocers, Inc. This sale represents

Development Associates (DA) agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through with the deal on the agreed date, when the market price of the land is $17,000. DA may recover

Kris contracts to work exclusively for Little Manufacturing Company during May for $5,000. On April 30, Little cancels the contract. Kris finds another job dur?ing May but earns only $3,000. Kris files a suit against Little. As compen?satory damages, Kris can recover

Hybrid Corporation enters into a contract with Insure Service, Inc. (ISI) , to obtain health insurance for Hybrid employees. If ISI breaches the contract and Hybrid is awarded compensatory damages, the purpose would be to

Fact Pattern 18-B1 A enters into a contract to buy 132 acres from B to subdivide and sell in quarter-acre lots for C Acres, a residential development. -Refer to Fact Pattern 18-B1. If B breaches the contract, A's remedy would most likely be

Bret contracts to work for City Construction Corporation (CCC) dur?ing July for $4,500. On June 30, CCC cancels the contract. Bret declines a similar job with Downtown Builders, Inc., which would have paid $4,000. Bret files a suit against CCC. As compensatory damages, Bret can recover

Even-Flo Hydraulics enters into a contract to repair valves and fittings in Fiesta Company's plant. If Even-Flo breaches the contract, Fiesta can

Carol pays Dick $10,000 to design an ad campaign for Carol's Coffee Stand chain. The next day, Dick tells Carol that he has accepted a job in New York and cannot design her campaign. Carol files a suit against Dick. As compensatory damages, Carol can recover

A, Inc., enters into a contract with B Service to fix A's precisely engineered molding equipment. If B delays the repair for five days, knowing that A will lose a certain percentage of profit for the delay, A might be awarded consequential damages to

Handy Hardware Store agrees to hire Ilsa for one year at a salary of $500 per week. When Handy cancels the contract, Ilsa spends $100 to obtain a similar job that pays $450 per week for a year. Ilsa is entitled to recover

Fact Pattern 18-B1 A enters into a contract to buy 132 acres from B to subdivide and sell in quarter-acre lots for C Acres, a residential development. -Refer to Fact Pattern 18-B1. If A breaches the contract, B's remedy would most likely be

A enters into a contract with B Fitness Club for discounted memberships for A's employees. If B breaches the contract and A enters into a contract with D Sports for the same service at a lower price, A might be awarded nominal damages to

Pam contracts to buy a Quotient-brand computer set-up from Regal Systems for $5,000, but Regal fails to deliver. Pam buys the computer else?where for $6,500. Pam's measure of damages is

Rite Contractors, Inc., agrees to build a motel for Sleep Inn Corporation. The project proceeds according to plan, but before it is done, Sleep tells Rite to quit. Rite may recover

Office Accounting, Inc., hires Perry to repair a computer on site for $400, but Perry does not show up as agreed. Office Accounting hires Raul to do the job for $350. Office Accounting may recover from Perry

Mona contracts to repair a computer for NuData, Inc. (NDI) . Mona knows that without the computer, NDI will lose a sale. Mona does not perform as promised. NDI files a suit against Mona. As consequential damages, NDI can recover

Pure Oil Company enters into a contract with QuikBilt, Inc., to construct an oil pipeline to withstand specific conditions. If QuikBilt fails to meet this standard, which is construed as a breach of contract and a breach of a duty of care, Pure might be awarded punitive damages to