Question 1

Clutch Auto Parts enters into a contract with Bio Health Club for discounted memberships for Clutch's employees. Bio breaches the contract and Clutch enters into a contract with Apex Fitness for the same service at a lower price. Clutch might be awarded nominal damages to

Accepted Answer

Nominal damages are a small amount of money awarded when a legal injury has occurred, but no real damage or financial loss was suffered. In this case, Clutch may be awarded nominal damages in order to establish as a matter of principle that Bio breached the contract and acted wrongfully, even though Clutch found a lower-priced alternative with Apex Fitness.

Question 2

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

Accepted Answer

Consequential damages are awarded to compensate for foreseeable losses beyond the contract, such as lost profits, that result from a breach of contract. This is different from direct damages, which are awarded to compensate for losses directly resulting from the breach of contract. In this case, Dobry would be awarded consequential damages to compensate for the loss of profit resulting from Chet's delay in repairing the molding equipment. The purpose of consequential damages is to put the non-breaching party in the position they would have been in had the breach not occurred.

Question 3

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

Accepted Answer

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

Question 4

Windstar Heli-Pads, Inc., enters into a contract to employ Valerie as an on-site project manager for two years. Windstar breaches the contract. Valerie has a duty to

Accepted Answer

Valerie has a duty to take reasonable steps to reduce the damages she might suffer from Windstar's breach because this is her duty to mitigate her own damages.

Question 5

Cooper's Brakes, Inc., enters into a contract with Byron's Service to fix Cooper's hydraulic equipment. Byron delays the repair for three days, but is not aware that Cooper loses a certain percentage of profit each day the equipment is out of service. Cooper is most likely to be awarded

Accepted Answer

Since there is a delay that causes Cooper's company to lose profit, compensatory damages would be awarded to compensate for the loss. Nominal damages are usually awarded when there is a breach of contract but no actual harm or loss was suffered. Punitive damages are only awarded in cases of intentional harm or gross negligence, which does not apply here. No damages would only be awarded if there was no breach of contract or harm caused.

Question 6

Fact Pattern 15-1 
Bella Homes enters into a contract to buy 132 acres from Watershed Holdings to subdivide and sell in fifth-acre lots for Pristine Meadow, a residential development.
-Refer to Fact Pattern 15-1. If Bella breaches the contract, Watershed's remedy would most likely be

Accepted Answer

If Bella breaches the contract, Watershed's remedy would most likely be the difference between the land's contract and market prices. This remedy is known as expectation damages, which aim to put the nonbreaching party in as good a position as if the contract had been performed. In this case, if Bella breaches, Watershed can sell the land to someone else at market price and recover the difference from Bella. Specific performance may not be a feasible option as the land is unique and it may be difficult to compel Bella to go through with the purchase. The other options do not provide a suitable remedy for Watershed.

Question 7

Home Delivery Corporation and Interstate Transport, Inc., sign an agree?ment that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to esti?mate but approximately $1,000." This is

Accepted Answer

The provision is a liquidated damages clause because it sets a specific amount of damages in the event of a breach that is difficult to estimate but approximately $1,000.

Question 8

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

Accepted Answer

If Great Promotions breaches the contract, Fashion has a duty to mitigate (or reduce) the damages that Fashion might suffer. This means that Fashion must take reasonable steps to minimize the harm caused by Great Promotions' breach, such as finding another company to retool its merchandising strategy or negotiating a settlement with Great Promotions. Simply punishing Great Promotions or taking no action would not fulfill Fashion's duty to mitigate damages.

Question 9

Rural Power Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certain location. Rural advances Shovel 10 percent of its cost. The parties rescind the contract. Shovel's refund of the payment is

Accepted Answer

Restitution is the return of any benefit received from the contract, which includes the advance payment made by Rural to Shovel. In this case, since the parties rescinded the contract, Shovel is required to return the advance payment. It is not a penalty, liquidated damages, or a breach of contract, as no party is found to be at fault for the contract's rescission.

Question 10

Sonny agrees to buy a unique collection of Olympics memorabilia for $7,000 from Jana and sends $1,500 as a down payment. When Sonny sends Jana the rest of the price, she refuses to ship the collection. Sonny should seek

Accepted Answer

Sonny should seek specific performance, which would require Jana to fulfill her obligation to sell the collection and ship it to Sonny. This is the best option because the collection is unique and cannot easily be replaced, and Sonny has already paid a significant amount towards the purchase. Restitution is not appropriate because Sonny does not want his money back, but rather wants the collection he agreed to purchase. A penalty or liquidated damages may not be sufficient to compensate Sonny for the unique and personal value of the collection.

Question 11

SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide surface material for Royal's tennis courts by April 1 for a tournament to begin May 1. 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 specifies a certain amount of money to be paid in the event of a breach, and that amount should be a reasonable estimate of the loss that the nonbreaching party would suffer as a result of the breach. It is not meant to penalize the breaching party or to provide quick cash to the nonbreaching party.

Question 12

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

Accepted Answer

Punitive damages are awarded to punish the defendant for their conduct and to deter others from engaging in similar acts. In this case, if QuikBilt breached the contract and the duty of care, they may be liable for punitive damages as a way to discourage them and others from making a similar breach in the future. The other options (A, B, and C) do not directly relate to the purpose of punitive damages.

Question 13

Rural Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certain location. Rural advances Shovel 10 percent of its cost. If the parties rescind the contract, Shovel's refund of the payment would be

Accepted Answer

Restitution is the return or restoration of funds or property received through a contract. In this situation, if the parties rescind the contract, Shovel would be required to return the advance payment under the principle of restitution. A penalty refers to a punitive measure for failing to perform a contractual obligation, liquidated damages are a predetermined amount of damages agreed upon by the parties in the event of a breach of contract, and specific performance is a court-ordered performance of a contract when monetary damages are not sufficient. None of these options apply in this scenario.

Question 14

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

Accepted Answer

Earl has mitigated his damages by selling the fruit to Green Grocers, Inc. Even though Fresh Food Corporation did not pay for the storage, Earl was still able to recover some of his losses by selling the fruit.

Question 15

Drew contracts to sell a residential duplex to Evan. The contract pro?vides that if Drew does not close the deal by September 15, he must pay Evan one-half of the contract price. This provision is not enforceable be?cause it is

Accepted Answer

The provision is a penalty clause because it seeks to punish Drew for not meeting the deadline rather than compensate Evan for any losses incurred. Penalty clauses are not enforceable in contracts.

Question 16

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

Accepted Answer

Lava had a specific deadline for the delivery of the drill and informed Mining Supplies of the consequences of not meeting the deadline. Therefore, Lava can recover the $10,000 loss caused by Mining's late shipment, in addition to the $3,000 they paid for the drill. Therefore, the total amount Lava can recover is $10,000 + $3,000 = $13,000.

Question 17

Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance else?where for $5,500. Dondi's measure of damages is

Accepted Answer

Dondi's measure of damages is the difference between the contract price and the cost of cover, which is the price he paid for the appliance elsewhere. Therefore, Dondi's damages are $1,000. He is also entitled to incidental damages, which are additional costs incurred as a result of Caffee's breach of contract, such as the cost of arranging for the delivery of the new appliance or the cost of storing the appliance until it can be returned to Caffee.

Question 18

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 or reduce the damages that he might otherwise suffer. This means that Scott must take reasonable steps to minimize his loss, such as seeking alternative employment or minimizing his expenses. Doing nothing (A) or rescinding the contract (C) may not be the best options for Scott. Punishing Rig and setting an example (D) is not a duty of Scott, but rather a matter for the courts or regulatory authorities.

Question 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

Candy can recover the costs needed to complete construction because Beachside Pools failed to build the pool according to the contract specifications. This means that Candy had to spend extra money to hire another company to finish the project as agreed upon. Therefore, Beachside Pools should pay for the additional costs incurred by Candy to complete the project.

Quiz 15: Breach and Remedies