Austin Community College

LGLA MISC

Chapter 18 DISCHARGE OF CONTRACTS

TRUE FALSE

1)Generally, contracts are discharged by the performance of the terms of the contract.

 

1. True

 

2. False

 

 

 

 

2. A condition precedent must occur before a party to a contract has an obligation to perform.

 

1. True

 

2. False

 

 

 

 

3. A condition subsequent can alter but not terminate a contract.

 

1. True

 

2. False

 

 

 

 

4. In most bilateral contracts, the performances of the parties are concurrent conditions.

 

1. True

 

2. False

 

 

 

 

5. If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified.

 

1. True

 

2. False

 

 

 

 

6. Payment by check is a conditional payment.

 

1. True

2. False

 

 

 

 

7. An agreement that does not specify the time for performance is not binding because it is too indefinite.

 

1. True

 

2. False

 

 

 

 

8. The time for performance is typically essential in a contract for the sale of perishable property.

 

1. True

 

2. False

 

 

 

 

9. Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time is sufficient.

 

1. True

 

2. False

 

 

 

 

10. A valid tender of payment consists of an unconditional offer of the exact amount due on the date when due.

 

1. True

 

2. False

 

 

 

 

11. A party who in good faith has provided substandard performance of a contract may sue to recover the payment specified in the contract.

 

1. True

 

2. False

 

 

12. The doctrine of substantial performance is concerned with the issue of whether an imperfect performance will be considered adequate to discharge one's responsibilities under a contract.

 

1. True

 

2. False

 

 

 

 

13. When a building contractor has substantially performed a contract to construct a building, the contractor is entitled to recover the full contract price.

 

1. True

 

2. False

 

 

 

 

14. A person who substantially performs a contract is liable for damages to the other party.

 

1. True

 

2. False

 

 

 

 

15. There is no exact standard or test by which to determine whether contractual performance is substantial.

 

1. True

 

2. False

 

 

 

 

16. All courts hold that when an agreement requires satisfaction of the other party regarding the acceptance of an act, a reasonable person standard is used.

 

1. True

 

2. False

 

 

 

 

17. A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.

 

1. True

2. False

 

 

 

 

18. The parties may agree that the adequacy of performance under a contract is to be determined by a third party.

 

1. True

 

2. False

 

 

 

 

19. Contracts may be discharged by the joint action of both contracting parties or, in some cases, by the action of one party alone.

 

1. True

 

2. False

 

 

 

 

20. The federal Consumer Credit Protection Act gives the debtor the right to rescind a credit transaction within three (3) business days when the transaction would impose a lien on the debtor's home.

 

1. True

 

2. False

 

 

 

 

21. In a mutual rescission, both parties, acting in good faith, renew their commitment to perform all obligations set forth in their original agreement.

 

1. True

 

2. False

 

 

 

 

22. For the parties to enter into an accord and satisfaction that discharges the original obligation, there must be a bona fide dispute.

 

1. True

 

2. False

 

 

23. Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.

 

1. True

 

2. False

 

 

 

 

24. A seller's inability to obtain from any supplier the goods called for by the contract generally discharges the contract for impossibility of performance.

 

1. True

 

2. False

 

 

 

 

25. In the absence of an agreement to the contrary, weather conditions constitute a risk that is assumed by a contracting party.

 

1. True

 

2. False

 

 

 

 

26. When parties contract expressly for a particular subject matter, the contract is discharged if the subject matter is destroyed through no fault of either party.

 

1. True

 

2. False

 

 

 

 

27. A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.

 

1. True

 

2. False

 

 

 

 

28. A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.

 

1. True

2. False

 

 

 

 

29. A contract may be discharged under the frustration of purpose doctrine if the event which frustrated the purpose was foreseeable.

 

1. True

 

2. False

 

 

 

 

30. By operation of law, a party can be discharged in bankruptcy from debts.

 

1. True

 

2. False

 

 

 

 

31. Commercial impracticability discharges a party's contractual obligations when the contract becomes more expensive to perform due to drastic and severe economic downturns.

 

1. True

 

2. False

 

 

 

 

 

MULTICHOICE

 

32. In most bilateral contracts, the performances of the parties are                                        .

 

1. conditions precedent

 

2. conditions subsequent

 

3. recurrent conditions

 

4. concurrent conditions

 

 

 

 

33. An offer to perform is known as a(n)                                 .

 

1. rendering

2. offering

 

3. tinder

 

4. tender

 

 

 

 

34. When a debtor makes a payment to a creditor specifying how it should be applied, the creditor must apply the payment:

 

1. as directed by the debtor.

 

2. to the oldest outstanding debt.

 

3. to the most recent outstanding debt.

 

4. to the largest outstanding debt.

 

 

 

 

35. If no time period for performance is specified in a contract:

 

1. the contract is unenforceable.

 

2. time shall be of the essence.

 

3. a reasonable time for performance will be implied.

 

4. the time for performance will be ignored by the courts.

 

 

 

 

36. The phrase "time is of the essence" means that:

 

1. the court is in a hurry to dispose of the case.

 

2. performance under the contract at the times specified in the contract is vital or essential.

 

3. the contract expressly states that time is of the essence.

 

4. the price stated in the contract is subject to change without notice.

 

 

 

 

37. A contract can be discharged by impossibility in all the following scenarios except:

 

1. destruction of subject matter in a sales contract.

 

2. performance under the contract becomes 25% more expensive due to currency fluctuations in construction contract.

3. when the law changes.

 

4. death of obligee in a personal services contract.

 

 

 

 

38. A homeowner who refinances her home mortgage may cancel the transaction:

 

1. if the terms of the contract were less favorable than anticipated.

 

2. within three business days.

 

3. only if she was the victim of fraud.

 

4. upon payment of a $1,000 penalty, as required by a Federal Trade Commission rule.

 

 

 

 

39. A Federal Trade Commission regulation gives a buyer three (3) business days in which to cancel a home-solicited sale of goods or services costing more than:

 

(A) $25.

 

(B) $50.

 

(C) $100.

 

(D) $500.

 

 

 

 

40. A contract may be discharge in all of the following scenarios except:

 

1. death or disability

 

2. destruction of subject matter

 

3. commercial impracticability

 

4. weather conditions

 

 

 

 

41. If the parties to a contract agree to undo the agreement and return any consideration involved, the contract is discharged by:

 

1. mutual cancellation

 

2. mutual rescission.

 

3. novation

4. accord and satisfaction

 

 

 

 

42. The parties may decide that their contract is not the one they want. They may then replace it with another contract. If they do, the original contract is discharged by                                                                     .

 

1. solution

 

2. elocution

 

3. retribution

 

4. substitution

 

 

 

 

43. Which of the following is not an element of an accord and satisfaction?

 

1. a bona fide dispute

 

2. a proposal to settle the dispute

 

3. performance of the agreement to settle the dispute

 

4. reservation of rights under the federal Consumer Credit Protection Act

 

 

 

 

44. In which case will performance on the exact date specified in the contract most likely be deemed essential?

 

1. a sale of goods that fluctuate rapidly in value.

 

2. a sale of goods that remain stable in value.

 

3. a sale of real estate.

 

4. a sale of goods where no harm results from a delay in performance.

 

 

 

 

45. Which of the following events excuses a promisor from performing his or her contractual obligations?

 

1. a riot

 

2. a shortage of materials necessary for production of goods and/or provision of services called for under the contract

3. an unanticipated increase in the cost of performance

 

4. destruction of the subject matter through no fault of either party

 

 

 

 

46. A change of law discharges a contract if the new law:

 

1. requires a license and none was required before.

 

2. requires the use of fireproof materials.

 

3. requires the use of antipollution devices.

 

4. prohibits the act called for by the contract.

 

 

 

 

47. The death or disability of a party to a contract discharges the contract when:

 

1. personal services requiring peculiar skill are involved.

 

2. the payment of money is involved.

 

3. a house is to be painted.

 

4. all of these.

 

 

 

 

48. V3 was a successful singing group that contracted to perform at the "Metalsubstance" rock concert. V3 was aware that the promoter would sustain a substantial loss if the group failed to perform. The members of the group were stricken with a virus that confined them to their beds. The promoter sued for breach of contract. What is the probable result?

 

1. V3 is liable for damages for breach of contract.

 

2. The contract was discharged by impossibility of performance.

 

3. In order to avoid liability for breach of contract, V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date.

 

4. V3 will be deemed to have substantially performed the contract.

 

 

 

 

49. To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called                                                                                                         clauses, and they are generally enforced by courts as written.

1. delta force

 

2. force majeure

 

3. magnum force

 

4. force corporeal

 

 

 

 

50. When performance is impeded due to the occurrence of an event whose nonoccurrence was a basic assumption of the contract, the contract may be discharged on the grounds of:

 

1. commercial impracticability.

 

2. commercial impossibility.

 

3. economic frustration.

 

4. economic stability.

 

 

 

 

51. A discharge by operation of law occurs in all of the following situations except:

 

1. accord and satisfaction.

 

2. material changes by a party.

 

3. bankruptcy.

 

4. statute of limitations.

 

 

 

 

52. A discharge by agreement can occur in any of the following situations except:A discharge by agreement can occur in any of the following situations except:

 

1. death of the obligor.

 

2. accord and satisfaction.

 

3. release.

 

4. mutual rescision.

 

 

 

 

53. Sales of goods transactions are subject to a statute of limitations period of:

 

1. one (1) year.

2. two (2) years.

 

3. three (3) years.

 

4. four (4) years.

 

 

 

 

54. Bankruptcy results in a discharge of contractual obligations by                                           .

 

1. default

 

2. equity

 

3. operation of law

 

4. oath or affirmation

 

 

 

 

 

ESSAY

 

55. An art collector commissioned an artist to create a sculpture for the collector. The artist wanted a substantial amount of money for the sculpture. This caused the collector some worry regarding possible dissatisfaction with the artwork once it was completed. To ensure that payment would be made only if the collector was satisfied with the sculpture, a condition was written into the commission contract. It required that the collector would have to be satisfied with the artwork, relying on the collector's taste and judgment, before an obligation of payment would be created.

 

The artist never imagined that a collector could possibly refuse a creation of his and allowed the condition to be placed within the contract. At the completion of the sculpture, the collector claimed that she did not care for the artwork and therefore refused to pay. Can the artist force payment in this situation? Would it help if the artist could establish that the collector actually approves of the sculpture but has temporarily run short on funds, and that this is the true motivating factor in refusing to accept the sculpture?

 

 

 

56. Kentucky Lumber and Millwork Company contracted to supply Rommell Company millwork for