National American University

BUSINESS L 3100

Chapter 20-BREACH OF CONTRACT AND REMEDIES

TRUE/FALSE

1)When one party breaks the contract, the contract is said to be breached.

 

                                           

 

2. When a party expressly declares before the time for performance arrives that the contract will not be performed, such a declaration is called an anticipatory repudiation.

 

                                           

 

3. An anticipatory repudiation must be clear, absolute, and unequivocal.

 

                                           

 

4. A waiver of a breach may be either express or implied.

 

                                           

 

5. If there is a breach of contract, the law requires that the other party terminate the contract and bring a lawsuit.

 

                                           

 

6. Whether there has been a waiver is a question of fact.

 

                                           

 

7. When a party waives compliance with one provision of a contract, the other party may thereafter ignore other provisions of that contract.

 

                                           

 

8. A reservation of rights is an assertion by a party to a contract that even though a tendered performance is accepted, the right to damages for the nonconformity to the contract is reserved.

 

                                           

 

9. An antimodification clause specifies that a waiver to any breach automatically modifies the contract .

 

                                           

 

10. A party injured by the other party's anticipatory repudiation of a contract has the right to bring suit at the time of the repudiation without waiting to see if there will be proper performance when due .

 

                                           

 

11. The measure of monetary damages when there has been a breach of contract is the sum of money that will place the injured party in the same position that would have been attained if the contract had been performed.

                                           

 

12. In some cases the court may require specific performance when there is a breach of contract.

 

                                           

 

13. The normal remedy for breach of contract where the plaintiff has suffered a loss is compensatory damages.

 

                                           

 

14. An injured party that does not suffer an actual loss from the breach of a contract is entitled to nominal damages.

 

                                           

 

15. Damages in excess of actual loss, imposed for the purpose of punishing or making an example of the defendant, are known as compensatory damages.

 

                                           

 

16. Punitive damages are generally recoverable in contract actions.

 

                                           

 

17. Consequential damages are those that necessarily flow from the breach.

 

                                           

 

18. Consequential damages may not be recovered, even if they were within the contemplation of the parties at the time of contracting.

 

                                           

 

19. Only direct losses from a breach of contract may be recovered by an injured party.

 

                                           

 

20. If one party to a contract breaks the contract, the other party generally is under a duty to stop any further performance to avoid sustaining greater damages.

 

                                           

 

21. A party must mitigate damages at all costs.

 

                                           

 

22. When one party commits a non-material breach of contract, the other party may rescind the contract.

 

                                           

23. An injured party who rescinds a contract after having performed services may recover the reasonable value of the performance rendered under restitutionary or quasi-contractual damages.

 

                                           

 

24. Ordinarily contracts for the performance of personal services are specifically ordered.

 

                                           

 

25. When the plaintiff seeks the remedy of specific performance, the plaintiff wants the other party to carry out the terms of the contract and not pay damages.

 

                                           

 

26. If monetary damages would be an adequate remedy, then an action for specific performance is not appropriate.

 

                                           

 

27. When the contract requires that both parties submit disputes to arbitration, this is an example of a limitation-of-remedies clause.

 

                                           

 

28. Contract provisions that limit the remedies of the parties are generally unenforceable.

 

                                           

 

29. If a plaintiff's loss involves damaged property, it is described as liquidated damages.

 

                                           

 

30. The “American rule” states that the losing party in a lawsuit is responsible for all attorney fees.

 

                                           

 

MULTIPLE CHOICE

 

1. The failure to act or perform in the manner called for by a contract is a:
   1. waiver.
   2. breach.
   3. forbearance.
   4. reservation of right.

                                           

 

2. When a party expressly declares that performance will not be made when required, this declaration is a(n):
   1. anticipatory repudiation.
   2. injunction.
   3. negotiating technique.
   4. waiver of breach.

                                           

3. A landlord who continuously accepts late rental payments without collecting the late fee provided in the lease:
   1. waives the late fee.
   2. will collect the late fee at a later date.
   3. is ignorant of the late fee.
   4. allows the tenant to repudiate the lease.        
4. Repeated breaches and waivers are generally interpreted to indicate:
   1. poor business practices.
   2. illegal behavior.
   3. ignorance of the law.
   4. modification of contract.

                                           

 

5. A contractual provision which states that a waiver of rights will not constitute a modification to the contract is:
   1. not enforceable as being in bad faith.
   2. not enforceable as a violation of law.
   3. enforceable by one party only.
   4. enforceable.

                                           

 

6. If a seller delivers defective goods, the buyer does not lose the right to object to the breach of contract if the buyer:
   1. accepts the goods.
   2. accepts the goods with a reservation of right.
   3. agrees to a modification of the contract.
   4. accepts the performance without protest.     
7. When one party has broken a contract, there are several remedies available to the non-breaching party, including:
   1. bringing an action for money damages.
   2. rescinding the contract.
   3. seeking specific performance.
   4. all of the above.

                                           

 

8. When an anticipatory repudiation of a contract occurs, the aggrieved person's option(s) include:
   1. doing nothing and waiting for performance per the contract.
   2. immediately declaring a breach of contract.
   3. considering the contract cancelled.
   4. all of the above.

                                           

 

9. If a plaintiff seeking damages in a breach of contract action receives $1 in damages, the damages would most likely be classified as:
   1. punitive damages.

1. 2. exemplary damages.
   3. nominal damages.
   4. compensatory damages.

                                           

 

10. Damages in excess of actual loss are called:
    1. punitive damages.
    2. compensatory damages.
    3. restitution.
    4. nominal damages.

                                           

 

11. The damages that are typically recoverable when a contract has been breached and one party has suffered loss are called:
    1. punitive damages.
    2. emotional distress damages.
    3. compensatory damages.
    4. liquidated damages.

                                           

 

12. The party that breaks a contract may be required to pay damages to the other party to compensate for:
    1. losses that could have been avoided by hiring someone else to perform the contract.
    2. emotional disturbance caused by the breach of contract.
    3. a heart attack induced by the emotional disturbance caused by the breach of contract.
    4. damages resulting necessarily and directly from the breach of contract.            
13. Consequential damages may be recovered if:
    1. the damages were not a foreseeable consequence of the breach.
    2. the damages reasonably flow from the breach as a result of the injured party’s particular circumstances.
    3. the breach did not cause the damages.
    4. the loss exceeds $500.

                                           

 

14. The rule of mitigation of damages requires that a party injured by a breach of contract must:
    1. take any and all steps possible to reduce the damages that will be sustained because of the breach.
    2. discharge the contract before filing suit for breach.
    3. hire someone else to perform the contract.
    4. take reasonable steps to reduce the damages that would otherwise be sustained because of the breach.

                                           

 

15. Failure to mitigate damages limits recovery to:
    1. damages that would have been sustained had the plaintiff mitigated the damages where it was possible to do so.
    2. nominal damages and punitive damages.
    3. damages for consequential loss.
    4. exemplary damages.

                                           

 

16. Which is not a correct statement concerning rescission of a contract?
    1. The breach must be material.
    2. The injured party who rescinds may recover money paid under the contract.
    3. The contract remains in effect after the rescission.
    4. Rescission is the undoing of the contract.        
17. The remedy of specific performance will most likely be granted in the case of a(n):
    1. employment contract.
    2. contract to buy shares of publicly-traded stock.
    3. contract for the sale of a business.
    4. contract for the sale of Florida oranges.           
18. Which is not a correct statement concerning the remedy of specific performance?
    1. The subject matter of the contract must generally be unique.
    2. An award of monetary damages would be an inadequate remedy.
    3. The granting of specific performance is discretionary with the court.
    4. It is generally available in all breach of contract cases.
19. An action for injunctive relief may be granted:
    1. if money is due and payable.
    2. if the breach consists of doing a prohibited act.
    3. if the breach would cause nominal damages.
    4. if the breach would cause consequential damages.     
20. When a written contract does not correctly state the agreement already made but the parties either party make seek a(n):
    1. rescission
    2. injunction
    3. reformation of the contract
    4. action for specific performance

                                           

 

21. A provision stipulating the amount of money damages to be paid in the event of default or breach of contract is known as a                          damages clause.
    1. nominal
    2. contract
    3. liquidated
    4. breach

                                           

 

22. Which is NOT a correct statement concerning a liquidated damages clause?
    1. If the clause is enforced, the injured party can collect no more than the amount specified.
    2. If the clause is enforced, the injured party has a choice between compensatory damages or

liquidated damages.

22. 3. It must be possible to determine actual damages.
    4. The amount of liquidated damages are established by the parties to the contract.       
23. If a liquidated damages clause demands an unusually large sum that is not related to reasonably- anticipated actual damages, the clause will be held to be void as a(n):
    1. penalty.
    2. unliquidated damages clause.
    3. Extortion
    4. Blackmail

                                           

 

24. A contract provision stating that one of the parties shall not be liable for damages in case of a breach is called a(n)                                       clause.
    1. liquidated damages
    2. exculpatory
    3. waiver.
    4. due process

                                           

 

25. Between experienced businesspersons, exculpatory clauses are generally:
    1. voidable.
    2. void.
    3. valid.
    4. unenforceable.

                                           

 

CASE

 

1. Cyril made two contracts. The first was to have his house painted one month from the date of the written contract. The second was for his neighbor's 1957 Ford Thunderbird. Each contract was definite and clear in all respects. As to the house painting, Cyril inquired with the painter as to when the work could begin. The painter explained that he was extremely busy and was not sure if he could fulfill the contract. Cyril flew into a rage and immediately hired someone else who painted the house, but at a higher price. Cyril then sued the painter, claiming that there was an anticipatory repudiation of the contract by the painter.

 

With regard to the automobile purchase contract, after signing the contract, the neighbor decided that she did not wish to sell her car and refused to complete the transaction. Cyril attempted to purchase a similar car elsewhere, but the car was a vintage automobile which was not available on the open market. Cyril sued the neighbor for specific performance of the contract. Discuss the probable outcomes of the lawsuits.