Question 1

Arlene signs an employment contract to work for a local business, Davis Restoration, for one year but is wrongfully discharged after three months. In order to recover from Davis full pay for the remaining nine months of her contract, Arlene:
A) must accept employment 60 miles away if that is the only available similar job.
B) must use reasonable efforts to mitigate her damages by seeking other employment, even if she does not find another job.
C) need only file suit against Davis Restoration since they are contractually bound to pay Arlene for one year of employment.
D) must accept a radically different type of job if that is all she can find.

Accepted Answer

Arlene has a duty to mitigate her damages by seeking other employment, even if she does not find another job. This means that she must make reasonable efforts to find new employment of the same type and level as her previous job. If she does find new employment, any income she earns will be subtracted from the damages owed by Davis Restoration. Arlene is not required to accept a job that is radically different from what she had before or a job located too far away from her residence. She can file a lawsuit against Davis Restoration to recover her damages, but she still has a duty to mitigate damages.

Question 2

The usual remedy for breach of contract is:
A) injunction.
B) specific performance.
C) punitive damages.
D) money damages.

Accepted Answer

Money damages are the usual remedy for breach of contract, where the plaintiff seeks compensation for the damages caused by the defendant's breach of the agreement. In some cases, specific performance may also be granted, where the court orders the defendant to fulfill their contractual obligations, but this is not the usual remedy. Injunctions and punitive damages are not typically awarded for breach of contract unless there are exceptional circumstances.

Question 3

If no performance is rendered at all under a contract, then the damages will be the loss of value of the promised performance.

Accepted Answer

This is known as expectation damages, where the party who did not receive the promised performance is compensated for the loss of value that they expected to receive from the performance.

Question 4

Which of the following is NOT true regarding specific performance?
A) It will not be granted if money damages would be adequate to compensate the injured party.
B) It is granted in contracts involving unique items of personal property.
C) It will be granted frequently in contracts involving the sale of goods.
D) The courts will not order directly the specific enforcement of contracts for personal services.

Accepted Answer

Specific performance is a remedy where a court orders a party to perform their obligations under a contract as agreed. While it is true that specific performance will not be granted if money damages would be adequate to compensate the injured party (A), and the courts will not order directly the specific enforcement of contracts for personal services (D), specific performance is generally granted in contracts involving unique items of personal property (B), such as artwork or antique items. However, specific performance is not frequently granted in contracts involving the sale of goods (C), as such contracts are generally seen as involving easily replaceable items and monetary compensation can provide sufficient relief.

Question 5

Miller made a contract to sell his condominium to Jefferson for $80,000. Two days later Miller changed his mind after discovering that he could have sold the property to another buyer for an additional $20,000. Jefferson sues and asks the court to have the property conveyed to him at the price of $80,000. Jefferson is seeking:
A) restitution.
B) punitive damages.
C) specific performance.
D) valid tender.

Accepted Answer

Jefferson is seeking specific performance, which means he wants the court to force Miller to follow through with the contract and sell him the condominium for the agreed-upon price of $80,000. This is a common remedy in contract law when monetary damages are inadequate or unsatisfactory.

Question 6

Delay will have no effect on the power of avoidance.

Accepted Answer

The answer of Delay will have no effect on the...

Question 7

When a breach of contract occurs, the nonbreaching party is required to take reasonable steps to lessen or mitigate the damages that he may sustain.

Accepted Answer

This is known as the duty to mitigate, which means that the nonbreaching party can't sit back and allow damages to accumulate without taking any action to minimize them. They must take reasonable steps to minimize the damages flowing from the breach.

Question 8

Marcella pays $12,000 down on a houseboat which Hugh had agreed to sell to her for $64,000. Marcella then repudiates the contract. Hugh sells the houseboat to Lloyd in good faith for $60,000. Marcella may recover from Hugh:
A) nothing, since she was the one who repudiated the contract.
B) her $12,000 down payment since Hugh's contract with Lloyd created a novation and discharged any duty Marcella had to pay anything toward the houseboat.
C) $8,000 in restitution, which represents Marcella's $12,000 down payment less the $4,000 in damages Hugh sustained because of Marcella's breach.
D) only a nominal amount.

Accepted Answer

Marcella can recover $8,000 in restitution from Hugh. This is because Hugh can retain the $4,000 in damages that he sustained because of Marcella's breach, but he must return the $12,000 down payment to Marcella since he was able to sell the houseboat to Lloyd for $60,000, which is $4,000 less than what Marcella agreed to pay. Therefore, Marcella is entitled to her down payment of $12,000 minus the $4,000 loss that Hugh sustained, which equals $8,000. Hugh cannot argue that the sale to Lloyd constitutes a novation because it must be shown that all parties intended to discharge the original contract and enter into a new one. In this case, there is no evidence that Marcella intended to be discharged from her duty to pay for the houseboat.

Question 9

The purpose of reliance damages is to place the injured party in a position as good as he would have held if the contract had not been made.

Accepted Answer

This is the definition of reliance damages, which are a type of damages awarded in contract law to compensate the injured party for the costs incurred in reliance on the other party's promise. Reliance damages aim to restore the injured party to the position he would have been in if the contract had not been made by compensating him for his reliance expenses.

Question 10

A small breach of contract damage amount fixed without regard to the amount of loss is known as:
A) reliance damages.
B) out-of-pocket damages.
C) nominal damages.
D) None of these.

Accepted Answer

Nominal damages are a small amount of damages awarded when a breach of contract has occurred but the loss suffered is small or difficult to quantify. The amount awarded is usually nominal and does not take into account any actual loss suffered by the innocent party.

Question 11

Restitution can be obtained where a voidable contract is avoided.

Accepted Answer

Restitution refers to the return of any benefits or payments that were made under a contract that is later avoided or cancelled. This can occur where a contract is voidable, meaning that it can be cancelled due to some defect or issue with the formation of the contract. In such cases, restitution can be obtained by the innocent party who seeks to avoid the contract.

Question 12

A contractor and Southampton, Inc. have a contract, which calls for the contractor to build a building with the completion by June 15. If the building is not completed by that date, the contract calls for the contractor to pay $100 per day in damages. The $100 per day is:
A) punitive damages.
B) nominal damages.
C) liquidated damages.
D) an illegal penalty.

Accepted Answer

The $100 per day to be paid by the contractor in case of delay is specified in the contract as liquidated damages. It is an agreed-upon amount that reasonably estimates the actual damages Southampton, Inc. would suffer due to the delay. Therefore, this is not considered an illegal penalty.

Question 13

Incidental damages are those that arise directly out of the breach.

Accepted Answer

Incidental damages are a type of damages that arise directly out of a breach of contract, such as expenses incurred as a result of trying to remedy the breach or find a replacement for the non-performing party.

Question 14

Even if a party has the power to avoid a contract for lack of capacity, duress, or undue influence, the party will lose that power by affirming the contract.

Accepted Answer

Affirming the contract means that the party has accepted and agreed to be bound by the terms of the contract, and therefore cannot later avoid it based on lack of capacity, duress, or undue influence.

Question 15

Deanne contracts with Leonard to paint her barn in two weeks. If Leonard breaches the contract, Deanne can elect the remedy of damages or the remedy of injunctive relief to prevent Leonard from providing his painting services for anyone else until he paints her barn.

Accepted Answer

The statement is not entirely accurate. While Deanne can choose to seek damages, she cannot unilaterally elect injunctive relief. Injunctive relief would require a court order, which Deanne would need to seek through a lawsuit.

Question 16

In the Arrowhead School District No. 75, Park County, Montana, v. James A. Klyap, Jr. case, the court found the liquidated damages clause was void as a penalty because it was unreasonable and unduly oppressive.

Accepted Answer

The answer of In the Arrowhead School District No. 75,...

Question 17

The test of foreseeable damages is subjective.

Accepted Answer

The test of foreseeable damages in contract law is objective, focusing on what a reasonable person would have foreseen at the time the contract was made, rather than the subjective foresight or intentions of the specific parties involved.

Question 18

If West and Burton designated in their contract an amount to be paid in the event of a breach and the amount is found to be so high it is considered a penalty, the injured party will be left without a remedy.

Accepted Answer

If the designated amount is found to be a penalty, the injured party can still seek a remedy through the court. However, the court may choose to reduce the amount to a reasonable level that reflects the actual damages suffered by the injured party.

Question 19

At its discretion, a court of equity may grant an injunction against breach of a contractual duty when damages for a breach would be inadequate.

Accepted Answer

This statement is true. A court of equity may grant an injunction if damages for a breach of contract would be inadequate to remedy the harm caused. In such cases, an injunction may be necessary to prevent irreparable harm or to enforce specific performance of the contractual duty.

Question 20

According to the "American Rule," when contracting parties litigate over a breach:
A) each party pays its own attorney fees, regardless of who wins.
B) attorney fees are considered consequential damages.
C) the losing party has to pay the winner's attorney fees.
D) a provision for attorney fees in the written contract will not be given effect.

Accepted Answer

The American Rule states that each party is responsible for paying its own attorney fees regardless of who wins in litigation over a breach of contract. This is the default rule in most U.S. courts unless there is a specific statute or contract provision that provides for attorney fees to be awarded to the prevailing party.

Quiz 18: Contract Remedies

Arlene signs an employment contract to work for a local business, Davis Restoration, for one year but is wrongfully discharged after three months. In order to recover from Davis full pay for the remaining nine months of her contract, Arlene:

The usual remedy for breach of contract is: