Question 1

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
A) do nothing.
B) reduce the damages that Scott might otherwise suffer.
C) rescind the contract with Rig.
D) punish Rig and set an example to deter others from similar acts.

Accepted Answer

If Rig breaches the contract, Scott has a duty to take reasonable steps to minimize the damages that he might suffer as a result of the breach. This is also known as the duty to mitigate. Simply doing nothing or punishing Rig would not be practical or effective solutions, and rescinding the contract may not be feasible or desirable depending on the circumstances.

Question 2

Fact Pattern 14-1 (Questions 7-8 apply)
Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in quarter-acre lots for Country Acres, a residential development.
-Refer to Fact Pattern 14-1.If Estelle breaches the contract,Desmond's remedy would most likely be
A) a certain ratio of the amount that Estelle has in liquid funds.
B) a percentage of Estelle's unrealized profit.
C) the difference between the land's contract and market prices.
D) specific performance.

Accepted Answer

The typical remedy for breach of a real estate contract is the difference between the contract price and the market price at the time of the breach.

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
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 motel for...

Question 4

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 defendant and deter similar conduct in the future. Therefore, option D is the correct choice. Options A, B, and C do not accurately reflect the purpose of punitive damages.

Question 5

Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corporation.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

By selling the fruit to Green Grocers, Inc., Earl is mitigating his damages by finding a way to recoup the costs of storing the fruit since Fresh Food Corporation did not pay for it. This does not represent a breach of contract, rescission and restitution, or specific performance.

Question 6

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 damages that result indirectly from the breach of contract. In this case, NDI can recover the loss of profit from the lost sale as a consequential damage. The cost of a new computer or the difference between Mona's price and the actual cost of repair would be considered direct damages, which are not applicable in this scenario. Therefore, the best choice is C.

Question 7

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 or reduce the damages that Fashion might otherwise suffer. This means Fashion must take reasonable steps to minimize the harm caused by Great Promotions' breach, such as finding a replacement service provider or adjusting their merchandising strategy to mitigate any losses. Fashion is not obligated to punish Great Promotions or take no action.

Question 8

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 a computer...

Question 9

Development Associates (DA)agrees to buy five acres of land from Eastside Properties for $15,000.Eastside sells the acreage to Fealty Realty,and fails to go through with DA's 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 Properties failed to go through with the agreed deal, DA has the right to recover the difference in price between the agreed price and the market price at the time of the breach. Therefore, DA can recover $2,000, which is the difference between the $15,000 they agreed to pay and the $17,000 market price at the time of the breach.

Question 10

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

If Beachside Pools failed to build the pool according to the contract specifications, Candy has the right to recover the costs needed to complete the construction from Beachside Pools. This would be the actual amount required to complete the swimming pool as per the contract specifications, which may be more or less than the contract price. Therefore, option C is the best choice.

Question 11

Home Delivery Corporation and Interstate Transport,Inc.,sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This is
A) a liquidated damages clause.
B) a mitigation of damages clause.
C) a nominal damages clause.
D) a penalty clause.

Accepted Answer

This is a liquidated damages clause as it sets a predetermined amount of damages to be paid in case of a material breach where the actual damages are difficult to estimate but can be approximated.

Question 12

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

Accepted Answer

Nominal damages are awarded to establish, as a matter of principle, that the defendant acted wrongfully or breached the contract. They are usually a small sum of money, such as $1, and are not meant to compensate the plaintiff for any actual loss or damage. In this case, the Centre would be awarded nominal damages to show that Local Motion Fitness Club breached the contract and acted wrongfully by not providing the agreed-upon service.

Question 13

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
A) establish, as a matter of principle, that Chet's acted wrongfully.
B) provide Dobry with funds for a foreseeable loss beyond the contract.
C) provide Dobry with funds for its loss of the bargain.
D) punish Chet's and set an example to deter others from similar acts.

Accepted Answer

Consequential damages are awarded to compensate the non-breaching party for any foreseeable losses beyond the contract. In this case, Dobry can claim consequential damages for the loss of profit due to the delay caused by Chet's. It is not meant to establish wrongdoing or punish the breaching party.

Question 14

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 during May but earns only $3,000.Kris files a suit against Little.As compensatory damages,Kris can recover
A) $3,000.
B) $2,000.
C) $1,000.
D) $0.

Accepted Answer

The compensatory damages would be the difference between what Kris would have earned under the contract with Little ($5,000) and what Kris actually earned from the other job ($3,000). Therefore, Kris can recover $2,000 as compensatory damages.

Question 15

Fact Pattern 14-1 (Questions 7-8 apply)
Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in quarter-acre lots for Country Acres, a residential development.
-Refer to Fact Pattern 14-1.If Desmond breaches the contract,Estelle's remedy would most likely be
A) a certain ratio of the amount that Desmond has in liquid funds.
B) a percentage of Desmond's unrealized profit.
C) the difference between the land's contract and market prices.
D) specific performance.

Accepted Answer

Estelle's remedy for breach of contract by Desmond would most likely be specific performance, which would require Desmond to fulfill his obligation to transfer the 132 acres of land to Estelle. This would allow Estelle to proceed with her plans for the subdivision and sale of the lots. Monetary damages, such as those described in choices A, B, and C, may not fully compensate Estelle for the losses she would incur due to the breach of contract.

Question 16

Bret contracts to work for City Construction Corporation (CCC)during 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 recover the difference between what CCC was supposed to pay him ($4,500) and what he could have earned with Downtown Builders, Inc. ($4,000), which is $500. Thus, the compensatory damages Bret can recover is $500.

Question 17

Drew contracts to sell a residential duplex to Evan.The contract provides 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 because it is
A) a liquidated damages clause.
B) a mitigation clause.
C) a nominal damages clause.
D) a penalty clause.

Accepted Answer

This provision is not enforceable because it is a penalty clause. A penalty clause is one that provides a punishment for a breach of contract that is disproportionate to the actual harm caused by the breach. In this case, the provision that Drew must pay Evan one-half of the contract price if he does not close the deal by September 15 is a penalty that is unrelated to the actual harm caused to Evan by Drew's failure to close the deal.

Question 18

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 Excavators, Inc. stated that they would lose $10,000 if the drill did not arrive by Tuesday. This indicates that the $10,000 is considered a consequential loss, meaning that it resulted from the breach of contract by Mining Supplies Company. Therefore, Lava can recover the $10,000, in addition to the $3,000 that was paid for the drill, for a total of $13,000.

Question 19

Mikayla enters into a contract with Logan to provide surface material for Mikayla'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
A) an excessive estimate of the loss on a breach.
B) a reasonable estimate of the loss on a breach.
C) designed to penalize the breaching party.
D) intended to quickly provide cash to the nonbreaching party.

Accepted Answer

A liquidated damages clause is a provision in a contract that specifies the amount of damages that will be payable by a party in the event of a breach. To be enforceable, the amount specified must be a reasonable estimate of the loss that would be incurred by the nonbreaching party as a result of the breach. If the amount is excessive, it may be seen as a penalty and not a reasonable estimate of damages. If the amount is too low, it may not adequately compensate the nonbreaching party. Therefore, a reasonable estimate of the loss on a breach is necessary for a liquidated damages clause to be enforceable.

Question 20

Ray breaches his lease with Sunny Properties and vacates the premises six months before the end of the term.In some states,Sunny would have to
A) avoid reletting the premises to recover damages from Ray.
B) make reasonable efforts to relet the premises to mitigate damages.
C) relet the premises to recover damages from Ray.
D) sell the premises to recover damages from Ray.

Accepted Answer

In most states, the landlord has a duty to mitigate damages caused by a tenant who breaches the lease and vacates the premises early. This means that the landlord must make reasonable efforts to relet the premises and cannot simply sit back and wait for the lease term to expire while holding the tenant responsible for the full rent. Therefore, choice B is the best answer.

Quiz 14: Breach and Remedies

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

Fact Pattern 14-1 (Questions 7-8 apply) Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in quarter-acre lots for Country Acres, a residential development. -Refer to Fact Pattern 14-1.If Estelle breaches the contract,Desmond's remedy would most likely be

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

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

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

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

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

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

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

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

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

Medical Centre enters into a contract with Local Motion Fitness Club for discounted memberships for the Centre's employees.If the Club breaches the contract and the Centre enters into a contract with KO Sports for the same service at a lower price,the Centre might be awarded nominal damages to

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

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 during May but earns only $3,000.Kris files a suit against Little.As compensatory damages,Kris can recover

Fact Pattern 14-1 (Questions 7-8 apply) Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in quarter-acre lots for Country Acres, a residential development. -Refer to Fact Pattern 14-1.If Desmond breaches the contract,Estelle's remedy would most likely be

Bret contracts to work for City Construction Corporation (CCC) during 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

Drew contracts to sell a residential duplex to Evan.The contract provides 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 because it is

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

Mikayla enters into a contract with Logan to provide surface material for Mikayla'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

Ray breaches his lease with Sunny Properties and vacates the premises six months before the end of the term.In some states,Sunny would have to