Question 1

A party who in good faith performs substantially all of the terms of a con-tract can enforce the contract against the other party.

Accepted Answer

A) True 
 B)False  True

Question 2

OnTrack Rehabilitation Center signs an agreement with Platinum Bank to borrow $40,000 at 20 percent interest. Later,the state legislature passes a law lowering the maximum permissible rate of interest to 15 per-cent. OnTrack's best argument for avoiding payment to Platinum Bank is that

Accepted Answer

A) performance of the contract is commercially impracticable. 
B) payment of the loan would force the debtor into bankruptcy. 
C) the law has rendered performance of the contract illegal. 
D) the specific subject matter of the contract has been destroyed. 
A) performance of the contract is commercially impracticable. 
B) payment of the loan would force the debtor into bankruptcy. 
C) the law has rendered performance of the contract illegal. 
D) the specific subject matter of the contract has been destroyed. C

Question 3

Contracts that are executory on both sides can be rescinded by agreement.

Accepted Answer

A) True 
 B)False  True

Question 4

A material breach occurs when performance is substantial,but not complete.

Accepted Answer

A) True 
 B)False

Question 5

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs,they sign an accord,in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on

Accepted Answer

A) neither the accord nor the original obligation. 
B) the accord only. 
C) the accord or the original obligation. 
D) the original obligation only. 
A) neither the accord nor the original obligation. 
B) the accord only. 
C) the accord or the original obligation. 
D) the original obligation only.

Question 6

A novation requires the existence of a previous,valid obligation.

Accepted Answer

A) True 
 B)False

Question 7

Flora,who owns and operates Garden Fresh Organic Farms,agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months.
-Refer to Fact Pattern 16-2.If bad weather destroys Flora's crops,the obliga-tion to deliver produce to Harvesters is

Accepted Answer

A) breached. 
B) discharged. 
C) not affected. 
D) suspended. 
A) breached. 
B) discharged. 
C) not affected. 
D) suspended.

Question 8

When a contract party alters a written contract without consent,the other party must adapt his or her performance accordingly.

Accepted Answer

A) True 
 B)False

Question 9

Lin and Mercedes agree to incorporate to open and operate a Natural & Organic Foods Café. Before the opening,they decide to replace Mercedes with Ngo as a party to the deal. They can best accomplish this by

Accepted Answer

A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) anticipatory repudiation. 
A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) anticipatory repudiation.

Question 10

Building Restoration,Inc. (BRI),enters into a contract to refurbish an old train depot for Casual Dining,Inc.,to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract,its performance will be

Accepted Answer

A) absolute. 
B) complete. 
C) material. 
D) substantial. 
A) absolute. 
B) complete. 
C) material. 
D) substantial.

Question 11

Flora,who owns and operates Garden Fresh Organic Farms,agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months.
-Refer to Fact Pattern 16-2. If a strike delays delivery of the produce beyond the time for performance,Flora's contract with Harvesters is

Accepted Answer

A) breached. 
B) discharged. 
C) not affected. 
D) suspended. 
A) breached. 
B) discharged. 
C) not affected. 
D) suspended.

Question 12

Water Rites LLC enters into a contract to site and dig a well for Rancho Verde. Water Rites completely performs. Rancho Verde is entitled to

Accepted Answer

A) a discount. 
B) rescission. 
C) novation. 
D) nothing more. 
A) a discount. 
B) rescission. 
C) novation. 
D) nothing more.

Question 13

Flora,who owns and operates Garden Fresh Organic Farms,agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months.
-Refer to Fact Pattern 16-2. If the market price for organic produce exceeds the price in the contract with Harvesters,and Flora decides not to deliver the order. her contract with the grocery is

Accepted Answer

A) breached. 
B) discharged. 
C) not affected. 
D) suspended. 
A) breached. 
B) discharged. 
C) not affected. 
D) suspended.

Question 14

Carol enters into a contract to hire Joanne to paint a portrait of Carol's favorite cat. Joanne agrees to do the portrait to Carol's satisfaction for $100. When Joanne finishes the portrait,Carol announces that she is not satisfied with the portrait because it does not look like her cat. Carol

Accepted Answer

A) must accept the portrait and pay Joanne $100. 
B) mustaccept the portrait and pay Joanne $50. 
C) mustaccept the portrait and pay Joanne $25. 
D) does not have to accept the portrait or pay Joanne any money. 
A) must accept the portrait and pay Joanne $100. 
B) mustaccept the portrait and pay Joanne $50. 
C) mustaccept the portrait and pay Joanne $25. 
D) does not have to accept the portrait or pay Joanne any money.

Question 15

Mutual Company enters into a contract to employ Neil as an investment manager for two years. During the first year,Neil is often absent without explanation and when present fails to adequately monitor and manage Mutual's investments.
-Refer to Fact Pattern 16-1. Neil's performance is most likely

Accepted Answer

A) a material breach. 
B) a minor breach. 
C) Mutual's breach. 
D) no breach. 
A) a material breach. 
B) a minor breach. 
C) Mutual's breach. 
D) no breach.

Question 16

Mutual Company enters into a contract to employ Neil as an investment manager for two years. During the first year,Neil is often absent without explanation and when present fails to adequately monitor and manage Mutual's investments.
-Refer to Fact Pattern 16-1. With respect to Mutual's duties,Neil's performance most likely

Accepted Answer

A) discharges Mutual from the contract. 
B) has no effect on Mutual's performance. 
C) increasesMutual's duties under the contract. 
D) suspends Mutual's duty to perform. 
A) discharges Mutual from the contract. 
B) has no effect on Mutual's performance. 
C) increasesMutual's duties under the contract. 
D) suspends Mutual's duty to perform.

Question 17

Hilton enters into a contract to erect a fence around Irene's cattle pasture. When the fence is built,Hilton's performance will be

Accepted Answer

A) absolute. 
B) complete. 
C) conditional. 
D) substantial. 
A) absolute. 
B) complete. 
C) conditional. 
D) substantial.

Question 18

Omar and Penn agree to develop a certain area of real estate. Environmental concerns force them to change their plans. The best method for Omar and Penn to discharge their contract by executing a new agreement with different performance is

Accepted Answer

A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) an alteration of the original contract. 
A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) an alteration of the original contract.

Question 19

Objective impossibility discharges a contract.

Accepted Answer

A) True 
 B)False

Question 20

Gliding Light,LLC,and Hang Gliders,Inc.,are parties to a contract. They subse-quently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is

Accepted Answer

A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) a settlement agreement. 
A) an agreement to rescind. 
B) an accord and satisfaction. 
C) a novation. 
D) a settlement agreement.

Exam 16: Performance and Discharge

A party who in good faith performs substantially all of the terms of a con-tract can enforce the contract against the other party.

OnTrack Rehabilitation Center signs an agreement with Platinum Bank to borrow $40,000 at 20 percent interest. Later,the state legislature passes a law lowering the maximum permissible rate of interest to 15 per-cent. OnTrack's best argument for avoiding payment to Platinum Bank is that

Contracts that are executory on both sides can be rescinded by agreement.

A material breach occurs when performance is substantial,but not complete.

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs,they sign an accord,in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on

A novation requires the existence of a previous,valid obligation.

Flora,who owns and operates Garden Fresh Organic Farms,agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months. -Refer to Fact Pattern 16-2.If bad weather destroys Flora's crops,the obliga-tion to deliver produce to Harvesters is

When a contract party alters a written contract without consent,the other party must adapt his or her performance accordingly.

Lin and Mercedes agree to incorporate to open and operate a Natural & Organic Foods Café. Before the opening,they decide to replace Mercedes with Ngo as a party to the deal. They can best accomplish this by

Building Restoration,Inc. (BRI),enters into a contract to refurbish an old train depot for Casual Dining,Inc.,to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract,its performance will be

Water Rites LLC enters into a contract to site and dig a well for Rancho Verde. Water Rites completely performs. Rancho Verde is entitled to

Carol enters into a contract to hire Joanne to paint a portrait of Carol's favorite cat. Joanne agrees to do the portrait to Carol's satisfaction for $100. When Joanne finishes the portrait,Carol announces that she is not satisfied with the portrait because it does not look like her cat. Carol

Mutual Company enters into a contract to employ Neil as an investment manager for two years. During the first year,Neil is often absent without explanation and when present fails to adequately monitor and manage Mutual's investments. -Refer to Fact Pattern 16-1. Neil's performance is most likely

Hilton enters into a contract to erect a fence around Irene's cattle pasture. When the fence is built,Hilton's performance will be

Omar and Penn agree to develop a certain area of real estate. Environmental concerns force them to change their plans. The best method for Omar and Penn to discharge their contract by executing a new agreement with different performance is

Objective impossibility discharges a contract.

Gliding Light,LLC,and Hang Gliders,Inc.,are parties to a contract. They subse-quently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is

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