Deck 13: Breach of Contract and Its Remedies

Question 1

Use this fact situation to answer the questions that follow. You are driving into the north entrance of a parking lot and pull up beside the ticket machine.At the south entrance facing out into the street is a sign that says: "The owners of this lot will not be responsible for any loss or damage however caused to a motor vehicle while parked in this lot." You take a ticket from the machine,park your car,and leave.When you come back,your car has been broken into and its contents stolen.You now wish to sue the parking lot owners.
The sign facing out into the street contains

A)an exclusion clause.
B)an express term of the contract.
C)a limited liability clause.
D)an ambiguous clause.
E)an implied term of the contract.

Answer 1

A

Question 2

Which of the following is NOT true about how a breach may occur?

A)Jack may breach the contract by acting in a manner that makes his promise impossible to perform.
B)Jack may breach a contract by expressly repudiating his liabilities.
C)Jack may breach a contract by calling James and advising him that he will be ten minutes late in arriving at the home of James to start painting the home.
D)Jack may breach a contract by tendering an actual performance that falls short of his promise.
E)Jack may breach a contract by failing to perform all his obligations.

Answer 2

C

Question 3

Jack agrees to paint the home of Jim.During the negotiations,Jim leads Jack to believe that he is in some financial predicament and so cannot pay the full fee.Jack agrees to give him a discount because of his predicament.A few days before Jack is due to perform,he learns from a source that Jim is a very wealthy man.Jack decides that because he has been tricked he will not honour his obligation to paint the home.He gives away all his tools and equipment and tells Jim that he cannot paint the home because his tools have been stolen.Jack's conduct is

A)a breach of contract by implied repudiation.
B)a breach of a condition.
C)not a breach of contract.
D)a breach of contract because Jack's conduct renders performance impossible.
E)a breach of contract by express repudiation.

Answer 3

D

Question 4

Jack has a contract to deliver goods to Jim on June 2.On the morning of June 2,Jack tells Jim that he will not be able to deliver the goods as promised.This is

A)an express repudiation of the contract.
B)a rescission of the contract.
C)an implied repudiation.
D)a minor breach.
E)a warranty.

Question 5

George Edwards has just bought a brand new furnace from Henry's Furnace Company.Towards the end of the installation of the furnace,a piece of piping falls on the furnace and scratches one side of it.Because of the scratch,George does not want to pay for the furnace.In a lawsuit by Henry's Furnace Company for payment

A)George will successfully defend the lawsuit because the scratch is a major breach and terminates the contract.
B)George will successfully defend the action because a brand new furnace is not the same as a scratched furnace.
C)George will successfully defend the lawsuit because the scratch fundamentally changed the contract.
D)George will lose the lawsuit because the scratch is a minor breach of the contract.
E)George will lose the lawsuit because he already provided a post-dated cheque for the full amount of the furnace.

Question 6

An injured party cannot elect to treat a breach as discharging him or her from its obligations under a contract unless

A)the breaching party elects to treat the breach as discharging him or her from contractual obligations.
B)the breaching party suffers financial loss.
C)the innocent party suffers financial loss.
D)the breach causes physical injury.
E)it is of the whole contract or an essential part of the contract.

Question 7

Terms in a contract agreed to by parties of unequal bargaining power that give an unfair advantage to the powerful party over the weaker party are referred to as

A)material terms.
B)warranties.
C)unconscionable terms.
D)conditions.
E)standard terms.

Question 8

Use the fact situation in Q5 to answer the related question that follows. In the same lawsuit,A Co.will argue that

A)the act of B Co.entering into the contract with C Co.on February 15 was an express repudiation of the contract.
B)its fax of February 2 did not constitute a repudiation of the contract.
C)not being a repudiation,the contract was still in force.
D)having repudiated the contract on February 15 in the way it did,the contract was at an end and A Co.was relieved from further performance.
E)all of the above

Question 9

A breach will discharge a contract if

A)the injured party elects to treat it as discharging the contract.
B)the breach is of the whole contract or an essential part of the contract.
C)the breaching party decides to abandon its obligations under the contract as a result of the breach.
D)the breach causes injury to the innocent party.
E)the innocent party suffers significant financial loss.

Question 10

A condition is

A)a fundamental event that must be fulfilled before another can happen.
B)a contractual obligation that must happen before another can take place.
C)a term of a contract that must be fulfilled by the promisee.
D)an essential term of a contract.
E)a contractual event that must take place before another can happen.

Question 11

Between the time when a contract is formed and the date of performance,a promisee is entitled to

A)notice of any anticipatory breach.
B)performance of the warranties.
C)notice of any intention on the party of a party to breach the contract.
D)notice of all conditions and warranties.
E)a continuous expectation of performance.

Question 12

A warranty is

A)a non-essential term of a contract.
B)a guarantee of performance given by one party to another.
C)a guarantee contained in a contract regarding the performance of an obligation.
D)a non-essential term of a contract that guarantees the performance of an obligation.
E)an essential term of a contract that guarantees the performance of an obligation.

Question 13

Even if the wording of an exemption clause applies to a situation that has occurred and the clause is not determined to be unconscionable at the time the contract was formed,a court may still refuse to enforce it if the injured party can

A)point to some paramount consideration of public policy sufficient to override the public interest and freedom of contract.
B)prove it is an unreasonable term.
C)prove a significant loss.
D)claim an unjust enrichment.
E)argue the clause is restitutionary in nature.

Question 14

Use the fact situation in Q8 to answer the related question that follows. If the sign had been facing you as you drove into the parking lot but had read "The owners of this parking lot will not be responsible for any damage to your car," in a lawsuit by you for damage to the car and for the stolen contents,

A)the parking lot owners will be liable for both the damage to your car and the lost contents.
B)the parking lot owners will not be liable because the damage and loss was beyond their control.
C)the parking lot owners will be liable for the damage to your car,but not the lost contents.
D)the words of the sign will be a good defence to your action because you saw it as you drove into the lot.
E)the parking lot owners will be liable for the lost contents,but not the damage to your car.

Question 15

Use this fact situation to answer the questions that follow. On January 1,A Co.enters into a contract with B Co.to build a stadium.The date of completion of the contract is August 1.On February 2,A Co.faxes to B Co.a letter that states that it is having problems with its steel girder supplier and that if these continue,it may not be able to complete on time,although it will try to find other suppliers if necessary.On February 15,B Co.enters into a contract with C Co.to build the stadium.On March 1,A Co. ,which finally received its shipment of steel girders,attended at the construction site to begin its work only to find C Co.there.In a lawsuit by A Co.against B Co. ,B Co.will argue that

A)by electing to treat the contract as at an end,it was entitled to enter into the contract with C Co.
B)A Co.'s fax of February 2 was an express repudiation of the contract.
C)in light of A Co.'s repudiation,B Co.was entitled to elect to treat the contract as at an end or to affirm the contract.
D)it elected to treat the contract as at an end.
E)all of the above

Question 16

A breach of a minor term in a contract

A)does not entitle an aggrieved party to abandon obligations under a contract.
B)will enable an aggrieved party to elect to treat the breach as discharging the contract.
C)does not entitle an aggrieved party to damages.
D)amounts to a frustration of the contract.
E)amounts to a termination of the contract.

Question 17

Use the fact situation in Q8 to answer the related question that follows. In deciding whether you should win your lawsuit against the parking lot owners,the court will

A)look at the type of damage to your car and the contents that was stolen.
B)look at how wealthy the parking lot owners are.
C)look at the wording on the sign.
D)look at the ticket.
E)look at whether the words on the sign were brought to your attention.

Question 18

Use the fact situation in Q5 to answer the related question that follows. In the same lawsuit,the court is most likely to find that

A)the fax of February 2 from A Co.was a material change in the contract.
B)the fax of February 2 from A Co.was an express repudiation of the contract.
C)the contract between B Co.and C Co.on February 15 was proper in the circumstances.
D)the fax of February 2 from A Co.was an implied repudiation.
E)the entering into the contract with C Co.on February 15 was an express repudiation of the contract by B Co.

Question 19

Jack has a contract to deliver goods to Jim on June 2.On May 31,Jack calls Jim and advises him that he cannot deliver the goods on June 2.This is

A)an anticipatory breach.
B)an early breach.
C)an implied repudiation.
D)an early termination.
E)a rescission.

Question 20

Any ambiguity in an exemption clause must be interpreted against the _________ party because that party had every chance to make the ambiguity more clear.

A)remote
B)third
C)drawing
D)assigning
E)minor

Question 21

Where the losses suffered by an innocent party for breach of contract are minimal in nature,an award of damages

A)may be outweighed by the litigation costs incurred by the innocent party.
B)will be a vindication of the innocent party.
C)will usually be pursued as a matter of principle.
D)establishes the validity of the innocent party's claim.
E)all of the above

Question 22

The concepts of unjust enrichment and restitution are part of the gradually expanding development in the area of

A)quasi tort.
B)quasi contract.
C)unconscionability.
D)damages.
E)substantial performance.

Question 23

Generally speaking,to successfully seek an equitable remedy for breach of contract,a plaintiff must

A)come to court with "clean hands."
B)be a party against whom the remedy would otherwise be awarded were he a defendant.
C)have paid a substantial consideration for the defendant's promise.
D)launch his lawsuit within a reasonable amount of time of the breach.
E)all of the above

Question 24

When a breach of contract has occurred,the purpose of damages is to

A)make the case an example to the rest of the community that this type of behaviour will not be tolerated.
B)have the damages reflect the severity of the breach.
C)compensate the wronged party for the loss incurred.
D)provide a deterrent for the breaking of moral and legal obligations.
E)punish the party who has committed the breach by making him or her pay compensation.

Question 25

Casey Construction abandoned its $23 million North County road project after spending $7 million.By this time,one progress payment of $5 million had been made.The county immediately contracted with Beachwood Corp.to take over and finish the project for $21 million.Expectation damages for Casey Construction would be

A)the difference between $16 and $21 million.
B)the difference between $21 and $23 million.
C)zero,since Casey did $2 million of work where no payment was received.
D)none;only consequential damages might apply.
E)the difference between $18 and $21 million.

Question 26

Where by reason of a breach of contract an innocent party suffers loss,

A)entitlement to damages will depend on the size of the loss occasioned by the breach.
B)entitlement to damages will only be considered if the innocent party actively takes steps to reduce its losses.
C)entitlement to damages will depend solely on the nature of the breach committed.
D)entitlement to damages will be dependent on the remedy chosen.
E)damages will automatically flow regardless of what the innocent party does.

Question 27

An exemption clause in a contract can protect a party from liability for

A)damages.
B)negligence.
C)deliberate acts of employees.
D)breach of contract.
E)all of the above

Question 28

The fact that a party enters into a contract with knowledge of special liability if it fails to perform

A)has a direct effect on the amount of damages that will be awarded against it.
B)has no material effect on the amount of damages that will be awarded against it.
C)has the effect of rendering the contract a nullity in the event of a breach.
D)has a minimal effect on the amount of damages that will be awarded against it.
E)none of the above

Question 29

Exemption clauses are

A)not used in contracts for the sale of goods.
B)strictly construed by the courts against the party that seeks to rely on them.
C)not considered by courts.
D)strictly construed by the courts against the parties for whom they are drawn.
E)not used in employer-employee contracts.

Question 30

Where the parties to a contract agree in advance on an amount of damages to be paid in the event of a breach,in order for the damages to be effective,

A)they can be any amount agreed on by the parties,who are presumed to know what they have contracted for.
B)they must be reasonable in the context of the contract.
C)they must be meant to penalize the party committing the breach.
D)they must relate solely to the breach,without regard to penalty or reasonableness.
E)none of the above

Question 31

Michael's Shop has a standard from contract that includes an exemption clause.Michael enters into an agreement with Jill.Jill signs the agreement without reading it because she says she trusts Michael.When Michael fails to perform his part of the agreement,Jill tries to sue.The court,in considering the effect of the exemption clause,will most likely

A)seek the opinion of Jill on how the clause will affect her.
B)strictly construe the clause against Michael.
C)require that experts provide it with a report on the effect of the clause.
D)refuse to apply the court.
E)apply the clause.

Question 32

There are three circumstances when a court will refuse to apply an exemption clause to protect the breaching party from liability.Which of the following is NOT one of these circumstances?

A)when the clause does not apply to the circumstances
B)when there is a strong public policy reason against enforcement
C)when the clause was unconscionable at the time of contracting
D)when the parties were of equal bargaining power at the time of contracting

Question 33

Which of the following is NOT true?

A)Not every breach may distract a contract.
B)If a breach is of a minor term,the contract is still binding on both parties.
C)A party to a contract may breach it by acting in a way that makes performance impossible.
D)If a breach is of an essential term,the party not in breach is still bound,but the party committing the breach may elect to discharge the contract.
E)A major term may be broken in only a minor respect.

Question 34

In contract,the material time for measuring damages is

A)the time of the wrongdoing.
B)both the time of wrongdoing and the time the contract is formed.
C)the time the breach occurs.
D)the time the contract is formed.
E)the time the tort was committed.

Question 35

An award of damages

A)seldom comes out of a case for breach.
B)aims to place the injured party in the same position as if the contract had been completed.
C)is an "equitable remedy" for breach.
D)usually accompanies a rescission.
E)is a tool used by the courts to act as a punishment to those who breach a contract.

Question 36

The consequences of a purely economic approach to breach of contract can result in

A)the decision by a party to ensure that all contractual obligations are met.
B)the decision by a party not to perform a contractual obligation.
C)the decision by a party to breach the contract.
D)the decision by a party to actually weigh the consequences of breach against its reward.
E)the decision by a party to merely perform a contractual obligation.

Question 37

General damages are

A)damages that cannot be precisely calculated in monetary terms.
B)damages that are meant to punish the wrongdoer,whether calculable or not.
C)damages that include both readily calculable damages and damages that cannot be precisely calculated.
D)damages that can be readily calculated.
E)all of the above

Question 38

The effect of the doctrine of substantial performance is that

A)where there is substantial performance,a court will entertain a suit for damages for breach of contract.
B)a promisee cannot seize upon a trivial failure of performance to avoid his or her obligations under a contract.
C)where there is substantial performance,a court will not entertain a suit for damages for breach of contract.
D)the promisee who has substantially performed a contract is entitled to damages.
E)the promisor who has substantially performed a contract is entitled to damages.

Question 39

Liability in contract

A)acts as an incentive to commit a breach of contract.
B)acts as an economic deterrent to committing a breach of contract.
C)acts as a punishment for committing a breach of contract.
D)acts as both an economic deterrent and a punishment for committing a breach of contract.
E)all of the above

Question 40

In a contract of sale,where the seller fails to deliver goods on time,the measure of damages will normally be

A)the loss or losses that is/are reasonably foreseeable by the seller at the time the contract was made.
B)only the loss or losses that occur(s)at the time of the breach.
C)the loss or losses that is/are reasonably foreseeable by the seller at the time of the breach.
D)all losses,whether or not reasonably foreseeable by the seller.
E)only the loss or losses that is/are reasonably foreseeable by the buyer at the time the contract was made.

Question 41

Farmer Gibson ordered an irrigation pump from Sinclair Farm Supply,where he has an open account.When they attempted to deliver,he refused to accept,claiming he could get a better deal elsewhere.Legally,Gibson could be charged for all damages that naturally flow from this breach.Assuming Sinclair made free deliveries and it had more pumps than customers,the damages would include

A)the damages associated with Gibson not being able to properly irrigate his land.
B)only the expected profits on this item.
C)transportation as well as a restocking charge.
D)only two-way transportation to Gibson's farm.
E)expected profits,delivery charge,and a restocking charge.

Question 42

Hastro Toys Mfg.operates on a "just-in-time" inventory basis.When one of its suppliers missed a 2:00 p.m.delivery of a key component,the entire assembly line was shut down for the balance of the day.Hastro is suing its supplier for ________ damages.

A)reliance
B)expectation
C)liquidated
D)consequential
E)general

Question 43

Onar Development stopped progress payments to its general contractor,Shape Construction.Upon the advice of their lawyer,Shape decided to sue for rescission of the contract rather than collect damages for breach.Shape will most likely

A)collect under quantum meruit.
B)ask for specific performance.
C)get expectation damages.
D)file for bankruptcy.
E)get an injunction.

Question 44

Speedy Courier Service has a phrase on their order form that reads,"We deliver on time or our delivery is free." In legal terminology,this is

A)an advertising gambit.
B)liquidated damages.
C)a promotional come-on.
D)a self-imposed penalty clause.
E)consequential damages.

Question 45

How can the judgment creditor extract money from the judgment debtor?

A)by obtaining a garnishee order against the creditor's wages
B)by instructing a court-appointed councilor to set up a payment schedule,which,if not followed,can amount to contempt of court for the debtor
C)by relying on the plaintiff's legal council,who is responsible for collecting the money awarded in the judgment
D)by requesting the sheriff to levy execution against the assets of the debtor
E)by having the court collect the money through its authorized collection agency

Question 46

Specific performance will NOT generally be available for breach of a contract for

A)sale of goods.
B)contracts requiring unique personal skill or judgment.
C)sale of goods that have been custom-made.
D)sale of works of art.
E)sale of antiques.

Question 47

An order of specific performance

A)would always apply to the buyer of real property (i.e. ,land and buildings).
B)requires one party to a contract to refrain from acting in a particular manner.
C)requires that the defendant do a certain act,usually something not specified in the contract.
D)requires that the defendant do a certain act,usually fulfilling his or her part of the contract.
E)requires that the party in breach pay a specific monetary sum to the other party.

Question 48

Which of the following is NOT an equitable remedy?

A)injunction
B)specific performance
C)rescission
D)punitive award
E)quantum meruit

Question 49

A breach of a minor term will not discharge a contract,but a major term that is broken in only a minor respect will discharge a contract.

Question 50

Lambhair Corp.contracted with Prof.Jones for a two-week series of seminars with employees in the Appliance Division.Prof.Jones put in 10 days of specific preparation only to have the series cancelled at the Appliance Division and rescheduled at the Tool Division.This change required Prof.Jones to put in another 5 days of specific preparation.This change was a breach of the original contract.Prof.Jones is entitled to what type of damages?

A)consequential
B)nominal
C)general
D)reliance
E)expectation

Question 51

Danny agreed to sell a large painting to Mary for $5000.It has a sentimental value to Mary-being a painting of her house in 1938.Before delivery,Danny discovered the sentimental interest of Mary and refused to sell it at the agreed-upon price.Which of the following statements is correct?

A)Mary is entitled to damages of $5000.
B)Mary could claim the remedy of specific performance because the painting is so special to her.
C)Danny can demand compensation for the painting's full esthetic value.
D)Mary is not entitled to an equitable remedy because the subject of the contract is not real property.
E)Danny does not have to deliver the painting at the original price because of the doctrine of mistaken value.

Question 52

Carlos,an antique dealer,contracted to buy an antique dining room set at a garage sale for $700.He made a down payment and agreed to return on the weekend to pick it up.Then Carlos contacted a former customer who he knew wanted such an item.This customer agreed to pay $850 for the set.However,when Carlos returned on the weekend to where the garage sale had been,he found that the dining room set had been sold to someone else for $900 and had already been hauled away.Carlos was given back his down payment cheque.Does Carlos have any other claim to damages?

A)Yes,he does,for mental anguish.
B)No,he doesn't;there are no further damages.
C)Yes,he does,for $150 of consequential damages.
D)Yes,he does,for $200 of consequential damages.
E)Yes,he does,for $200 of expectation damages.

Question 53

A genuine estimate of damages contained in a contract as a term of the contract can best be described as

A)reliance damages.
B)liquidated damages.
C)nominal damages.
D)expectation damages.
E)consequential damages.

Question 54

Chin Chang agreed to buy an antique dresser from Pedro for $2500.He made a down payment of $750 and agreed to return and pick the item up at a later date.However,when he returned,Pedro refused to give him the furniture,saying that he had found a buyer who would pay a higher price.Chin Chang may be entitled to which of the following equitable remedies?

A)injunction
B)specific performance
C)rectification
D)compensation
E)damages

Question 55

In rare circumstances courts have awarded punitive damages if the behaviour of the breaching party is considered to be

A)malicious.
B)in bad faith.
C)high-handed.
D)arbitrary.
E)any of the above

Question 56

Nominal damages are

A)assessed with purely personal or passionate reasons.
B)assessed where a party commits a tort within the context of a contract.
C)awarded to serve as an acknowledgement to a breach of contract where no appreciable loss has been sustained by the promisee.
D)used for allowing the case to go to a higher court.
E)where damages are determined by local bylaws.

Question 57

The Lockheart Community has a restrictive covenant that does not allow more than a 1 metre solid fence within 3 metres of any public walkway.Ignoring the covenant,Mr.Bailey starts to build a 2 metre high rock wall along his front sidewalk.Mr.Bailey might be subject to

A)a restraining order.
B)the sheriff's ordnance writ.
C)the community compliance marshal.
D)the building inspector.
E)a court injunction.

Question 58

Rachel had been looking forward to her two weeks of vacation in Paris,France,with a Never Late Inc.tour group.The day before the tour was to leave Toronto,Rachel was told that the entire tour had to be cancelled because of a "mix-up in hotel accommodations." She was immediately given a full refund of her money.What sort of additional damages is Rachel entitled to?

A)consequential-since breach was the result of negligence in making hotel reservations
B)general-since there was mental anguish
C)nominal-to recognize the breach that did occur
D)none-since she received all her money back
E)expectation-for cost of a substitute tour

Question 59

Construction of the shopping centre was to be completed by October 15 (late penalties were included in the contract)and tenants such as FabricLand would move in by November 1.However,the contractor for the shopping centre was 43 days late in completing and now FabricLand is suing the shopping centre owner for ________ damages,and the shopping centre owner is suing the contractor for ________ damages.

A)expectation;liquidated
B)expectation;consequential
C)consequential;reliance
D)general;liquidated
E)general;consequential

Question 60

All of the following may bar someone from obtaining an equitable remedy EXCEPT

A)if to do so would affect an innocent purchaser.
B)if the plaintiff is a minor and the contract couldn't be enforced against him or her.
C)if the plaintiff her- or himself did not have "clean hands."
D)if there were unreasonable delays in taking the other party to court.
E)if no attempt was made by the defendant to mitigate damages.

Question 61

Damages are not available for an anticipatory breach because the time for performance has not arrived.

Question 62

The doctrine of substantial performance says that there will be rescission if each party does not substantially perform its obligations under the contract.

Question 63

Unconscionable terms in a contract can be unfair even if they are agreed to by parties of equal bargaining power.

Question 64

It is contrary to public interest to allow an exemption clause to insulate an offending party for conduct approaching criminal or fraudulent behaviour.

Question 65

Specific performance will always be granted to a purchaser of land.

Question 66

Exemption clauses are generally strictly construed against the party that is not seeking to rely on them.

Question 67

Jack's supplier fails to deliver the products Jack has ordered at the required time.Jack is expected to do what he can to reduce his losses.This is called mitigation of losses.

Question 68

The failure of an innocent party to take steps to reduce the loss arising from a breach of contract is of no consequence at all.

Question 69

The expression that damages must flow naturally from the breach of a contract has been meant to refer to only those damages that actually flow from the breach.

Question 70

Punitive damages will often be awarded where the conduct of the party in breach is high-handed,malicious,arbitrary,or highly reprehensible.

Question 71

The remedy of rescission involves suspending the operation of a contract temporarily.

Question 72

It is fair to say that the damages for breach of contract may well exceed the damages arising in tort.

Question 73

If one party breaches a condition of a contract,the other party will generally be entitled to repudiate the contract.

Question 74

Where a creditor serves an employer with an order that requires the employer to retain a portion of the debtor's wages each payday,the employer has been served with an execution order.

Question 75

An express repudiation only occurs when one party to a contract actually tells the other party that it refuses to perform its obligations under the contract.

Question 76

A promissor is entitled to enforce a contract when it has performed to the best of its ability even though its performance does not comply in a major way with the requirements of a contract.

Question 77

A willful or negligent act by the promissor that destroys its ability to fulfill its contractual promises amounts to a breach of contract.

Question 78

An injunction is available in a variety of circumstances,including where the contract does not contain a negative covenant.

Question 79

An anticipatory breach occurs where a party to a contract fails to perform its obligations under the contract on the date set for performance of the contract.

Question 80

Where a person has a contractual obligation,he or she has to perform the whole obligation before being entitled to enforce the contract.He or she cannot perform part of the obligation and then seek to enforce the contract.