Deck 19: Discharge of Contracts

Question 1

A person who substantially performs a contract is liable for damages to the other party.

Answer 1

True

Question 2

The federal Consumer Credit Protection Act gives the debtor the right to rescind a credit transaction within three (3) business days when the transaction would impose a lien on the debtor's home.

Answer 2

True

Question 3

The parties may agree that the adequacy of performance under a contract is to be determined by a third party.

Answer 3

True

Question 4

In most bilateral contracts, the performances of the parties are concurrent conditions.

Question 5

Generally, contracts are discharged by the performance of the terms of the contract.

Question 6

Contracts may be discharged by the joint action of both contracting parties or, in some cases, by the action of one party alone.

Question 7

Payment by check is a conditional payment.

Question 8

The time for performance is typically essential in a contract for the sale of perishable property.

Question 9

In a case of the sale of property, time is not regarded as of the essence when there has not been any appreciable change in the market value or condition of the property and when the person who delayed does not appear to have done so for the purpose of speculating on a change in market price.

Question 10

A contract can be discharged by the expiration of the time period specified in the contract.

Question 11

A party who in good faith has provided substandard performance of a contract may sue to recover the payment specified in the contract.

Question 12

When a building contractor has substantially performed a contract to construct a building, the contractor is entitled to recover the full contract price.

Question 13

A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.

Question 14

There is no exact standard or test by which to determine whether contractual performance is substantial.

Question 15

If a debtor specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified; therefore, if a debtor specifies that a payment is to be made for a current purchase, the creditor may not apply the payment to an older balance.

Question 16

Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time is sufficient.

Question 17

The doctrine of substantial performance is concerned with the issue of whether an imperfect performance will be considered adequate to discharge one's responsibilities under a contract.

Question 18

An agreement that does not specify the time for performance is not binding because it is too indefinite.

Question 19

All courts hold that when an agreement requires satisfaction of the other party regarding the acceptance of an act, a reasonable person standard is used.

Question 20

A condition subsequent is a condition that must occur before a party to a contract has an obligation to perform under the contract.

Question 21

By operation of law, a party can be discharged in bankruptcy from debts.

Question 22

A seller's inability to obtain from any supplier the goods called for by the contract generally discharges the contract for impossibility of performance.

Question 23

In most bilateral contracts, the performances of the parties are __________.

A)conditions precedent
B)conditions subsequent
C)recurrent conditions
D)concurrent conditions

Question 24

A __________ is a condition that must occur before a party to a contract has an obligation to perform under a contract.

A)condition precedent
B)condition subsequent
C)concurrent condition
D)none of the above

Question 25

For the parties to enter into an accord and satisfaction that discharges the original obligation, there must be a bona fide dispute.

Question 26

The phrase "time is of the essence" means that:

A)the court is in a hurry to dispose of the case.
B)performance under the contract at the times specified in the contract is vital or essential.
C)the contract expressly states that time is of the essence.
D)the price stated in the contract is subject to change without notice.

Question 27

When a debtor makes a payment to a creditor specifying how it should be applied, the creditor must apply the payment:

A)as directed by the debtor.
B)to the oldest outstanding debt.
C)to the most recent outstanding debt.
D)to the largest outstanding debt.

Question 28

If no time period for performance is specified in a contract:

A)the contract is unenforceable.
B)time shall be of the essence.
C)a reasonable time for performance will be implied.
D)the time for performance will be ignored by the courts.

Question 29

In a mutual rescission, both parties, acting in good faith, renew their commitment to perform all obligations set forth in their original agreement.

Question 30

A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.

Question 31

When parties contract expressly for a particular subject matter, the contract is discharged if the subject matter is destroyed through no fault of either party.

Question 32

An offer to perform is known as a(n) __________.

A)rendering
B)offering
C)tinder
D)tender

Question 33

A contract provision requiring that suit be brought within one (1) year does not violate public policy, although the statute of limitations would allow two (2) years in the absence of such a contract limitation.

Question 34

In which case will performance on the exact date specified in the contract most likely be deemed essential?

A)a sale of goods that fluctuate rapidly in value
B)a sale of goods that remain stable in value
C)a sale of real estate
D)a sale of goods where no harm results from a delay in performance

Question 35

Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.

Question 36

A contract to build a house is deemed performed when:

A)there has been substantial performance of the contract.
B)the house is approved by the city housing inspectors.
C)the house is approved by the owner's architect.
D)the house is approved by the owner.

Question 37

A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.

Question 38

A Federal Trade Commission regulation gives a buyer three (3) business days in which to cancel a home-solicited sale of goods or services costing more than:

A)$25.
B)$50.
C)$100.
D)$500.

Question 39

A homeowner who refinances her home mortgage may cancel the transaction:

A)if the terms of the contract were less favorable than anticipated.
B)before midnight of the third full business day, as allowed by the federal Consumer Credit Protection Act.
C)only if she was the victim of fraud.
D)upon payment of a $1,000 penalty, as required by a Federal Trade Commission rule.

Question 40

To establish impossibility a party must show (1) the unexpected occurrence of an intervening act; (2) that the risk of the unexpected occurrence was not allocated by agreement or custom; and (3) that the occurrence made performance impossible.

Question 41

An art collector commissioned an artist to create a sculpture for the collector. The artist wanted a substantial amount of money for the sculpture. This caused the collector some worry regarding possible dissatisfaction with the artwork once it was completed. To ensure that payment would be made only if the collector was satisfied with the sculpture, a condition was written into the commission contract. It required that the collector would have to be satisfied with the artwork, relying on the collector's taste and judgment, before an obligation of payment would be created.
The artist never imagined that a collector could possibly refuse a creation of his and allowed the condition to be placed within the contract. At the completion of the sculpture, the collector claimed that she did not care for the artwork and therefore refused to pay. Can the artist force payment in this situation? Would it help if the artist could establish that the collector actually approves of the sculpture but has temporarily run short on funds, and that this is the true motivating factor in refusing to accept the sculpture?

Question 42

Kentucky Lumber and MillWork Company contracted to supply Rommell Company millwork for use in the construction of a school building. While the work was in progress, the Kentucky mill was destroyed by fire. For two months thereafter, Kentucky Lumber and MillWork Company supplied Rommell with mill work purchased by it from a third party. The Kentucky mill did not wish to continue this plan and declared that the contract was ended. Rommell brought an action against Kentucky Company to enforce the contract. How will the court decide?

Question 43

A change of law discharges a contract if the new law:

A)requires a license and none was required before.
B)requires the use of fireproof materials.
C)requires the use of antipollution devices.
D)prohibits the act called for by the contract.

Question 44

Sales of goods transactions are subject to a statute of limitations period of:

A)one (1) year.
B)two (2) years.
C)three (3) years.
D)four (4) years.

Question 45

Which of the following events excuses a promisor from performing his or her contractual obligations?

A)a riot
B)a shortage of materials necessary for production of goods and/or provision of services called for under the contract
C)an unanticipated increase in the cost of performance
D)destruction of the subject matter through no fault of either party

Question 46

If the parties to a contract agree to undo the agreement and return any consideration involved, the contract is discharged by:

A)mutual cancellation
B)mutual rescission.
C)novation
D)accord and satisfaction

Question 47

The death or disability of a party to a contract discharges the contract when:

A)personal services requiring peculiar skill are involved.
B)the payment of money is involved.
C)a house is to be painted.
D)none of the above.

Question 48

The parties may decide that their contract is not the one they want. They may then replace it with another contract. If they do, the original contract is discharged by __________.

A)solution
B)elocution
C)retribution
D)substitution

Question 49

To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called __________ clauses, and they are generally enforced by courts as written.

A)delta force
B)force majeure
C)magnum force
D)force corporeal

Question 50

If the costs of performing a contract have risen so unexpectedly and dramatically that performance would result in a substantial loss, the contract may be discharged on the grounds of:

A)commercial impracticability.
B)commercial impossibility.
C)economic frustration.
D)economic stability.

Question 51

Through which of the following circumstances may a contract be discharged?

A)mutual cancellation
B)mutual rescission
C)accord and satisfaction
D)all of the above

Question 52

Ordinarily, a temporary impossibility __________ the duty to perform.

A)suspends
B)excuses
C)discharges
D)none of the above

Question 53

Which of the following is not an element of an accord and satisfaction?

A)a bona fide dispute
B)a proposal to settle the dispute
C)performance of the agreement to settle the dispute
D)reservation of rights under the federal Consumer Credit Protection Act

Question 54

V3 was a successful singing group that contracted to perform at the "Metalsubstance" rock concert. V3 was aware that the promoter would sustain a substantial loss if the group failed to perform. The members of the group were stricken with a virus that confined them to their beds. The promoter sued for breach of contract. What is the probable result?

A)V3 is liable for damages for breach of contract.
B)The contract was discharged by impossibility of performance.
C)In order to avoid liability for breach of contract, V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date.
D)V3 will be deemed to have substantially performed the contract.

Question 55

Bankruptcy results in a discharge of contractual obligations by __________.

A)default
B)equity
C)operation of law
D)oath or affirmation

Question 56

When a second contract is made between two parties:

A)the first contract between the parties is cancelled.
B)the second contract immediately and automatically displaces the first.
C)the intent of the parties will control the legal effect of the agreement.
D)the modifying contract must be in writing.

Question 57

Sam Student had borrowed $1,000 from his cousin. Sam and the cousin became involved in a heated disagreement when the cousin began to press Sam for repayment of the loan. Finally, Sam wrote a check for $190 to the cousin and conspicuously wrote on the check in big letters that it was full and final payment of the $1,000 loan. In need of money, the cousin cashed the check and demanded the remaining $810 from Sam. Sam refused to pay, claiming that they had entered into an accord and satisfaction that discharged Sam's obligation to pay anything more. The cousin sued Sam. Discuss the probable outcome.