Deck 18: Contract Remedies

Question 1

If Alex cannot prove a particular element of his loss with reasonable certainty, he cannot recover any of the loss arising from breach of contract.

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

Equitable remedies result in money awards to the plaintiff.

Question 5

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

Question 6

Courts of equity generally will not grant specific performance of contracts for personal services.

Question 7

The test of foreseeable damages is subjective.

Question 8

Restitution requires a return of value to the aggrieved party.

Question 9

Under contract law, the deceived party can elect either to affirm and enforce the contract despite the misrepresentation or to disaffirm the contract and seek rescission.

Question 10

Equitable remedies are available any time the plaintiff chooses them over money damages.

Question 11

A plaintiff who has not sustained any loss resulting from the defendant's breach of contract cannot recover any damages.

Question 12

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.

Question 13

A liquidated damage clause that represents a reasonable approximation of the damages where the actual amount would be very difficult to determine will usually be upheld.

Question 14

A party with the power to avoid a contract will not lose that power by delaying the avoidance.

Question 15

AllMed Corporation may obtain an injunction against its head chemical engineer, Dwight, if they have an employment contract with Dwight and Dwight accepts a consulting job offer from AllMed's major competitor.

Question 16

The majority of states allow the injured party who has been induced to enter into a contract by fraud to recover only "out-of-pocket" damages equal to the difference between the value of what she has received and the value of what she has given for it.

Question 17

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.

Question 18

Bonnie has an employment contract with QualNeed Corporation which includes a clause requiring exclusive personal services.  If Bonnie takes on contract work with QualNeed's primary competitor, she is not breaching her agreement, as long as her status remains as an independent contractor with the competitor.

Question 19

A deceived party may seek a remedy under tort law, contract law, and restitution,  and may be compensated under more than one of these remedies.

Question 20

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

Question 21

Restitution can be obtained where a voidable contract is avoided.

Question 22

If the parties to a contract stipulate an amount that will be paid in the event of a breach, the courts will always enforce it.

Question 23

In which of the following situations is restitution available as a remedy?

A) As an alternative remedy for a party injured by breach.
B) For a party in default.
C) For a party who may not enforce the contract because of the statute of frauds.
D) All of these are situations in which restitution is available.

Question 24

Punitive damages are not always awarded as a deterrent in breach of contract cases.

Question 25

Consequential damages include lost profits and injury to person or property.

Question 26

Under the law of restitution, a remedy for misrepresentation is rescission (avoidance) of the contract by the deceived party, though when appropriate, the courts also will require restitution.

Question 27

A party with the power to avoid a contract may lose that power by affirming the contract.

Question 28

A party with the power to avoid a contract may lose that power by being subordinated to the intervening rights of third parties.

Question 29

Specific performance is the usual judicially granted remedy for breach of contract.

Question 30

Gina contracts with Lonnie to build a fence around her backyard in the next three weeks. If Lonnie breaches the contract, Gina can elect the remedy of damages or the remedy of injunctive relief to prevent Lonnie from providing his fencing services for anyone else until he completes her fence.

Question 31

Which of the following is correct with respect to election of remedies?

A) The Code follows the doctrine of election of remedies with respect to contracts for the sale of goods.
B) The remedy of specific performance is consistent with that of restitution.
C) A person who seeks an injunction may also seek incidental damages for the breach.
D) The injured party may have several choices of remedies, but cannot choose more than one remedy.

Question 32

To fully compensate a plaintiff for losses suffered for a breach of contract, punitive damages are always awarded.

Question 33

Incidental damages include lost profits and injury to person or property resulting from defective performance.

Question 34

The costs or losses an injured party avoids by not having to perform are not figured in the computation of damages.

Question 35

The remedy for misrepresentation is specific performance of the contract.

Question 36

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.

Question 37

Under the rule in Hadley v. Baxendale , only damages foreseeable at the time of entering into the contract can be recovered.

Question 38

If Wallace and Bruce 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.

Question 39

Where a party has been induced by fraud to enter a contract, the Restatement of Torts permits the injured party to recover out-of-pocket damages but expressly excludes recovery of benefit-of-the-bargain damages.

Question 40

Where a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in reliance on the contract.

Question 41

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.

Question 42

Jimmy made a contract to sell his townhouse to Thomas for $180,000. Two days later Jimmy changed his mind after discovering that he could have sold the property to another buyer for an additional $30,000. Thomas sues and asks the court to have the property conveyed to him at the price of $180,000. Thomas is seeking:

A) restitution.
B) punitive damages.
C) specific performance.
D) valid tender.

Question 43

What principle did the court apply in the case of Madison Square Garden Corp., Ill. v. Carnera ?

A) When damages are not adequate, an injunction may be used to enforce a negative covenant regarding exclusive services that are unique and extraordinary.
B) When services contracted for are unusual or extraordinary, the injured party cannot obtain injunctive relief.
C) An injured party's damages may not be reduced by mitigation for his failure to accept or seek other employment of a different or inferior kind.
D) Damages are recoverable only if they were foreseeable at the time of entering into the contract.

Question 44

Lynne agrees to buy Harriette's farm for $200,000 and puts $20,000 down. Then Lynne learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm in a good faith transaction for $190,000 a month later, she may:

A) keep Lynne's $20,000.
B) keep $10,000 of Lynne's down payment.
C) not keep any of the down payment money.
D) sue for specific performance.

Question 45

Busby contracts to build a house for Connell. Busby finishes approximately half of the house and quits. Connell files suit against Busby. Which remedy is not available?

A) Compensatory damages.
B) Specific performance.
C) Reformation.
D) Nominal damages.

Question 46

Vladimir entered into a contract to buy Daniel's collection of rare stamps. Vladimir mailed payment of $10,000 for the stamps to Daniel, but now Daniel tells Vladimir, "I'll never part with these stamps." Are the following remedies available to Vladimir?

A) Restitution: Yes; Specific Performance: Yes
B) Restitution: Yes; Specific Performance: No
C) Restitution: No; Specific Performance: Yes
D) Restitution: No; Specific Performance: No

Question 47

Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, "My truck will pull a 2,000 pound trailer with ease." Relying on Gordon's statement, Howard buys the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive and Howard sues for nonfraudulent misrepresentation, he can ask for:

A) punitive damages, but not out-of-pocket damages.
B) out-of-pocket damages, plus consequential damages.
C) out-of-pocket damages plus punitive damages.
D) nominal damages because Howard should have known the capacity of the truck.

Question 48

The usual remedy for breach of contract is:

A) injunction.
B) specific performance.
C) punitive damages.
D) money damages.

Question 49

In the case of Hadley v. Baxendale , the plaintiff was seeking damages for:

A) restitution.
B) lost profits.
C) failure to convey land.
D) failure to specifically perform a contract.

Question 50

Joann, an antique dealer, intentionally misrepresents the value of an antique bed, as $7,000 when she has reason to know the value is actually $3,500. Connie agrees to buy it for $6,500. In a state that uses the "out-of-pocket" rule, Connie's damage award would be:

A) $3,000.
B) $3,500.
C) $6,500.
D) $500.

Question 51

Carolyn agrees to sell Marianne an antique handmade lace tablecloth for $1,500. When Carolyn discovers that her cousin wants it too, she breaks the contract with Marianne. Marianne can ask the court to order:

A) injunctive relief.
B) specific performance.
C) restitution.
D) equitable rescission.

Question 52

Contract damages that put the injured party in as good a position as if the other party had performed are:

A) compensatory damages.
B) incidental damages.
C) consequential damages.
D) liquidated damages.

Question 53

To accomplish the basic purposes of contract remedies, which of the following limitations have not been imposed upon monetary damages?

A) Foreseeability.
B) Certainty.
C) Mitigation.
D) Restitution.

Question 54

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.

Question 55

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.

Question 56

A power of avoidance held by a party may be lost if:

A) the contract is disaffirmed.
B) there are delays in exercising the power.
C) the party lacks contractual capacity.
D) the rights of third parties are terminated.

Question 57

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.

Question 58

Glen enters into a contract giving Woody the right of first refusal on a tract of land owned by Glen . Glen subsequently offers the land to Leif without first offering it to Woody . An appropriate remedy for Woody to seek would be:

A) an injunction.
B) liquidated damages.
C) reformation.
D) punitive damages.

Question 59

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.

Question 60

Harry said to Marge, "I have a ring once owned by Marilyn Monroe. Would you like to buy it for $500?" Marge pays for the ring, but the next day a friend tells her that Harry had recently purchased the ring at a local store. Marge enjoys wearing the ring and wears it constantly for twelve months. Finally, she goes to Harry and says, "Here is the ring you lied about. Give me my $500." Most likely Marge will:

A) get her money back since Harry's statement was fraudulent.
B) not get her money back since she should have investigated the facts about the ring more carefully.
C) not get her money back since she is a good faith purchaser of merchandise.
D) not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

Question 61

Bob's brother, Steve, planned to visit over Labor Day weekend. Together they planned to build a deck in Bob's backyard. Bob ordered the lumber, concrete, nails, and other supplies to be delivered on Friday. He also arranged to rent a saw for the weekend (Sat., Sun., and Mon.) at a cost of $20 a day. When he went to pick up the saw, the store had already rented it. He drove all over town trying to borrow another but could only get one for Sunday, Monday, and Tuesday at a cost of $50 per day. Because they couldn't work on Saturday without a saw, Bob had to hire Mac at a cost of $80 to work with him on Tuesday and, of course, Bob had to take off from work. Calculate the damages to which Bob is entitled. Why? Explain.

Question 62

Scott, a minor, sells his digital camera to Hadley, who then sells it to Sherry. Under these circumstances:

A) Scott retains the power of avoidance of the contract, since he is a minor, even after the property is sold to Sherry.
B) if Sherry is a good faith purchaser for value and she buys the camera before Scott elects to rescind, no rescission is permitted.
C) Hadley and Sherry both received a voidable title regardless of whether they contracted in good faith.
D) if Scott wants to rescind the transaction after the sale to Sherry, a good-faith purchaser for value, he has no remedy or recourse.

Question 63

Explain consequential damages. Give an example.

Question 64

Explain three limitations on monetary damages.

Question 65

When will a court enforce a liquidated damage clause? When will a court refuse to enforce one?

Question 66

In which of the following situations will a court grant specific performance?

A) In a case involving breach of contract for the sale of real property.
B) In contracts for personal services.
C) Where goods are unique or rare.
D) Both in cases involving breach of contract for the sale of real property and w here goods are unique or rare .

Question 67

a. When is specific performance available to enforce a contract?
b. Under what circumstances will a court grant specific performance to enforce a contract involving personal services?
c. What remedy did the court award in the Madison Square Garden case? Explain why the court chose this remedy.

Question 68

What interests of injured parties are protected by remedies for a breach of contract?

Question 69

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) minimal damages.

Question 70

Bartow signed a contract to coach baseball for Washington High for a period of three years. After two years he is offered and accepts an assistant coaching position at State University. Contract law will not allow Washington High to ask for:

A) specific performance of his contract.
B) payment of compensatory damages.
C) an injunction against coaching at the university.
D) liquidated damages.

Question 71

Damages for reliance include expenses for:

A) lost profits.
B) injury to the person.
C) preparing to perform.
D) punishment of the breaching party.

Question 72

Wayne breaches a contract with Tim causing damages of $25,000 in lost profits, when damages under ordinary circumstances would be $17,000. Explain under what circumstances a court would award $25,000.

Question 73

Misrepresentation that induces a party to enter into a contract may give rise to remedies under:

A) the law of restitution only
B) contract law only
C) the law of restitution and contract law
D) the law of restitution, contract law, and tort law

Question 74

Eve agrees to sell her boutique to Shelley for $150,000. Shelley spends $60,000 on inventory and fixtures for the store, but then Eve repudiates the contract. Shelley is able to sell the inventory and fixtures for $45,000. Since Shelley cannot establish her lost profits with reasonable certainty, discuss what damages she should seek for Eve's breach of contract.