Deck 9: Third Party Rights and Discharge

Question 1

A breach of contract occurs only when a party fails to perform all of his or her duties under a contract.

Answer 1

False

Question 2

The measurement of compensatory damages for breach of contract is the same for all types of contracts.

Answer 2

False

Question 3

An assignment of rights in real estate often cannot be prohibited.

Answer 3

True

Question 4

A life insurance contract involves an intended beneficiary.

Question 5

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

Question 6

A breach of contract entitles the nonbreaching party to sue for monetary damages.

Question 7

An incidental beneficiary can sue directly to enforce a promisor's promise.

Question 8

Compensatory damages compensate an injured party for damages arising from the loss of a bargain caused by a breach of contract.

Question 9

Compensatory damages compensate the injured party for injuries sustained due to loss of the contract and also punish the party that breached the contract.

Question 10

It is legally necessary to notify the obligor of any assignment of rights to a third party.

Question 11

Performance can be accomplished by tender.

Question 12

Expenses that are caused directly by a breach of contract-such as those in?curred to obtain performance from another source-are compensatory dam?ages.

Question 13

A right can be assigned even if the assignment will significantly alter the risks or duties of the obligor.

Question 14

Only personal contracts can be discharged by agreement of the parties.

Question 15

A party seeking to recover compensatory damages cannot also recover in?cidental damages.

Question 16

Objective impossibility discharges a contract.

Question 17

As long as a contract is personal in nature, all rights under the contract can be assigned.

Question 18

A party is entitled to cancel a contract based on the other party's material breach.

Question 19

An insurance policy is an example of a right that can be assigned.

Question 20

A transfer of contract duties to a third party is an assignment.

Question 21

Pat, a world famous musician and composer, agrees to give ten piano les?sons to Quinn in exchange for $1,000. Pat's attempt to delegate his con?tract to Ruth, an in?experienced pianist, will probably be

A) permitted because contracts may be freely delegated.
B) permitted because the contract is concerned with music lessons.
C) prohibited because contracts may not be freely delegated.
D) prohibited because Pat and Ruth have very different skill levels.

Question 22

Richly Merchandise, Inc., contracts with Stand-Rite Contractors to build a store. Stand-Rite assigns the contract to Town Builders, which has a poor record of completing projects. Richly could most successfully argue that the con?tract cannot be assigned because

A) Richly did not consent to the assignment.
B) Richly did not receive adequate consideration for the assignment.
C) the assignment will materially increase the risk of nonperformance.
D) Town Builders was not an original party to the deal.

Question 23

Will owes Jenny $1,000. Brad owes Will $1,000. Will unconditionally assigns his rights to Jenny. Will's right to the $1,000 is then

A) unchanged.
B) extinguished.
C) incidental.
D) assigned to a court.

Question 24

A contract may include a clause stating that no damages can be recovered for a certain type of breach.

Question 25

In a contract for a sale of goods, the usual measure of compensatory dam?ages is the difference between the contract price and the market price.

Question 26

The measure of damages for breach of a construction contract depends on which party breaches and when.

Question 27

Normally, when a nonbreaching party has been damaged by a breach of contract, he or she does not have a duty to mitigate those damages.

Question 28

Ordinarily, the remedy for a seller's breach of a contract for a sale of real estate is damages.

Question 29

Restitution involves one party's recapture of a benefit through which another party has been unjustly enriched.

Question 30

Special damages are awarded for damage caused by special circumstances beyond a contract.

Question 31

Stephanie's sale of rights she has under a contract with Runway Retail, Inc., to buy the retailer's clothing overstock is

A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) none of the choices.

Question 32

The failure of one party to perform a contract entitles the other party to rescind it.

Question 33

Whether a contract's limitation-of-liability clause will be enforced depends on the type of breach that the clause excuses.

Question 34

A party seeking to recover in quasi contract must show that there was an actual contract or agreement between the parties.

Question 35

Marco and Fred enter into a contract for the sale of Marco's apartment for which Fred agrees to pay him $100,000. Marco cannot prohibit Fred from transferring his right to the ownership of the apartment because such a prohibition is

A) against public policy.
B) immoral.
C) unconscionable.
D) a crime.

Question 36

A contract can include a provision stating that no damages can be recovered for certain types of breaches.

Question 37

To rescind a contract, each party essentially advances to the position he or she would have been in if the contract had been fully executed.

Question 38

The measure of damages for the breach of a contract for a sale of land de?pends on which party breaches and when.

Question 39

A liquidated damages provision specifies that a certain amount to be paid in the event of a future default or breach of contract.

Question 40

Liquidated damages provisions are usually not enforceable.

Question 41

Handy Hardware Store agrees to hire Ilsa for one year at a salary of $500 per week. When Handy cancels the contract, Ilsa spends $100 to obtain a similar job that pays $450 per week for a year. Ilsa is entitled to recover

A) the amount of the wages that Handy promised only.
B) the difference between the wages at the two jobs only.
C) the difference between the wages at the two jobs plus $100.
D) $100 only.

Question 42

Lily is a farmer. When bad weather destroys her crop, her obliga?tion to deliver it un?der an outstanding contract with Macro Food Corporation is

A) discharged.
B) completely enforceable.
C) enforceable only to the extent of finding an alterna?tive supply.
D) enforceable only to the extent of transferring to the next year's crop.

Question 43

Leonardo contracts to install automatic watering troughs in Kendall's dairy barn. Leonardo then becomes seriously ill and contracts with Jake to install the troughs. Jake is unreliable and never shows up to install the troughs. Kendall can sue

A) no one.
B) Jake only.
C) Leonardo only.
D) Jake or Leonardo.

Question 44

Valley View Farms enters into a contract to sell Sarah's Corner Shop a truckload of eggs from free-range chickens. If Valley View fails to deliver the eggs, Sarah's

A) must pay for the eggs to avoid a suit for breach.
B) does not have to pay for the eggs and can sue Valley View for breach.
C) must pay for the eggs to file suit against Valley View for breach.
D) does not have to pay for the eggs, but cannot then sue Valley View for breach.

Question 45

Phil enters into a contract to hire Bob's Building Business to build a warehouse for Phil. The contract specifies that the warehouse should be built with HighQual Bricks. When construction starts, HighQual Bricks cannot provide enough bricks for the warehouse. Bob's Building Business substitutes Big Red Bricks, which are comparable in quality and price to HighQual Bricks. This deviation from the contract

A) discharges Phil from the contract.
B) has no effect on the contract.
C) increases Bob's Building Business's duties under the contract.
D) suspends Bob's Building Business's duty to perform.

Question 46

Even-Flo Hydraulics enters into a contract to repair valves and fittings in Fiesta Company's plant. If Even-Flo breaches the contract, Fiesta can

A) do nothing but make a deal with a different service provider.
B) do nothing but temporarily suspend operations and wait.
C) file a criminal complaint against Even-Flo.
D) sue Even-Flo for damages.

Question 47

Clarice pays Damien $10,000 to design an ad campaign for her Sweetwater Coffee Stand chain. The next day, Damien tells Clarice that he has accepted a job in New York and cannot design her campaign. She files a suit against Damien. As compensatory damages, she can recover

A) $100,000.
B) $10,000.
C) $1,000.
D) $0.

Question 48

Tristan promises to paint Katy's house in exchange for Lila's promise to plant trees on Tristan's property. This is

A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) none of the choices.

Question 49

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.

Question 50

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.

Question 51

Dylan enters into a contract to manage the operations of Cash's accounting office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be

A) breached.
B) rescinded.
C) altered.
D) performed.

Question 52

App Developers, Inc. (ADI), enters into a contract with Carmen, the chief executive officer of SalesCorp, to create an app for the firm. To fulfill the contract, ADI hires Max and ten other student interns. With respect to the contract, Max is

A) an intended beneficiary.
B) an incidental beneficiary.
C) a delegatee.
D) an assignee.

Question 53

Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance else?where for $5,500. Dondi's measure of damages is

A) $1,000.
B) $1,000 plus incidental damages.
C) incidental damages only.
D) $0.

Question 54

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.

Question 55

Red's Plumbing Service substantially performs its contract with Shady Grove Condominiums, Inc. Shady Grove is entitled to

A) damages.
B) nothing more.
C) repudiation.
D) alteration.

Question 56

Juan and Isidro enter into a contract to buy, restore, and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is

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

Question 57

Cooper's Brakes, Inc., enters into a contract with Byron's Service to fix Cooper's hydraulic equipment. Byron delays the repair for three days, but is not aware that Cooper loses a certain percentage of profit each day the equipment is out of service. Cooper is most likely to be awarded

A) consequential damages.
B) nominal damages.
C) punitive damages.
D) no damages.

Question 58

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.

Question 59

Hybrid Corporation enters into a contract with Insure Service, Inc. (ISI), to obtain health insurance for Hybrid employees. If ISI breaches the contract and Hybrid is awarded compensatory damages, the purpose would be to

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

Question 60

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.

Question 61

Pam borrows $5,000 from Quality Auto Sales to buy a car. When Pam does not pay the loan or return the car, Quality wants to transfers the right to the payment to Rapid Collection Agency. Rapid agrees to pay Quality for this right, but for a price that is less than the amount owed. Can Quality transfer this right to Rapid without Pam's consent? If so, and Quality committed fraud in the deal with Pam, could Pam legiti?mately refuse to pay Rapid? Explain.

Question 62

Drew contracts to sell a residential duplex to Evan. The contract pro?vides 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 be?cause it is

A) a liquidated damages clause.
B) a mitigation clause.
C) a nominal damages clause.
D) a penalty clause.

Question 63

SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide surface material for Royal'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) meant to pay for additional liquid sealant in the event of damage.
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.

Question 64

National Drilling Company ships its only pump to American Hydraulics Corporation, the manufacturer, for repair. National hires Overland Transport, Inc., to take the pump to American Hydraulics and to return it to National as soon as the repair is complete. National is forced to sus?pend operations without a pump, but Overland does not know this. National expects to be without the pump for five days and to lose profits of $5,000. When the pump is not returned by the end of the fifth day, National rents a pump at a cost of $100 per day. Overland delays five more days before returning the pump. National files a suit against Overland, asking for compensatory, consequential, and punitive damages. Will National recover?

Question 65

Lou and Mira want to rescind their contract under which Lou sold an MP3 player to Mira for $50. To rescind the contract

A) Lou must return the $50 and Mira must return the player.
B) Lou must return the $50 only.
C) Mira must return the player only.
D) the parties can keep the "benefits" of their bargain.

Question 66

Clutch Auto Parts enters into a contract with Bio Health Club for discounted memberships for Clutch's employees. Bio breaches the contract and Clutch enters into a contract with Apex Fitness for the same service at a lower price. Clutch might be awarded nominal damages to

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

Question 67

Ralph contracts to sell his Double-R Ranch to Samantha on May 1. On April 20, Ralph tells Samantha that he will not go through with the deal. Samantha can recover

A) the cost of any property that Samantha would find suitable.
B) the cost of a similar, nearby ranch.
C) the Double-R Ranch.
D) nothing.

Question 68

Rural Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certain location. Rural advances Shovel 10 percent of its cost. If the parties rescind the contract, Shovel's refund of the payment would be

A) a penalty.
B) liquidated damages.
C) restitution.
D) specific performance.

Question 69

Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders Corporation. The agreement states that delivery is to be within "3" days, although the parties intend "30" days. Refined cannot convince Select to amend the contract. Refined should seek

A) damages.
B) reformation.
C) rescission.
D) specific performance.

Question 70

Sonny agrees to buy a unique collection of Olympics memorabilia for $7,000 from Jana and sends $1,500 as a down payment. When Sonny sends Jana the rest of the price, she refuses to ship the collection. Sonny should seek

A) a penalty.
B) liquidated damages.
C) restitution.
D) specific performance.

Question 71

Clear Creek Corporation enters into a contract with Brightside Management Associates to manage and maintain Clear Creek's apartment complex. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is

A) a limitation-of-liability clause.
B) an exculpatory clause.
C) a liquidated damages clause.
D) a quasi contract.

Question 72

A contract between E-Debits, Inc., and First Credit Corporation includes a provision excluding liability as a result of fraud. This provision is

A) enforceable because the parties are protected from liability.
B) enforceable because the parties consented to it.
C) enforceable if the parties have equal bargaining power.
D) not enforceable.