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Discharge, Breach, and Remedies

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Business Law- Contracts

Question 1 of 29

1

Which of the following penalties is usually imposed against an accountant who, in the course of performing professional services, breaches contract duties owed to a client?

Select one of the following:

  • A. Specific performance

  • B. Punitive damages

  • C. Money damages

  • D. Rescission

Explanation

Question 2 of 29

1

Davis, an inventor, developed a new product, but lacked money to get the product to the marketplace. Before creating a corporation to raise capital, Davis leased office space and equipment, entered into con¬tracts with third parties, and identified investors. Who has liability for preincorporation debts?

Select one of the following:

  • A. Davis is liable until the corporation assumed the debts in novation.

  • B. Davis is liable until the articles of incorporation were filed.

  • C. If this corporation is never formed, Davis is not liable.

  • D. If this corporation is never formed, the unpaid third parties must write off the debt because no corporate entity existed at the time debt was incurred.

Explanation

Question 3 of 29

1

To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a:
A. novation.

Select one of the following:

  • A. novation.

  • B. release.

  • C. rescission.

  • D. revocation.

Explanation

Question 4 of 29

1

On May 25, Year 1, Smith contracted with Jackson to repair Smith’s cabin cruiser. The work was to begin on May 31, Year 1. On May 26, Year 1, the boat, while docked at Smith’s pier, was destroyed by arson. Which of the following statements is t with regard to the contract?

Select one of the following:

  • A. Smith would not be liable to Jackson because of mutual mistake.

  • B. Smith would be liable to Jackson for the profit Jackson would have made under the contract.

  • C. Jackson would not be liable to Smith because performance by the parties would be impossible.

  • D. Jackson would be liable to repair another boat owned by Smith.

Explanation

Question 5 of 29

1

To prevail in common-law action for fraud in the inducement, a plaintiff must prove that the:

Select one of the following:

  • A. defendant was an expert with regard to the misrepresentations.

  • B. defendant made the misrepresentations with knowledge of their falsity and with an intention to deceive.

  • C. misrepresentations were in writing.

  • D. plaintiff was in a fiduciary relationship with the defendant.

Explanation

Question 6 of 29

1

Which of the following concepts affects the amount of monetary damages recoverable by the nonbreaching party when a contract is breached?

Select one of the following:

  • A. Foreseeability of damages

  • B. Mitigation of damages

  • C. Both foreseeability and mitigation of damages

  • D. Neither foreseeability nor mitigation of damages

Explanation

Question 7 of 29

1

In general, a clause in a real estate contract entitling the seller to retain the purchaser’s down payment as liquidated damages if the purchaser fails to close the transaction is enforceable:

Select one of the following:

  • A. in all cases, when the parties have a signed contract.

  • B. if the amount of the down payment bears a reasonable relationship to the probable loss.

  • C. as a penalty, if the purchaser intentionally defaults.

  • D. only when the seller cannot compel specific performance.

Explanation

Question 8 of 29

1

Parc hired Glaze to remodel and furnish an office suite. Glaze submitted plans that Parc approved. After completing all the necessary construction and painting. Glaze purchased minor accessories that Parc rejected because they did not conform to the plans. Parc refused to allow Glaze to complete the project and refused to pay Glaze any part of the contract price. Glaze sued for the value of the work performed. Which of the following statements is t?

Select one of the following:

  • A. Glaze will lose because Glaze breached the contract by not completing performance.

  • B. Glaze will win because Glaze substantially performed and Parc prevented complete performance.

  • C. Glaze will lose because Glaze materially breached the contract by buying the accessories.

  • D. Glaze will win because Parc committed anticipatory breach.

Explanation

Question 9 of 29

1

In June, Mullin, a general contractor, contracted with a town to renovate the town square. The town council wanted the project done quickly and the parties placed a clause in the contract that for each day the project extended beyond 90 working days, Mullin would forfeit $100 of the contract price. In August, Mullin took a three-week vacation. The project was completed in October, 120 working days after it was begun. What type of damages may the town recover from Mullin?

Select one of the following:

  • A. Punitive damages because taking a vacation in the middle of the project was irresponsible

  • B. Compensatory damages because of the delay in completing the project

  • C. Liquidated damages because of the clause in the contract

  • D. No damages because Mullin completed performance

Explanation

Question 10 of 29

1

Which of the following actions will result in the discharge of a party to a contract?

Select one of the following:

  • A. Prevention of performance

  • B. Accord and satisfaction

  • C. Both prevention of performance and accord and satisfaction

  • D. Neither prevention of performance nor accord and satisfaction

Explanation

Question 11 of 29

1

In Year 2, Dart bought an office building from Graco under a written contract signed only by Dart. In Year 15, Dart discovered that Grace made certain false representations during their negotiations concerning the building’s foundation. Dart could have reasonably discovered the foundation problems by Year 8. Dart sued Graco claiming fraud in the formation of the contract. Which of the following statements is t?

Select one of the following:

  • A. The parol evidence rule will prevent the admission into evidence of proof concerning Dart’s allegations.

  • B. Dart will be able to rescind the contract because both parties did not sign it.

  • C. Dart must prove that the alleged misrepresentations were part of the written contract because the contract involved real estate.

  • D. The statute of limitations would likely prevent Dart from prevailing because of the length of time that has passed.

Explanation

Question 12 of 29

1

Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following is t regarding contracts subsequently entered into by Green?

Select one of the following:

  • A. All contracts are voidable.

  • B. All contracts are valid.

  • C. All contracts are void.

  • D. All contracts are enforceable.

Explanation

Question 13 of 29

1

Which of the following statements is t regarding the effect of the expiration of the period of the statute of limitations on a contract?

Select one of the following:

  • A. Once the period of the statute of limitations has expired, the contract is void.

  • B. The expiration of the period of the statute of limitations extinguishes the contract's underlying obligation.

  • C. A course of action barred by the statute of limitations may not be revived.

  • D. The running of the statute of limitations bars access to judicial remedies.

Explanation

Question 14 of 29

1

Under a personal services contract, which of the following circumstances will cause the discharge of a party's duties?

Select one of the following:

  • A. Death of the party who is to receive the services

  • B. Cost of performing the services has doubled

  • C. Bankruptcy of the party who is to receive the services

  • D. Illegality of the services to be performed

Explanation

Question 15 of 29

1

Nagel and Fields entered into a contract in which Nagel was obligated to deliver certain goods to Fields by September 10. On September 3, Nagel told Fields that Nagel had no intention of delivering the goods required by the contract. Prior to September 10, Fields may successfully sue Nagel under the doctrine of:

Select one of the following:

  • A. promissory estoppel.

  • B. accord and satisfaction.

  • C. anticipatory repudiation.

  • D. substantial performance.

Explanation

Question 16 of 29

1

For which of the following contracts will a court generally grant the remedy of specific performance?

Select one of the following:

  • A. A contract for the sale of a patent

  • B. A contract of employment

  • C. A contract for the sale of fungible goods

  • D. A contract for the sale of stock that is traded on a national stock exchange

Explanation

Question 17 of 29

1

Which of the following actions (if taken by one party to a contract) generally will discharge the performance required of the other party to the contract?

Select one of the following:

  • A. Material breach of the contract

  • B. Delay in performance

  • C. Tender

  • D. Assignment of rights

Explanation

Question 18 of 29

1

Which of the following circumstances best describes a landlord's constructive eviction of a tenant who has a written lease for the property?

Select one of the following:

  • A. The landlord starts a legal proceeding against the tenant for failure to pay rent.

  • B. The landlord sues the tenant because the tenant complained to a government agency about the condition of the premises.

  • C. The landlord refuses to provide utilities to the tenant.

  • D. None of the answer choices are examples of constructive eviction.

Explanation

Question 19 of 29

1

Omega Corp. owned a factory that was encumbered by a mortgage securing Omega’s note to Eagle Bank. Omega sold the factory to Spear, Inc., which assumed the mortgage note. Later, Spear defaulted on the note, which had an outstanding balance of $15, 000. To recover the outstanding balance, Eagle:

Select one of the following:

  • A. may sue Spear only after suing Omega.

  • B. may sue either Spear or Omega.

  • C. must sue both Spear and Omega.

  • D. must sue Spear first and then proceed against Omega for any deficiency.

Explanation

Question 20 of 29

1

Grill deals in the repair and sale of new and used clocks. West brought a clock to Grill to be repaired. One of Grill's clerks mistakenly sold West's clock to Hone, another customer. Under the Sales Article of the U.C.C., will West win a suit against Hone for the return of the clock?

Select one of the following:

  • A. No, because the clerk was not aware that the clock belonged to West

  • B. No, because Grill is a merchant to whom goods had been entrusted

  • C. Yes, because Grill could not convey good title to the clock

  • D. Yes, because the clerk was negligent in selling the clock

Explanation

Question 21 of 29

1

Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled?

Select one of the following:

  • A. Punitive damages and compensatory damages

  • B. Specific performance and compensatory damages

  • C. Consequential damages or punitive damages

  • D. Compensatory damages or specific performance

Explanation

Question 22 of 29

1

Bronson is a residential tenant with a 10-year written lease. In the absence of specific provisions in the lease to the contrary, which of the following statements is correct?

Select one of the following:

  • A. The premises may not be sublet for less than the full remaining lease term.

  • B. Bronson may not assign the lease.

  • C. The landlord’s death will automatically terminate the lease.

  • D. Bronson’s purchase of the property will terminate the lease.

Explanation

Question 23 of 29

1

Which of the following types of mistake will generally make a contract unenforceable and allow it to be rescinded?

Select one of the following:

  • A. A unilateral mistake of fact

  • B. A mutual mistake of fact

  • C. A unilateral mistake of value

  • D. A mutual mistake of value

Explanation

Question 24 of 29

1

On June 15, 20X1, Alpha, Inc., contracted with Delta Manufacturing, Inc., to buy a vacant parcel of land Delta owned. Alpha intended to build a distribution warehouse on the land because of its location near a major highway. The contract stated that “Alpha's obligations hereunder are subject to the vacant parcel being rezoned to a commercial zoning classification by July 31, 20X2.” Which of the following statements is correct?

Select one of the following:

  • A. If the parcel is not rezoned by July 31, and Alpha refuses to purchase it, Alpha would not be in breach of contract.

  • B. If the parcel is rezoned by July 31, and Alpha refuses to purchase it, Delta would be able to successfully sue Alpha for specific performance.

  • C. The contract is not binding on either party because Alpha's performance is conditional.

  • D. If the parcel is rezoned by July 31, and Delta refuses to sell it, Delta's breach would not discharge Alpha's obligation to tender payment.

Explanation

Question 25 of 29

1

Master Mfg., Inc., contracted with Accur Computer Repair Corp. to maintain Master's computer system. Master's manufacturing process depends on its computer system operating properly at all times. A liquidated damages clause in the contract provided that Accur pay $1,000 to Master for each day that Accur was late responding to a service request. On January 12, Accur was notified that Master's computer system failed. Accur did not respond to Master's service request until January 15. If Master sues Accur under the liquidated damage provision of the contract, Master will:

Select one of the following:

  • A. win, unless the liquidated damage provision is determined to be a penalty.

  • B. win, because under all circumstances liquidated damage provisions are enforceable.

  • C. lose, because Accur's breach was not material.

  • D. lose, because liquidated damage provisions violate public policy.

Explanation

Question 26 of 29

1

A tenant renting an apartment under a 3-year written lease that does not contain any specific restrictions may be evicted for:

Select one of the following:

  • A. counterfeiting money in the apartment.

  • B. keeping a dog in the apartment.

  • C. failing to maintain a liability insurance policy on the apartment.

  • D. making structural repairs to the apartment.

Explanation

Question 27 of 29

1

A tenant renting an apartment under a 3-year written lease that does not contain any specific restrictions may be evicted for:

Select one of the following:

  • A. counterfeiting money in the apartment.

  • B. keeping a dog in the apartment.

  • C. failing to maintain a liability insurance policy on the apartment.

  • D. making structural repairs to the apartment.

Explanation

Question 28 of 29

1

Wren purchased a factory from First Federal Realty. Wren paid 20% at the closing and gave a note for the balance secured by a 20-year mortgage. Five years later, Wren found it increasingly difficult to make payments on the note and defaulted. First Federal threatened to accelerate the loan and foreclose if Wren continued in default. First Federal told Wren to make payment or obtain an acceptable third party to assume the obligation. Wren offered the land to Moss, Inc., for $10,000 less than the equity Wren had in the property. This was acceptable to First Federal and at the closing Moss paid the arrearage, assumed the mortgage and note, and had title transferred to its name. First Federal released Wren. The transaction in question is:

Select one of the following:

  • A. a purchase of land subject to a mortgage.

  • B. an assignment and delegation.

  • C. a third-party beneficiary contract.

  • D. a novation.

Explanation

Question 29 of 29

1

Ordinarily, in an action for breach of a construction contract, the statute of limitations time period would be computed from the date the:

Select one of the following:

  • A. contract is negotiated.

  • B. contract is breached.

  • C. construction is begun.

  • D. contract is signed.

Explanation

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