Business Law- Contracts

Quiz by jagdishlehal88, updated more than 1 year ago
Created by jagdishlehal88 over 5 years ago


Discharge, Breach, and Remedies

Resource summary

Question 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?
  • A. Specific performance
  • B. Punitive damages
  • C. Money damages
  • D. Rescission

Question 2

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?
  • 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.

Question 3

To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a: A. novation.
  • A. novation.
  • B. release.
  • C. rescission.
  • D. revocation.

Question 4

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?
  • 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.

Question 5

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

Question 6

Which of the following concepts affects the amount of monetary damages recoverable by the nonbreaching party when a contract is breached?
  • A. Foreseeability of damages
  • B. Mitigation of damages
  • C. Both foreseeability and mitigation of damages
  • D. Neither foreseeability nor mitigation of damages

Question 7

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:
  • 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.

Question 8

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?
  • 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.

Question 9

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?
  • 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

Question 10

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

Question 11

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?
  • 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.

Question 12

Green was adjudicated incompetent by a court having proper jurisdiction. Which of the following is t regarding contracts subsequently entered into by Green?
  • A. All contracts are voidable.
  • B. All contracts are valid.
  • C. All contracts are void.
  • D. All contracts are enforceable.

Question 13

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

Question 14

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

Question 15

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:
  • A. promissory estoppel.
  • B. accord and satisfaction.
  • C. anticipatory repudiation.
  • D. substantial performance.

Question 16

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

Question 17

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?
  • A. Material breach of the contract
  • B. Delay in performance
  • C. Tender
  • D. Assignment of rights

Question 18

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

Question 19

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:
  • 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.

Question 20

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?
  • 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

Question 21

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?
  • A. Punitive damages and compensatory damages
  • B. Specific performance and compensatory damages
  • C. Consequential damages or punitive damages
  • D. Compensatory damages or specific performance

Question 22

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?
  • 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.

Question 23

Which of the following types of mistake will generally make a contract unenforceable and allow it to be rescinded?
  • A. A unilateral mistake of fact
  • B. A mutual mistake of fact
  • C. A unilateral mistake of value
  • D. A mutual mistake of value

Question 24

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?
  • 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.

Question 25

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:
  • 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.

Question 26

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

Question 27

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

Question 28

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:
  • A. a purchase of land subject to a mortgage.
  • B. an assignment and delegation.
  • C. a third-party beneficiary contract.
  • D. a novation.

Question 29

Ordinarily, in an action for breach of a construction contract, the statute of limitations time period would be computed from the date the:
  • A. contract is negotiated.
  • B. contract is breached.
  • C. construction is begun.
  • D. contract is signed.
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