1. Eagle Products, Inc., breaches its contract with Federated Stores Company. Federated files a suit to recover compensatory damages, which are normally assessed to
a. compensate a nonbreaching party for the loss of a bargain.
b. establish, in the absence of a loss, that a party acted wrongfully.
c. pay for harm caused by special circumstances beyond a contract.
d. penalize a breaching party.
2. Carol pays Dick $10,000 for Dick to design an advertising campaign for Carol’s health club. The next day, Dick tells Carol that he has accepted a job in New York and cannot design the campaign. Carol files a suit against Dick. As compensatory damages, Carol can recover
a. $100,000.
b. $10,000.
c. $1,000.
d. $0.
3. Pam contracts to buy a Quotient-brand computer set-up from Regal Systems for $5,000, but Regal fails to deliver. Pam buys the computer elsewhere for $6,500. Pam’s measure of damages is
a. $1,500 only.
b. $1,500 plus incidental damages.
c. incidental damages only.
d. $0.
4. Development Associates (DA) agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through with the deal on the agreed date, when the market price of the land is $17,000. DA may recover
a. $17,000.
b. $15,000.
c. $2,000.
d. $0.
5. Ace Contractors, Inc., agrees to build a motel for Best Motels Corporation. The project proceeds according to plan, but before it is done, Best tells Ace to quit. Ace 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.
6. Mona contracts to repair a computer for New Data, Inc. (NDI). Mona knows that without the computer, NDI will lose a sale. Mona does not perform as promised. NDI files a suit against Mona. As consequential damages, NDI can recover
a. the cost of a new computer.
b. the difference between Mona’s price and the actual cost of repair.
c. the loss of profit from the lost sale.
d. nothing.
7. Natural Expeditions needs a tent for a mountain-climbing trip and orders one for $500 from Outdoor Supplies. Natural does not tell Outdoor about the trip, or that it must receive the tent by July 1 or it will lose $10,000. Outdoor ships the tent July 15. Natural can recover
a. $10,500.
b. $10,000.
c. $500.
d. nominal damages.
8. Business Office, Inc., hires Carl to repair a computer on site for $400, but Carl does not show up as agreed. Business Office hires Dan to do the job for $350. Business Office may recover from Carl
a. compensatory damages.
b. consequential damages.
c. nominal damages.
d. punitive damages.
9. Ron breaches his lease with Sunny Properties and vacates the premises six months before the end of the term. In some states, the landlord would have to
a. avoid reletting the premises to recover any damages from Ron.
b. make reasonable efforts to relet the premises to mitigate the damages recoverable from Ron.
c. relet the premises to recover any damages from Ron.
d. sell the premises to recover any damages from Ron.
10. Home Delivery Corporation and Interstate Transport, Inc., sign an agreement that provides for the payment of “$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000.” This is
a. a liquidated damages clause.
b. a mitigation of damages clause.
c. a nominal damages clause.
d. a penalty clause.
Fact Pattern 18-1 (Questions 11-12 apply)
AAA Properties, Inc., leases an office building to Business Corporation (BC). At the time, the amount of damages on BC’s default is difficult to determine, so the parties reasonably estimate, and the lease provides, that if BC defaults, AAA is entitled to $50,000 as “liquidated damages.”
11. Refer to Fact Pattern 18-1. BC defaults, and AAA asks for the $50,000. Under the decision in Case 18.2, Green Park Inn, Inc. v. Moore, this amount is most likely
a. an unenforceable penalty because at the time of the lease, the amount of damages on default was too difficult to determine.
b. an unenforceable penalty because the amount is excessive.
c. liquidated damages because at the time of the lease, the amount of damages on default was difficult to determine and the estimate is reasonable.
d. liquidated damages because the lease refers to the amount as “liquidated damages.”
12. Refer to Fact Pattern 18-1. Suppose that the amount stipulated as “liquidated damages” is $1 million. Under the decision in Case 18.2, Green Park Inn, Inc. v. Moore, this amount is most likely
a. an unenforceable penalty because at the time of the lease, the amount of damages on default was too difficult to determine.
b. an unenforceable penalty because the amount is excessive.
c. liquidated damages because at the time of the lease, the amount of damages on default was difficult to determine and the estimate is reasonable.
d. liquidated damages because the lease refers to the amount as “liquidated damages.”
13. 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.
14. Ira orally agrees to buy a unique collection of sports memorabilia for $1,000 from Jane and sends her $250 as a down payment. When Ira sends her the rest of the price, Jane refuses to ship Ira the collection. Ira should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
15. Alan contracts for the sale of an ancient vase, a Renaissance painting, and a modern mansion to Beth. Alan breaches the contract. Beth files a suit against Alan. The court will most likely award specific performance for
a. the mansion only.
b. the painting and the vase only.
c. the painting or the vase only, but not both.
d. the mansion, the painting, and the vase.
16. Alpha Commodities, Inc., agrees to deliver ten tons of sheet metal to Beta Builders Corporation. The agreement states that delivery is to be within “3” days, although the parties intend “30” days. Alpha cannot convince Beta to amend the contract. Alpha should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
17. As part of a sale of Ad-Vance, Inc., Britney’s product-promotion firm, she signs a covenant not to compete that is unreasonable in its essential terms. To prevent undue hardship, a court will most likely
a. convert the unreasonable terms into reasonable ones.
b. declare that the entire contract is illegal.
c. decree that the sale of the business must be undone.
d. do nothing.
18. Fred files a suit against Gail. To recover from Gail in quasi contract, Fred must show all of the following except
a. Fred conferred a benefit on Gail, reasonably expecting to be paid.
b. Fred did not act as a volunteer in conferring a benefit on Gail.
c. Gail was in a better financial position than Fred.
d. Gail would be unjustly enriched if she kept the benefit without paying.
19. Outstate Properties, Inc. (OPI), agrees to sell certain acreage to Pia. OPI repudiates the deal. Pia sues OPI and recovers damages. Pia can now obtain
a. an amount in a quasi-contractual recovery.
b. damages representing restitution.
c. specific performance of the deal.
d. nothing more.
20. To avoid liability for intentional injuries, Alaskan Power Corporation includes in its contracts an exculpatory clause. This is
a. enforceable if the other parties are protected from liability.
b. enforceable if the other parties consent to it.
c. enforceable if the other parties have equal bargaining power.
d. not enforceable.