Business Law: Text & Cases, Chapter 18

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1

Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony

a. ​agree to sign a bill of sale.

b. ​exchange the car for the $3,000.

c. ​sign a receipt.

d. ​shake hands and go their separate ways.

b. ​exchange the car for the $3,000.

2

Even-Bilt Construction contracts to build a warehouse for Discount E-Sales Company. Even-Bilt substantially performs. Discount E-Sales is entitled to

a. damages.

b. nothing more.

c. to be excused from performance.

d. suspend performance.

b. nothing more.

3

Stephanie enters into a contract to work as a lifeguard at Tim’s Water Park for the summer in exchange for a weekly paycheck and free admission to the park’s attractions. If Stephanie works the entire summer and Tim’s provides her paychecks and free admission, the duties have been:

a. avoided.

b. breached.

c. performed.

d. rescinded.

c. performed.

4

Dharma enters into a contract to manage the operations of Esther’s dental office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be

a. ​canceled.

b. ​breached.

c. ​altered.

d. ​performed.

d. ​performed.

5

State University provides housing on campus and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be student at State. This requirement is

a. ​an implied condition.

b. ​a concurrent condition.

c. ​a condition subsequent.

d. ​a condition precedent.

d. ​a condition precedent.

6

Khan offers to buy Lonnie’s 1967 Mustang only if an appraiser estimates that it can be restored for less than a certain price. This requirement is

a. ​an implied condition.

b. ​a concurrent condition.

c. ​a condition subsequent.

d. ​a condition precedent.

d. ​a condition precedent.

7

Ann offers to buy Beth’s land only if an appraiser estimates that its current value is more than a certain price. Later, the appraiser deems the worth of the land to be less than Beth’s price. Ann and Beth’s obligations

a. ​must still be performed.

b. ​must now be renegotiated.

c. ​are on “hold.”

d. ​are discharged.

d. ​are discharged.

8

Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be

a. ​absolute.

b. ​complete.

c. ​material.

d. ​substantial.

d. ​substantial.

9

Ed’s Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to

a. damages.

b. nothing more.

c. to be excused from performance.

d. suspend performance.

b. nothing more.

10

Lew’s Landscaping Service substantially performs its contract with Metro Office Park. Metro’s duty to perform

a. ​remains absolute.

b. ​is discharged.

c. ​is excused.

d. ​is suspended.

a. ​remains absolute.

11

Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job.

Refer to Fact Pattern 18-1. ​Natalie’s performance most likely

a. ​discharges Medical Accounts from the contract.

b. ​has no effect on Medical Accounts’ performance.

c. ​undercuts Medical Accounts’ duties under the contract.

d. ​suspends Medical Accounts’ duty to perform.

a. ​discharges Medical Accounts from the contract.

12

Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job.

Refer to Fact Pattern 18-1. Natalie’s performance is most likely​

a. ​a material breach.

b. ​a minor breach.

c. ​a reasonable breach.

d. ​no breach.

a. ​a material breach.

13

Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez

a. ​must pay Josh the contract price.

b. ​must pay Josh half of the contract price as a compromise.

c. ​must pay Josh only the cost of his materials.

d. ​does not have to pay Josh.

d. ​does not have to pay Josh.

14

Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this contract requires

a. ​a mutual agreement to rescind.

b. ​an accord and satisfaction.

c. ​a novation.

d. ​a settlement agreement.

a. ​a mutual agreement to rescind.

15

Home Construction LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases—in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home’s obligation to perform is

a. ​breached.

b. ​discharged.

c. ​rescinded.

d. ​suspended.

a. ​breached.

16

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. ​specific performance.

b. ​mutual rescission.

c. ​accord and satisfaction.

d. ​novation.

b. ​mutual rescission.

17

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light’s place and assume all of its rights and duties under the contract. This is

a. ​a mutual agreement to rescind.

b. ​an accord and satisfaction.

c. ​a novation.

d. ​a settlement agreement.

c. ​a novation.

18

Barbara and Johann are parties to a contract. They agree on a novation. The novation requires

a. ​the existence of a previous, valid obligation.

b. ​consideration greater than $5,000.

c. ​performance of the original contract by all of the parties.

d. ​an accord and satisfaction.

a. ​the existence of a previous, valid obligation.

19

Renee contracts with Scott to pay him $25,000 for his work on Renee’s new album “Hip Pop.” After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on​

a. ​neither the accord nor the original obligation.

b. ​the accord only.

c. ​the accord or the original obligation.

d. ​the original obligation only.

c. ​the accord or the original obligation.

20

Leah and Mason are parties to a contract for the sale of Mason’s day care facility to Leah. Before the deal closes, they agree to substitute Nell for Leah as a party to the deal. This novation does not require

a. ​the existence of a previous, valid obligation.

b. ​the agreement by all of the parties to the new contract.

c. ​performance of the original contract by all of the parties.

d. ​a new, valid contract.

c. ​performance of the original contract by all of the parties.

21

Oren and Pat are parties to a contract for the management of Oren’s residential rental properties. A dispute arises between them over the obligations due under the contract. They negotiate a compromise and form a different agreement to substitute for the original one. This settlement agreement does not require

a. ​the existence of a previous, valid obligation.

b. ​the agreement by the parties to the new contract.

c. ​a third party.

d. ​a new, valid contract.

c. ​a third party.

22

Planners & Builders, Inc., enters into a contract with O’Reilly to refurbish a garage on his property as an auto repair shop. O’Reilly’s neighbor Nora challenges the project as a violation of the local zoning laws. A court orders a permanent halt to the project. O’Reilly’s contract with Planners & Builders is

a. breached.

b. discharged.

c. not affected.

d. suspended.

b. discharged.

23

Amy and Bob enter into a contract for Bob to perform waste management services for Amy’s commercial properties. Later, Bob alters a material term—increases the price—without Amy’s knowledge or consent. Amy

a. ​can alter a material term, such as the payment date, without Bob’s consent.

b. ​can treat the contract as discharged.

c. ​must adapt his performance accordingly.

d. ​must determine whether Bob’s alteration constitutes substantial performance.

b. ​can treat the contract as discharged.

24

Jason and Kelly enter into a contract for Jason to renovate Kelly’s house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit

a. ​must be filed within ten to twenty years, depending on state law.

b. ​can no longer be brought.

c. ​can be filed within four years after Kelly decides to sue.

d. ​must be filed between four and five years after Kelly decides to sue.

b. ​can no longer be brought.

25

Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre’s Soup Spoons Bistro with Dierdre’s payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation

a. ​Dierdre’s bank is liable to Contractors Service.

b. ​Dierdre is in breach of contract.

c. ​the contract is discharged.

d. ​the contract is suspended.

b. ​Dierdre is in breach of contract.

26

Omar and Penn want to discharge their contract by executing a new agreement with performance different from what they originally promised. They can best accomplish this by

a. ​a mutual agreement to rescind.

b. ​an accord and satisfaction.

c. ​a novation.

d. ​an alteration of the original contract.

b. ​an accord and satisfaction.

27

Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of uncommon fresh fruits and vegetables for the region every week for three months.

Refer to Fact Pattern 18-2. If Flora, the only employee of her company, dies before the deliveries begin, her contract with Harvesters is

a. breached.

b. discharged.

c. not affected.

d. suspended.

b. discharged.

28

Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of uncommon fresh fruits and vegetables for the region every week for three months.

Refer to Fact Pattern 18-2. If bad weather destroys Flora’s crops, the obligation to deliver produce to Harvesters is

a. ​breached.

b. ​discharged.

c. ​not affected.

d. ​suspended.

b. ​discharged.

29

Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of uncommon fresh fruits and vegetables for the region every week for three months.

Refer to Fact Pattern 18-2. If a strike of Harvester’s Grocery workers delays delivery of the produce beyond the time for performance, Flora’s contract with Harvesters is

a. breached.

b. discharged.

c. not affected.

d. suspended.

d. suspended.

30

Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of uncommon fresh fruits and vegetables for the region every week for three months.

Refer to Fact Pattern 18-2. If the market price for organic produce exceeds the price in the contract with Harvesters, and Flora decides not to deliver the order, her contract with the grocery is

a. ​breached.

b. ​discharged.

c. ​not affected.

d. ​suspended.

a. ​breached.

31

Ralph agrees to lease an apartment from Susan for one day to see Thomas, the president of the United States, deliver a speech in the street below. The speech is canceled three days before its scheduled date. The contract is

a. ​discharged.

b. ​not affected in terms of Ralph’s obligation to pay Susan.

c. ​postponed until another event is scheduled.

d. ​breached.

a. ​discharged.

32

Contractors LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before construction begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation

a. ​Contractors is in breach of contract.

b. ​the local zoning authority is in breach of contract.

c. ​the contract is discharged.

d. ​Discount must compensate Contractors for its lost profit.

c. ​the contract is discharged.

33

Rehab Center signs an agreement with Savers Bank to borrow $40,000 at 20 percent interest. Later, the state legislature passes a law lowering the maximum permissible rate of interest to 15 percent. Rehab’s best argument for avoiding payment to Savers is that

a. ​performance of the contract is commercially impracticable.

b. ​payment of the loan would force Rehab into bankruptcy.

c. ​the law has rendered performance of the contract illegal.

d. ​the specific subject matter of the contract has been destroyed.

c. ​the law has rendered performance of the contract illegal.

34

Lana agrees to work as Michelle’s personal assistant for one year but dies in the ninth month of the contract. Lana’s estate

a. ​is discharged from any contractual liability.

b. ​must find a competent assistant to fulfill the contract.

c. ​must pay damages.

d. ​must refund any money paid to Lana on the contract.

a. ​is discharged from any contractual liability.

35

Quinn contracts to provide ten tons of scrap steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage of scrap steel suddenly develops, making it impossible for Quinn to fulfill the contract for less than $5,000 per ton. Quinn’s best defense against performing the contract would be that

a. ​performance of the contract is commercially impracticable.

b. ​procuring the steel would force Quinn into bankruptcy.

c. ​the law has rendered performance of the contract illegal.

d. ​the specific subject matter of the contract has been destroyed.

a. ​performance of the contract is commercially impracticable.