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Law
Q:
Intended beneficiaries can sue to enforce a contract.
Q:
If a contract requires that performance be rendered directly to a third party, the third party is an intended beneficiary.
Q:
Both intended and incidental beneficiaries acquire legal rights in a contract.
Q:
An "assignment of all rights" creates an assignment of rights but not a delegation of duties.
Q:
There are no exceptions to the rule that any duty can be delegated.
Q:
All that a delegator needs to do to make a delegation effective is to express an intention to make the delegation.
Q:
A delegator is a party who transfers his or her obligation under a contract to another party.
Q:
A transfer of contract duties to a third party is an assignment.
Q:
No contract can prohibit delegation of the duties of the contract.
Q:
A valid delegation of duties relieves the delegator of the obligation to perform under the contract.
Q:
It is legally necessary to notify the obligor of any assignment of rights to a third party.
Q:
The assignment of the same contract right to two different parties automatically cancels both assignments.
Q:
Rights to receive funds can be assigned.
Q:
A right can be assigned even if the assignment will significantly alter the risks or duties of the obligor.
Q:
In most cases, a contract that prohibits its assignment cannot be assigned.
Q:
An assignment of rights in real estate often cannot be prohibited.
Q:
An insurance policy is an example of a right that can be assigned.
Q:
As long as a contract is personal in nature, all rights under the contract can be assigned.
Q:
In an assignment, the assignee obtains only those rights that the assignor had.
Q:
An assignee's rights are subject to the defenses that the obligor has against the assignor.
Q:
An assignee has a right to demand performance from the obligor.
Q:
A transfer of contract rights to a third person is generally prohibited.
Q:
When rights under a contract are assigned unconditionally, the rights of the assignor are extinguished.
Q:
A transfer of contractual rights to a third party is an assignment.
Q:
Banks may not assign their loan contracts to other firms.
Q:
In an assignment, the party receiving the rights is known as the assignor.
Q:
Privity of contract establishes the basic concept that third parties have no rights in contracts to which they are not parties.
Q:
General Equity Corporation enters into a contract with Honi, who agrees to create artwork for General's main office building. Honi delays and eventually refuses to perform. Meanwhile, General contracts to sell the building to Ideal Investments, Inc., but before the transaction is complete, Jewel Funds Company offers to pay a higher price. General refuses to transfer the building to Ideal. In separate suits by General against Honi and by Ideal against General, each plaintiff seeks specific performance. How might the court rule in each case, and why?
Q:
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 suspend 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?
Q:
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.
Q:
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.
Q:
Mitchell orally agrees to pay Lorena to plant and harvest a quarter of Mitchell's farm acreage for four soybean seasons. After Lorena prepares the land and plants the first crop, Mitchell says that their deal is off. Lorena can most likely recover
a. in quasi contract.
b. nothing.
c. in restitution.
d. on the parties' existing contract.
Q:
Karson orally agrees to pay Jaime to plant and harvest a quarter of Karson's farm acreage for four corn-planting seasons. After Jaime prepares the land and plants the first crop, Karson says that their deal is off. Jaime can most likely recover
a. in quasi contract.
b. in reformation.
c. in restitution.
d. on the parties' existing contract.
Q:
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.
Q:
Tristan hires Stefani to perform at Tristan's Club, but she breaches the agreement to accept a higher-paying job at Rock Star Arena. Tristan files a suit against her. The court will most likely
a. award damages to Tristan.
b. cancel Stefani and Rock Star's contract.
c. order Stefani to perform the contract.
d. reform Tristan and Stefani's contract.
Q:
Grady enters into a contract to buy 440 acres from Hollis to expand Grady's ranch. Hollis breaches the contract. Grady's normal remedy is
a. damages.
b. reformation.
c. rescission.
d. specific performance.
Q:
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.
Q:
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.
Q:
Bella Homes enters into a contract to buy 132 acres from Watershed Holdings to subdivide and sell in fifth-acre lots for Pristine Meadow, a residential development.
If Watershed breaches the contract, Bella's remedy would most likely be
a. a certain ratio of the amount that Watershed has in liquidated funds.
b. a percentage of Watershed's unrealized profit.
c. the difference between the land's contract and market prices.
d. specific performance.
Q:
Bella Homes enters into a contract to buy 132 acres from Watershed Holdings to subdivide and sell in fifth-acre lots for Pristine Meadow, a residential development.
If Bella breaches the contract, Watershed's remedy would most likely be
a. a certain ratio of the amount that Bella has in liquidated funds.
b. a percentage of Bella's unrealized profit.
c. the difference between the land's contract and market prices.
d. specific performance.
Q:
Rural Power 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. The parties rescind the contract. Shovel's refund of the payment is
a. a penalty.
b. liquidated damages.
c. restitution.
d. a breach of contract.
Q:
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.
Q:
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.
Q:
Drew contracts to sell a residential duplex to Evan. The contract provides 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 because it is
a. a liquidated damages clause.
b. a mitigation clause.
c. a nominal damages clause.
d. a penalty clause.
Q:
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.
Q:
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.
Q:
Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager for two years. If Rig breaches the contract, Scott has a duty to
a. do nothing.
b. reduce the damages that Scott might otherwise suffer.
c. rescind the contract with Rig.
d. punish Rig and set an example to deter others from similar acts.
Q:
Earl holds 1,000 pounds of perishable fruit in storage for Fresh Food Corporation. Fresh Food does not pay for the storage. Earl sells the fruit to Green Grocers, Inc. This sale represents
a. a breach of contract.
b. a mitigation of damages.
c. rescission and restitution.
d. specific performance.
Q:
Fashion Retail Center enters into a contract with Great Promotions, Inc., to provide Fashion with a plan to retool its merchandising strategy. If Great Promotions breaches the contract, Fashion has a duty to
a. reduce the damages that Fashion might otherwise suffer.
b. reduce the loss that Great Promotions might otherwise suffer.
c. punish Great Promotions and deter others from similar acts.
d. take no action.
Q:
Windstar Heli-Pads, Inc., enters into a contract to employ Valerie as an on-site project manager for two years. Windstar breaches the contract. Valerie has a duty to
a. do nothing.
b. reduce the damages that Valerie might otherwise suffer.
c. breach the contract with Windstar.
d. sue Windstar to deter others from similar acts.
Q:
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.
Q:
Pure Oil Company enters into a contract with QuikBilt, Inc., to construct an oil pipeline to withstand specific conditions. If QuikBilt fails to meet this standard, which is construed as a breach of contract and a breach of a duty of care, Pure might be awarded punitive damages to
a. establish, as a matter of principle, that QuikBilt acted wrongfully.
b. provide Pure with funds for a foreseeable loss beyond the contract.
c. provide Pure with funds for its loss of the bargain.
d. punish QuikBilt and deter others from similar acts.
Q:
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.
Q:
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. compensatory damages.
b. nominal damages.
c. punitive damages.
d. no damages.
Q:
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.
Q:
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.
Q:
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.
Q:
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.
Q:
Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance elsewhere for $5,500. Dondi's measure of damages is
a. $1,000.
b. $1,000 plus incidental damages.
c. incidental damages only.
d. $0.
Q:
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.
Q:
Kris contracts to work exclusively for Little Manufacturing Company during May for $5,000. On April 30, Little cancels the contract. Kris finds another job during May but earns only $3,000. Kris files a suit against Little. As compensatory damages, Kris can recover
a. $3,000.
b. $2,000.
c. $1,000.
d. $0.
Q:
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.
Q:
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.
Q:
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.
Q:
A contract can include a provision stating that no damages can be recovered for certain types of breaches.
Q:
Whether a contract's limitation-of-liability clause will be enforced depends on the type of breach that the clause excuses.
Q:
A contract may include a clause stating that no damages can be recovered for a certain type of breach.
Q:
A party seeking to recover in quasi contract must show that there was an actual contract or agreement between the parties.
Q:
A party seeking to recover in quasi contract must show that he or she has been unjustly enriched.
Q:
Quasi contract allows a court to act as if a contract exists when there is no contract.
Q:
The failure of one party to perform a contract entitles the other party to rescind it.
Q:
Specific performance is an equitable remedy requiring exactly the performance that was specified in a contract.
Q:
Restitution involves one party's recapture of a benefit through which another party has been unjustly enriched.
Q:
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.
Q:
A liquidated damages provision is the same as a penalty provision.
Q:
A penalty provision specifies a certain amount to be paid in the event of a default or breach of contract.
Q:
Liquidated damages provisions are usually not enforceable.
Q:
A liquidated damages provision specifies that a certain amount to be paid in the event of a future default or breach of contract.
Q:
When a breach of contract occurs, the innocent injured party has a duty to mitigate the damages.
Q:
The duty owed under the mitigation of damages doctrine depends on the nature of the contract.