Performance & Remedies Flashcards
When there has been no performance by either party, which of the following events generally will result in the discharge of a party’s obligation to perform as required under the original contract?
Accord and satisfaction Mutual rescission
Yes Yes .
Yes No
No Yes
C is incorrect because accord and completed satisfaction of the accord is a discharge of the contract.
No No
Yes Yes
A is correct because two methods of discharge of the original contract are by accord (agreement to accept a different performance) and satisfaction whereby the substituted performance is performed, and mutual rescission, whereby both parties agree to the discharge of their obligations (mutual rescission).
Wrong Answer
No Yes
C is incorrect because accord and completed satisfaction of the accord is a discharge of the contract.
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.
B. Contract is breached.
The statute of limitations will begin to run when a cause of action accrues. In this example, that is when the contract is breached.
D. Contract is signed.
The statute of limitations will begin to run when a cause of action accrues. In this example, that is when the contract is breached.
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.
D. Illegality of the services to be performed.
This is the best answer, as it is always correct. If a service becomes illegal to perform, it is treated as having become objectively impossible, and performance is always excused.
Wrong answer
C. Bankruptcy of the party who is to receive the services.
Bankruptcy of a party does not necessarily discharge a personal services contract.
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.
A. Win, unless the liquidated damage provision is determined to be a penalty.
Correct, because parties can agree in advance of a breach the amount of damages to be paid in the event of a future default (breach). To be valid and enforceable, at the time the contract was entered into, damages must be difficult to estimate in the event of a breach, and the amount set as damages must be a reasonable estimate (not excessive). If the amount is unreasonable (excessive), the liquidated damage clause is deemed a penalty and the clause in unenforceable.
Wrong Answer
B. Win, because under all circumstances liquidated damage provisions are enforceable.
This answer is incorrect because if either at the time of contract formation, damages would not be difficult to estimate, or the amount set as damages is considered as a penalty, the liquidated damage clause would be unenforceable.
Which of the following actions could result in the discharge of a party to a contract?
Prevention of performance Accord and satisfaction
Yes Yes
Yes No No Yes No No
Yes Yes
An accord is acceptance of an offer and satisfaction by accord is a discharge of the contract. If an accord (for example, a partial payment check marked “paid in full” for an unliquidated debt) is accepted, this is a satisfaction and discharges the contract. If performance of a contract is prevented because of objective impossibility or commercial impracticability, performance is discharged
Wrong Answer
Yes No
If an accord (for example, a partial payment check marked “paid in full” for an unliquidated debt) is accepted, this is a satisfaction and discharges the contract.
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.
D. Compensatory damages or specific performance.
This answer is correct because Hodges has a choice of these remedies. Because the subject of the contract (realty) is unique (no two pieces of property with the same legal description) and damages are really inadequate because performance is more valuable than money damages, Hodges can file a petition for specific performance requiring Kaye to deed the property to Hodges. Hodges could elect instead to file a lawsuit for breach of contract and seek damages (for the loss of the bargain) actually sustained.
Wrong Answer
B. Specific performance and compensatory damages.
This answer is incorrect because an aggrieved party, upon breach of contract, cannot have both specific performance (requiring Kaye to deed the property to Hodges), and compensatory damages for failure to deliver the deed. To allow both would result in an unjust enrichment for Hodges.
Teller brought a lawsuit against Kerr ten years after an oral contract was made and eight years after it was breached. Kerr raised the statute of limitations as a defense.
Which of the following allegations would be most important to Kerr’s defense?
A. The contract was oral.
B. The contract could not be performed within one year from the date made.
C. The action was not timely brought because the contract was entered into ten years prior to the commencement of the lawsuit.
D. The action was not timely brought because the contract was allegedly breached eight years prior to the commencement of the lawsuit.
D. The action was not timely brought because the contract was allegedly breached eight years prior to the commencement of the lawsuit.
The statute of limitations sets a limit on the amount of time (usually four years) a party may wait before bringing a lawsuit, and in a breach of contract suit, this time limit does not begin to run until the contract is breached.
Wrong Answer
C. The action was not timely brought because the contract was entered into ten years prior to the commencement of the lawsuit.
This does not affect the statute of limitations. Such a statute does set a limit on the amount of time a party may wait before bringing a lawsuit, but in a breach of contract suit, this time limit does not begin to run until the contract is breached.
The statute of limitations for an alleged breach of contract
A. Does not apply if the contract was oral.
B. Requires that a lawsuit is commenced and a judgment rendered within a prescribed period of time.
C. Is determined on a case by case basis.
D. Generally commences on the date of the breach.
D. Generally commences on the date of the breach.
A statute of limitations sets a fixed period (usually four years) that is the maximum amount of time a party has to file a lawsuit. In a breach of contract case, the period begins at the time the contract is breached.
Wrong Answer
B. Requires that a lawsuit is commenced and a judgment rendered within a prescribed period of time.
A statute of limitations sets a fixed period that is the maximum amount of time a party has to file a lawsuit. So long as the lawsuit is started before the time period expires, the statute is met. The lawsuit does not have to be finished within the time period.
To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a
A. Novation
B. Release
C. Rescission
D. Revocation
C. Rescission
A rescission is the undoing of a contract. Both sides are returned to their original positions, and the contractual obligations on both sides are discharged.
Wrong Answer
D. Revocation
A revocation is the taking back of an offer to make a contract and not the undoing of a contract itself. If an offeror says, for example, “The offer no longer stands,” a revocation has taken place.
