Business Law & Ethics- Chapter 9b

TRUE/FALSE QUESTIONS
1. F An assignment of rights in real estate can always be prohibited.
2. F A third party beneficiary contract is formed only when the parties to a contract intend to confer a benefit on a third
party.
3. T No third party has rights under a contract to which he or she is not a party.
4. F An intentional variation from a contract prevents substantial performance.
5. T A party’s refusal to perform an executory contract is anticipatory repudiation.
6. T An accord is an executory contract.
7. T Damages compensate a party for harm suffered as a result of another’s wrongful act.
8. T On the breach of a contract for a sale of land, the usual remedy is specific performance.
9. T Nominal damages normally establish that the defendant acted wrongly.
10. T Remedies that an innocent party can seek on the breach of a contract include rescission.
11. F Specific performance is the remedy customarily used when there is no actual contract or agreement between two
parties.
12. F The doctrine of election of remedies requires a court to “poll” the parties to a contract to “elect” a remedy.
MULTIPLE-CHOICE QUESTIONS
13. Jill and Kurt enter into a contract under which Jill agrees to pay Kurt $125 for a new briefcase. Kurt’s transfer of
his right to receive this payment is

a. a delegation.
b. an assignment.
c. a third party beneficiary contract.
d. not a delegation, an assignment, or a third party beneficiary contract.
14. Lois takes out a life insurance policy that names her son, Matt, as the beneficiary. This is

a. a delegation.
b. an assignment.
c. a third party incidental beneficiary contract.
d. a third party intended beneficiary contract.
Fact Pattern 9-1 (Question 15 applies)
AAA Properties, Inc., contracts with Best Builders, Inc., to construct an office building. AAA agrees to obtain insurance to
cover the project, after which the parties waive their rights against the subcontractors. AAA obtains the policy from City
Insurance Company. When the new building is destroyed in a storm, City pays AAA and then files a suit against the sub -
contractors.
15. Refer to Fact Pattern 9-1. Delta Corporation is the owner of an adjacent building, the value of which increased
when AAA’s new offices were built. City files a suit against Delta, claiming that Delta’s negligence contributed to
the collapse of AAA’s new building. In relation to the waiver in AAA’s contract with Best, Delta would be

a. an incidental beneficiary and thus not liable to City.

b. an incidental beneficiary and thus possibly liable to City.
c. an intended beneficiary and thus not liable to City.
d. an intended beneficiary and thus possibly liable to City.
16. Quality Contractors contracts to build a warehouse for Retail Storage Company. Quality completely performs.
Retail Storage is entitled to

a. damages.
b. nothing more.
c. rescission.
d. specific performance.
17. Jean contracts to sell her backhoe to Kyla for $2,000. Before performing, Jean and Kyla decide to cancel the deal.
This is an example of
a. a material breach.
b. an anticipatory repudiation.
c. a novation.
d. a rescission.
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 18. Flo agrees to work as Gary’s personal accountant for one year but dies in the sixth month of the contract. Flo’s
estate
a. is discharged from any contractual liability.
b. must find a competent accountant to fulfill the contract.
c. must pay liquidated damages.
d. must refund any money paid to Flo on the contract.

19. 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.
20. Loyal Engineers, Inc., needs a drill to continue its operations and orders one for $3,000 from Mining Supplies
Company. Loyal tells Mining that it must receive the drill by Tuesday or it will lose $10,000. Mining ships the
drill late. Loyal can recover

a. $13,000.
b. $10,000.
c. $3,000.
d. nothing.
21. Print Quik, Inc., seeks punitive damages in a suit against Reddy Supply Company. Generally, punitive damages
may be recovered when a contract has been breached

a. in almost all cases.

b. only if the breach is directly related to the commission of a tort.
c. only if the contract involves a sale of goods or a sale of land.
d. under no circumstances.
22. Fine Properties, Inc., negotiates with General Maintenance Corporation to include a liquidated damages clause in
their contract. To be enforceable, at the time of the contract, an estimate of the damages from a breach must be

a. definite.
b. difficult.
c. easy.
d. possible.
23. A contract for a sale of land from Best Properties, Inc., to Commercial Investments Corporation contains an
erroneous legal description. The most appropriate remedy for these parties is

a. damages.
b. reformation.
c. rescission.
d. specific performance.
24. Outstate Properties, Inc. (OPI), agrees to sell certain acreage to Pia. OPI repudiates the deal. Pia sues OPI and re -
covers damages. Pia can now obtain

a. an amount in quasi contract.

b. damages representing restitution.
c. specific performance of the deal.
d. nothing more.

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