Business Law Exam 4 Practice
Questions with Complete Answers
When a party's performance is perfect, it is said to be complete. - ANSWER-t
A party who in good faith performs substantially all of the terms of a contract can
enforce the contract against the other party. - ANSWER-t
Most contracts need to be performed only to the satisfaction of a reasonable person
unless they expressly state otherwise. - ANSWER-t
Any breach entitles the nonbreaching party to sue for damages. - ANSWER-t
The law allows an innocent party to be discharged when the other party has
materially altered a written contract without consent. - ANSWER-t
An occurrence or event that makes performance temporarily impossible operates to
discharge the parties' contractual duties. - ANSWER-f
A contract will be discharged if supervening circumstances make it impossible to
attain the purpose both parties had in mind when they made the contract. -
ANSWER-t
Damages that compensate the nonbreaching party for the loss of a bargain are
known as consequential damages. - ANSWER-f
Compensatory damages compensate a party injured by a breach of contract by
punishing the party that breached the contract. - ANSWER-f
A party seeking to recover compensatory damages cannot also recover incidental
damages. - ANSWER-f
Rescission is an equitable remedy used when the parties have imperfectly
expressed their agreement in writing. - ANSWER-f
Ordinarily, a waiver by a contracting party will not operate to waive subsequent,
additional, or future breaches of contract. - ANSWER-t
Whether a contract's limitation-of-liability clause will be enforced depends on the type
of breach that is excused by the provision. - ANSWER-t
Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting
from France to the United States for a certain price. But Oceanic makes a mistake in
, adding the costs, which results in a contract price that is $1,000 less than the true
cost. Most likely, a court would
a. allow the parties to rescind the contract.
b. award damages to Nora for the mistake.
c. award damages to Oceanic for the mistake.
d. enforce the contract as is. - ANSWER-a
2. Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively.
Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is
selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000
ATV. In this situation
a. Garth is entitled to $750 for the $500 ATV.
b. Helen is entitled to the $1,000 ATV for $750.
c. Helen must buy both ATVs for $1,500.
d. there is no contract. - ANSWER-d
Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the
land to be worthless, but beneath it is a gold mine. Byron can
a. not rescind the contract.
b. rescind the contract on the basis of fraud.
c. rescind the contract on the basis of mistake.
d. rescind the contract on the basis of undue influence. - ANSWER-a
Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would
"hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding
this agreement, a court would likely
a. enforce it.
b. not enforce it.
c. reform it to reflect the true market value of the property.
d. order the parties to renegotiate the price. - ANSWER-b
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 - ANSWER-d
Herb's Hot Dog Vending, Inc., enters into a contract to pay Idris for a business
survey and review of Herb's competitors, which Idris delivers on August 1. Herb's
offer, on the same date, to pay Idris is
a. a concurrent condition.
b. a novation.
c. tender.
d. mutual rescission. - ANSWER-c
Even-Bilt Construction contracts to build a warehouse for Discount E-Sales
Company. Even-Bilt completely performs. Discount E-Sales is entitled to
a. damages
Questions with Complete Answers
When a party's performance is perfect, it is said to be complete. - ANSWER-t
A party who in good faith performs substantially all of the terms of a contract can
enforce the contract against the other party. - ANSWER-t
Most contracts need to be performed only to the satisfaction of a reasonable person
unless they expressly state otherwise. - ANSWER-t
Any breach entitles the nonbreaching party to sue for damages. - ANSWER-t
The law allows an innocent party to be discharged when the other party has
materially altered a written contract without consent. - ANSWER-t
An occurrence or event that makes performance temporarily impossible operates to
discharge the parties' contractual duties. - ANSWER-f
A contract will be discharged if supervening circumstances make it impossible to
attain the purpose both parties had in mind when they made the contract. -
ANSWER-t
Damages that compensate the nonbreaching party for the loss of a bargain are
known as consequential damages. - ANSWER-f
Compensatory damages compensate a party injured by a breach of contract by
punishing the party that breached the contract. - ANSWER-f
A party seeking to recover compensatory damages cannot also recover incidental
damages. - ANSWER-f
Rescission is an equitable remedy used when the parties have imperfectly
expressed their agreement in writing. - ANSWER-f
Ordinarily, a waiver by a contracting party will not operate to waive subsequent,
additional, or future breaches of contract. - ANSWER-t
Whether a contract's limitation-of-liability clause will be enforced depends on the type
of breach that is excused by the provision. - ANSWER-t
Nora enters into a contract with Oceanic Transport, Inc., to insure and ship a painting
from France to the United States for a certain price. But Oceanic makes a mistake in
, adding the costs, which results in a contract price that is $1,000 less than the true
cost. Most likely, a court would
a. allow the parties to rescind the contract.
b. award damages to Nora for the mistake.
c. award damages to Oceanic for the mistake.
d. enforce the contract as is. - ANSWER-a
2. Garth owns two all-terrain vehicles (ATVs), worth $1,000 and $500, respectively.
Helen agrees to buy "Garth's ATV" for $750. Garth believes, in good faith, that he is
selling the $500 ATV. Helen believes, in good faith, that she is buying the $1,000
ATV. In this situation
a. Garth is entitled to $750 for the $500 ATV.
b. Helen is entitled to the $1,000 ATV for $750.
c. Helen must buy both ATVs for $1,500.
d. there is no contract. - ANSWER-d
Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the
land to be worthless, but beneath it is a gold mine. Byron can
a. not rescind the contract.
b. rescind the contract on the basis of fraud.
c. rescind the contract on the basis of mistake.
d. rescind the contract on the basis of undue influence. - ANSWER-a
Seth offers to buy a house from Tia for less than Tia paid for it, stating that he would
"hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding
this agreement, a court would likely
a. enforce it.
b. not enforce it.
c. reform it to reflect the true market value of the property.
d. order the parties to renegotiate the price. - ANSWER-b
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 - ANSWER-d
Herb's Hot Dog Vending, Inc., enters into a contract to pay Idris for a business
survey and review of Herb's competitors, which Idris delivers on August 1. Herb's
offer, on the same date, to pay Idris is
a. a concurrent condition.
b. a novation.
c. tender.
d. mutual rescission. - ANSWER-c
Even-Bilt Construction contracts to build a warehouse for Discount E-Sales
Company. Even-Bilt completely performs. Discount E-Sales is entitled to
a. damages
