Question 1

A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.

Accepted Answer

A) True 
 B)False

Question 2

V3 was a successful singing group that contracted to perform at the "Metalsubstance" rock concert.V3 was aware that the promoter would sustain a substantial loss if the group failed to perform.The members of the group were stricken with a virus that confined them to their beds.The promoter sued for breach of contract.What is the probable result?

Accepted Answer

A)  V3 is liable for damages for breach of contract. 
B)  The contract was discharged by impossibility of performance. 
C)  In order to avoid liability for breach of contract,V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date. 
D)  V3 will be deemed to have substantially performed the contract. 
A)  V3 is liable for damages for breach of contract. 
B)  The contract was discharged by impossibility of performance. 
C)  In order to avoid liability for breach of contract,V3 must arrange for another group of comparable quality and reputation to perform on the scheduled date. 
D)  V3 will be deemed to have substantially performed the contract.

Question 3

A contract provision requiring that suit be brought within one (1)year does not violate public policy,although the statute of limitations would allow two (2)years in the absence of such a contract limitation.

Accepted Answer

A) True 
 B)False

Question 4

Sam Student had borrowed $1,000 from his cousin.Sam and the cousin became involved in a heated disagreement when the cousin began to press Sam for repayment of the loan.Finally,Sam wrote a check for $190 to the cousin and conspicuously wrote on the check in big letters that it was full and final payment of the $1,000 loan.In need of money,the cousin cashed the check and demanded the remaining $810 from Sam.Sam refused to pay,claiming that they had entered into an accord and satisfaction that discharged Sam's obligation to pay anything more.The cousin sued Sam.Discuss the probable outcome.

Accepted Answer

The cousin will clearly win the lawsuit.

Question 5

The frustration of purpose doctrine:

Accepted Answer

A)  is based on common law. 
B)  requires that both parties were aware of the purpose. 
C)  temporarily suspends contract performance. 
D)  all of the above. 
A)  is based on common law. 
B)  requires that both parties were aware of the purpose. 
C)  temporarily suspends contract performance. 
D)  all of the above.

Question 6

A change of law discharges a contract if the new law:

Accepted Answer

A)  requires a license and none was required before. 
B)  requires the use of fireproof materials. 
C)  requires the use of antipollution devices. 
D)  prohibits the act called for by the contract. 
A)  requires a license and none was required before. 
B)  requires the use of fireproof materials. 
C)  requires the use of antipollution devices. 
D)  prohibits the act called for by the contract.

Question 7

To establish impossibility a party must show (1)the unexpected occurrence of an intervening act(2)that the risk of the unexpected occurrence was not allocated by agreement or custom;and (3)that the occurrence made performance impossible.

Accepted Answer

A) True 
 B)False

Question 8

When parties contract expressly for a particular subject matter,the contract is discharged if the subject matter is destroyed through no fault of either party.

Accepted Answer

A) True 
 B)False

Question 9

If the parties to a contract agree to undo the agreement and return any consideration involved,the contract is discharged by:

Accepted Answer

A)  mutual cancellation 
B)  mutual rescission. 
C)  novation 
D)  accord and satisfaction 
A)  mutual cancellation 
B)  mutual rescission. 
C)  novation 
D)  accord and satisfaction

Question 10

A __________ is a condition that must occur before a party to a contract has an obligation to perform under a contract.

Accepted Answer

A)  condition precedent 
B)  condition subsequent 
C)  concurrent condition 
D)  none of the above 
A)  condition precedent 
B)  condition subsequent 
C)  concurrent condition 
D)  none of the above

Question 11

A homeowner who refinances her home mortgage may cancel the transaction:

Accepted Answer

A)  if the terms of the contract were less favorable than anticipated. 
B)  within three business days. 
C)  only if she was the victim of fraud. 
D)  upon payment of a $1,000 penalty,as required by a Federal Trade Commission rule. 
A)  if the terms of the contract were less favorable than anticipated. 
B)  within three business days. 
C)  only if she was the victim of fraud. 
D)  upon payment of a $1,000 penalty,as required by a Federal Trade Commission rule.

Question 12

In which case will performance on the exact date specified in the contract most likely be deemed essential?

Accepted Answer

A)  a sale of goods that fluctuate rapidly in value. 
B)  a sale of goods that remain stable in value. 
C)  a sale of real estate. 
D)  a sale of goods where no harm results from a delay in performance. 
A)  a sale of goods that fluctuate rapidly in value. 
B)  a sale of goods that remain stable in value. 
C)  a sale of real estate. 
D)  a sale of goods where no harm results from a delay in performance.

Question 13

There is no exact standard or test by which to determine whether contractual performance is substantial.

Accepted Answer

A) True 
 B)False

Question 14

A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.

Accepted Answer

A) True 
 B)False

Question 15

If no time period for performance is specified in a contract:

Accepted Answer

A)  the contract is unenforceable. 
B)  time shall be of the essence. 
C)  a reasonable time for performance will be implied. 
D)  the time for performance will be ignored by the courts. 
A)  the contract is unenforceable. 
B)  time shall be of the essence. 
C)  a reasonable time for performance will be implied. 
D)  the time for performance will be ignored by the courts.

Question 16

Which of the following events excuses a promisor from performing his or her contractual obligations?

Accepted Answer

A)  a riot 
B)  a shortage of materials necessary for production of goods and/or provision of services called for under the contract 
C)  an unanticipated increase in the cost of performance 
D)  destruction of the subject matter through no fault of either party 
A)  a riot 
B)  a shortage of materials necessary for production of goods and/or provision of services called for under the contract 
C)  an unanticipated increase in the cost of performance 
D)  destruction of the subject matter through no fault of either party

Question 17

When a debtor makes a payment to a creditor specifying how it should be applied,the creditor must apply the payment:

Accepted Answer

A)  as directed by the debtor. 
B)  to the oldest outstanding debt. 
C)  to the most recent outstanding debt. 
D)  to the largest outstanding debt. 
A)  as directed by the debtor. 
B)  to the oldest outstanding debt. 
C)  to the most recent outstanding debt. 
D)  to the largest outstanding debt.

Question 18

Generally,contracts are discharged by the performance of the terms of the contract.

Accepted Answer

A) True 
 B)False

Question 19

The parties may decide that their contract is not the one they want.They may then replace it with another contract.If they do,the original contract is discharged by __________.

Accepted Answer

A)  solution 
B)  elocution 
C)  retribution 
D)  substitution 
A)  solution 
B)  elocution 
C)  retribution 
D)  substitution

Question 20

A Federal Trade Commission regulation gives a buyer three (3)business days in which to cancel a home-solicited sale of goods or services costing more than:

Accepted Answer

A)  $25. 
B)  $50. 
C)  $100. 
D)  $500. 
A)  $25. 
B)  $50. 
C)  $100. 
D)  $500.

Exam 19: Discharge of Contracts

A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.

A contract provision requiring that suit be brought within one (1)year does not violate public policy,although the statute of limitations would allow two (2)years in the absence of such a contract limitation.

The frustration of purpose doctrine:

A change of law discharges a contract if the new law:

To establish impossibility a party must show (1)the unexpected occurrence of an intervening act(2)that the risk of the unexpected occurrence was not allocated by agreement or custom;and (3)that the occurrence made performance impossible.

When parties contract expressly for a particular subject matter,the contract is discharged if the subject matter is destroyed through no fault of either party.

If the parties to a contract agree to undo the agreement and return any consideration involved,the contract is discharged by:

A __________ is a condition that must occur before a party to a contract has an obligation to perform under a contract.

A homeowner who refinances her home mortgage may cancel the transaction:

In which case will performance on the exact date specified in the contract most likely be deemed essential?

There is no exact standard or test by which to determine whether contractual performance is substantial.

A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.

If no time period for performance is specified in a contract:

Which of the following events excuses a promisor from performing his or her contractual obligations?

When a debtor makes a payment to a creditor specifying how it should be applied,the creditor must apply the payment:

Generally,contracts are discharged by the performance of the terms of the contract.

The parties may decide that their contract is not the one they want.They may then replace it with another contract.If they do,the original contract is discharged by __________.

A Federal Trade Commission regulation gives a buyer three (3)business days in which to cancel a home-solicited sale of goods or services costing more than:

The Nature and Sources of Law

The Court System and Dispute Resolution

Business Ethics, Social Forces, and the Law

The Constitution As the Foundation of the Legal Environment

Government Regulation of Competition and Prices

Administrative Agencies

The Legal Environment of International Trade

Crimes

Torts

Intellectual Property Rights

Cyberlaw

Nature and Classes of Contracts: Contracting on the Internet

Formation of Contracts: Offer and Acceptance

Capacity and Genuine Assent

Consideration

Legality and Public Policy

Writing, Electronic Forms, and Interpretation of Contracts

Third Persons and Contracts

Breach of Contract and Remedies

Personal Property and Bailments

Legal Aspects of Supply Chain Management

Nature and Form of Sales

Title and Risk of Loss

Product Liability: Warranties and Torts

Obligations and Performance

Remedies for Breach of Sales Contracts

Kinds of Instruments, parties, and Negotiability

Transfers of Negotiable Instruments and Warranties of Parties

Liability of the Parties Under Negotiable Instruments

Checks and Funds Transfers

Nature of the Debtor-Creditor Relationship

Consumer Protection

Secured Transactions in Personal Property

Bankruptcy

Insurance

Agency

Third Persons in Agency

Regulation of Employment

Equal Employment Opportunity Law

Types of Business Organizations

Partnerships

LPs, LLCs, and LLPs

Corporate Formation

Shareholder Rights in Corporations

Securities Regulation

Accountants Liability and Malpractice

Management of Corporations

Real Property

Environmental Law and Land Use Controls

Leases

Decedents Estates and Trusts

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