Contract Damages Multiple Choice Flashcards
(8 cards)
When parties to a contract agree in advance about the precise amount of damages that
should be awarded if the contact is breached, this practice is:
A. Always permissible
B. Never permissible
C. Permissible if damages would be difficult to measure at the time of contract and the
agreed upon sum is a reasonable estimate
D. Permissible only when both parties to the contract are corporate entities
C - the standard (A is wrong because liquidated damages will not be enforced)
Ralphie Torres lives in San Jose, California, and has a job interview in Phoenix, Arizona at 3:00 p.m. on Monday. He takes a 6:00 a.m. flight that morning from San Jose to Phoenix and checks one bag with the airline which contains, among other things, the laptop computer that he plans on using to put on a presentation for the potential employer during his interview. Unfortunately, the airline loses Ralphie’s luggage, so he is unable to put on a presentation during the interview and, as a result, is not offered the job. Ralphie sues the airline for breach of contract and seeks damages for (1) the value of the laptop computer; and (2) the salary that he would have received had he obtained the employment for which he was interviewing. Whether or not they are ultimately awarded, the damages for the lost salary can be best categorized as:
A. General damages
special
B. Special damages
C. Tort damages
D. Speculative damages
B - Lost salary would be special because airline could not have foreseen- what’s the difference between special and speculative? 4/8
A refrigerator manufacturer contracted with an ice cream company to provide
refrigeration units for ice cream delivery trucks. The contract guaranteed that the units
would keep ice cream at the optimal temperature. The manufacturer installed the wrong refrigeration units on the trucks, however, resulting in mechanical malfunctions. The units malfunctioned on trucks that were in transit loaded with ice cream, spoiling 200 cartons intended for customers. The malfunctioning refrigeration units can be replaced at a cost of $30,000. The cost of the spoiled ice cream was $1,000. The customer that did not receive the ice cream canceled its delivery contract with the ice cream company, resulting in the company losing profits of $50,000. In a breach of contract lawsuit against the refrigerator manufacturer, which is the most likely measure of the ice cream company’s damages?
A. Nothing, because the breach was not in bad faith
B. The $30,000 cost of replacing the refrigeration units
C. The $50,000 lost profits on the delivery contract and the $30,000 cost of replacing the
refrigeration units.
D. The $30,000 cost of replacing the refrigeration units and the $1,000
cost of the spoiled ice cream
D - These losses are natural and probable consequence and usually are recoverable as general damages (C is wrong because 50k would be special and ‘unreasonable’)
What is an efficient breach of contract?
A. An unintentional breach that does not harm the other party
B. An intentional breach that causes only economic loss
C. An intentional breach that occurs because the breaching party believes its performance is more valuable to someone else
D. A breach that is either intentional or unintentional but does not benefit the breaching
party
C
Sandra hires John to build her dream home. They enter into a contract that requires John to build the home according to provided specifications, in exchange for payment of $1 million. After construction begins, John tells Sandra he has run into financial trouble and will be unable to complete the home unless she pays him an additional $500,000. Sandra is upset but pays the additional money because she wants her home completed on time and believes she has no other choice. In truth, John was lying about needing the $500,000 because he was in financial trouble. He wanted the money to retire and move to Costa Rica-which he does, without finishing Sandra’s home. Sandra sues John for breach of contract and the tort of fraud. What is the most likely result?
A. Sandra will succeed on her breach of contract claim but the court will dismiss her
fraud claim
B. Sandra will succeed on both her breach of contract and fraud claims
C. Sandra will succeed on the fraud claim but the court will dismiss her breach of contract claim
D. Sandra will not succeed on either claim
B - tort involves breach OUTSIDE terms of contract// Tort claims must be DIFFERENT than contract claim.
Why are contract damages limited to compensating for financial harm?
A. To promote predictability and avoid deterring breaches of contract
B. To fully reimburse the injured party for all potential losses
C. Because English law historically limited contract damages that way
D. Because a breach of contract can only cause financial harm
terms of
A
Brooke is a yoga instructor. She charges $10 per class (payable on arrival), which
includes one hour of instruction and use of the mat used to do the exercises. 30 people have signed up for an upcoming class, but Brooke has no yoga mats. She orders 30 mats from a retailer, paying a total of $50. After receiving the payment, the retailer agrees to deliver the mats the day before the class is scheduled. The retailer fails to deliver the mats. Brooke has to cancel the class. In a lawsuit against the mat retailer for breach of Contract, what is the proper measure of Brooke’s damages?
A. $300
B. $150
C. $50
D. $250
C
A company is in the business of providing names and addresses to magazine publishers
so the publishers can send advertisements to potential subscribers. A publisher contracts with the company to provide a list of 10,000 names and addresses. In exchange for that list, the publisher agrees to pay the company $10,000. The company provides the list of names, but the publisher does not pay. The company sues for breach of contract and seeks $10,000 in damages. What is the most likely result?
A. The company will not be allowed to recover $10,000 because the amount represents lost profits and is therefore special damages; but the company will be allowed to recover any amount it expended in reliance on the contract.
B. The company will be allowed to recover $10,000 if it proves that loss was within the
contemplation of the parties at the time of the breach
C. The company will be allowed to recover $10,000 if it proves that is the fair market
value of the list
D. The company will be allowed to recover $10,000 because that loss was a natural and probable consequence of the breach
D - Lost profits would be GENERAL and natural/probable
