Bar Exam Bar Exam Remedies 1 — Questions and Answers
Question 1: In a breach of contract action, expectation damages are designed to:
- Reimburse the plaintiff only for out-of-pocket expenditures made in reliance on the contract
- Place the plaintiff in the position they would have been in had the contract been fully performed (Correct answer)
- Punish the defendant for willfully breaching the contract
- Return both parties to their pre-contract positions
Correct answer: Place the plaintiff in the position they would have been in had the contract been fully performed
Expectation (benefit-of-the-bargain) damages compensate the non-breaching party for the economic equivalent of full performance, including lost profits.
Question 2: Consequential (special) damages in a contract action are recoverable under the rule of Hadley v. Baxendale only if they were:
- Actually foreseen by the breaching party at the moment of breach
- Directly and naturally caused by the breach without any intervening cause
- Expressly identified and described in the contract itself
- Foreseeable as a probable result of breach at the time the contract was formed (Correct answer)
Correct answer: Foreseeable as a probable result of breach at the time the contract was formed
Under Hadley v. Baxendale, consequential damages are recoverable only if they were foreseeable to the breaching party as a probable consequence at the time of contracting.
Question 3: The non-breaching party's duty to mitigate damages requires:
- Both parties to attempt negotiation before seeking judicial relief
- The breaching party to minimize harm to the non-breaching party before the breach occurs
- The non-breaching party to take reasonable steps to reduce losses after the breach (Correct answer)
- The court to reduce the damage award by 50% if the plaintiff acted unreasonably
Correct answer: The non-breaching party to take reasonable steps to reduce losses after the breach
After a breach, the non-breaching party must take reasonable steps to avoid or reduce the resulting losses; unmitigated losses that could have been avoided are not recoverable.
Question 4: Reliance damages in a contract action are designed to restore the plaintiff to their:
- Pre-contract position by reimbursing costs incurred in reasonable reliance on the contract (Correct answer)
- Expected position had the contract been fully performed, including lost profit
- Position as a creditor with a secured interest in the defendant's assets
- Market-equivalent position based on the fair value of the contract
Correct answer: Pre-contract position by reimbursing costs incurred in reasonable reliance on the contract
Reliance damages compensate the plaintiff for expenditures made in reliance on the defendant's promise by restoring the plaintiff to the pre-contract status quo.
Question 5: A liquidated damages clause in a contract is enforceable when:
- Both contracting parties are sophisticated businesses represented by counsel
- The specified amount penalizes the breacher to deter future breach
- The amount is a reasonable pre-estimate of anticipated harm and actual damages are difficult to calculate (Correct answer)
- The clause is included in a written contract for a sale of goods over $500
Correct answer: The amount is a reasonable pre-estimate of anticipated harm and actual damages are difficult to calculate
A liquidated damages clause is enforceable only if it represents a genuine reasonable forecast of actual harm at the time of contracting and actual damages would be difficult to prove.
Question 6: Punitive damages in a tort action are generally available when the defendant:
- Acted with malice, fraud, oppression, or conscious disregard of the plaintiff's rights (Correct answer)
- Was negligent and caused substantial economic harm to the plaintiff
- Is a large corporation whose negligence caused widespread harm to consumers
- Caused both economic and non-economic losses to the plaintiff
Correct answer: Acted with malice, fraud, oppression, or conscious disregard of the plaintiff's rights
Punitive damages are awarded to punish and deter conduct involving malice, fraud, or reckless indifference to others' rights; ordinary negligence is insufficient.
Bar Exam Bar Exam Remedies 1
In a breach of contract action, expectation damages are designed to: