FYLSX Contract Breach and Remedies 3 — Questions and Answers
Question 1: What distinguishes a material breach from a minor breach in contract law?
- A material breach is always intentional, while a minor breach is accidental
- A material breach defeats the purpose of the contract and excuses the other party's performance; a minor breach does not (Correct answer)
- A material breach only occurs in contracts over $500 in value
- A minor breach never entitles the non-breaching party to damages
Correct answer: A material breach defeats the purpose of the contract and excuses the other party's performance; a minor breach does not
A material breach goes to the essence of the contract, excusing the other party from performing and entitling them to sue for total breach; a minor breach allows only partial damages.
Question 2: A seller delivers goods that fail to conform to the contract. Under UCC Article 2, what is the buyer's right upon inspection?
- The buyer must accept and seek damages later
- The buyer has the right to reject the goods if they fail to conform in any respect (Correct answer)
- The buyer can only reject if the defect is material
- The buyer must give the seller three opportunities to cure
Correct answer: The buyer has the right to reject the goods if they fail to conform in any respect
Under the UCC perfect tender rule (§2-601), the buyer may reject goods that fail to conform to the contract in any respect, even a minor one.
Question 3: Restitution as a remedy for breach of contract is designed to:
- Put the non-breaching party in the position they would have been in had the contract been performed
- Restore the non-breaching party to their pre-contract position by recovering the benefit conferred on the breaching party (Correct answer)
- Compensate for lost profits the non-breaching party would have earned
- Punish the breaching party for intentional wrongdoing
Correct answer: Restore the non-breaching party to their pre-contract position by recovering the benefit conferred on the breaching party
Restitution prevents unjust enrichment by requiring the breaching party to return any benefit they received from the non-breaching party.
Question 4: Under the Hadley v. Baxendale rule, consequential damages are recoverable only if:
- They exceed the contract price
- They were foreseeable by the breaching party at the time of contracting as a probable result of breach (Correct answer)
- They are specifically listed in the contract
- They result from the non-breaching party's failure to mitigate
Correct answer: They were foreseeable by the breaching party at the time of contracting as a probable result of breach
The Hadley rule limits consequential damages to those that were foreseeable to the breaching party at the time of contract formation as a likely consequence of breach.
Question 5: A construction contractor abandons a project halfway through. What damages may the owner recover?
- Only the amount paid to the contractor
- The cost to complete the project minus the unpaid contract balance, plus consequential damages (Correct answer)
- Nothing, because the contractor is entitled to quantum meruit for work completed
- Only nominal damages because the project was not finished
Correct answer: The cost to complete the project minus the unpaid contract balance, plus consequential damages
When a contractor breaches mid-performance, the owner may recover the reasonable cost to complete the work minus the balance owed under the contract.
Question 6: Which of the following is NOT a type of compensatory damages in contract law?
- Expectation damages
- Reliance damages
- Consequential damages
- Punitive damages (Correct answer)
Correct answer: Punitive damages
Punitive damages are generally not available in contract cases; compensatory damages include expectation, reliance, and consequential damages.
Question 7: An employee is wrongfully terminated with six months left on her employment contract at $5,000/month. She finds comparable work after two months paying $4,000/month. What is her likely recovery?
- $30,000 (full six months at $5,000)
- $10,000 (two months at $5,000) plus $6,000 difference for four months (Correct answer)
- $12,000 (two months at $5,000 plus two months salary difference)
- $10,000 (two months at $5,000 with no duty to mitigate)
Correct answer: $10,000 (two months at $5,000) plus $6,000 difference for four months
She recovers $10,000 for the two unemployed months, then $1,000/month difference for the remaining four months ($4,000), totaling $14,000, reflecting her mitigation duty.
FYLSX Contract Breach and Remedies 3
What distinguishes a material breach from a minor breach in contract law?