NYLE Contract Law Principles 3

Question 1

Which remedy places the non-breaching party in the position they would have been in had the contract never been formed?

Accepted Answer

Restitution / reliance damages

Answer

Reliance damages restore the non-breaching party to their pre-contract position by reimbursing expenditures made in reliance on the contract.

Question 2

Under the Restatement (Second) of Contracts, a contract may be voidable for unilateral mistake when:

Accepted Answer

One party was mistaken and enforcement would be unconscionable

Answer

Restatement §153 allows avoidance for unilateral mistake when enforcement would be unconscionable or the other party knew of the mistake.

Question 3

An agreement between two parties to release a third party from liability under the original contract is called a:

Accepted Answer

Novation

Answer

A novation substitutes a new party for an original party, releasing the original party from liability with the obligee's consent.

Question 4

Which of the following best describes the concept of 'efficient breach'?

Accepted Answer

A deliberate breach because the breaching party will profit even after paying damages

Answer

Efficient breach theory holds that a party may rationally breach if their gain exceeds the cost of damages owed to the non-breaching party.

Question 5

In New York, a contract clause that fixes damages in the event of breach is enforceable only if:

Accepted Answer

Actual damages would be difficult to estimate and the amount is a reasonable forecast of harm

Answer

New York enforces liquidated damages clauses only when actual damages are difficult to ascertain and the stipulated amount is a reasonable pre-estimate of harm.

NYLE - New York Law Exam Practice Test

NYLE - New York Law Exam Practice Test

NYLE Contract Law Principles 3