business law quiz

BUSINESS LAW 610 QUIZ 7

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1) Home Construction enters into a contract with Iris to build a house. Before Home starts

work, it learns that the cost to build the house will be much more expensive than it

originally thought—meaning that Home will lose money if it fulfills its contract with Iris. If

Home refuses to build the house under the original contract price, Home’s obligation to

perform will be:

a. excused.

b. discharged.

c. rescinded.

d. breached.

2) Don enters into a contract to buy Ezra’s commercial building for a certain price, subject

to an appraiser’s evaluation of the structure’s condition. If the appraiser finds the

condition of the building to be unsafe, Don’s obligation to purchase the building will be:

a. discharged.

b. breached.

c. altered.

d. performed.

3) New Builders enters into a contract with O’Reilly to refurbish a garage on his property

as an auto repair shop. Several weeks later, however, the parties are notified that the

project violates a recently changed zoning law and may not proceed. As a result, the

parties’ obligations under the contract are:

a. Discharged by failure of a condition.

b. Discharged by impossibility.

c. Discharged by commercial impracticability.

d. Suspended under the doctrine of temporary impossibility.

4) Bruce Springsteen enters into a written contract with Sam to perform a concert at

SNHU ARENA on New Year’s Eve as long as 4,000 tickets are sold by December 1 st . On

December 1 st , Sam notifies Springsteen that 3,800 tickets to the concert have been sold. As

a result, Springsteen:

BUSINESS LAW 610 QUIZ 7

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a. May cancel the concert under the doctrine of impossibility of performance.

b. May cancel the concert because of commercial impracticability.

c. May cancel the concert because a condition has not been satisfied.

d. Must perform the concert because Sam has substantially performed under the

contract.

5) Cow’s Milk Farms needs a certain part for its pasteurizing equipment and enters into a

contract to purchase the part from Dairy Supplies Inc., for $3000, with delivery promised

on Monday. Cow’s Milk also notifies Dairy Supplies that it must receive the part by

Tuesday or it will lose $10,000 in business. If Dairy Supplies ships the part late, and it is not

received until Wednesday, Cow’s Milk can likely recover:

a. $3,000 in compensatory damages.

b. $10,000 in consequential damages.

c. $13,000 in compensatory and consequential damages.

d. Less than $3000, because Dairy substantially performed under the contract.

6-7) Uncle Nate is an elderly man who lives with his nephew Mike in Nate’s house. Uncle Nate

is totally dependent on Mike for care and support. Mike convinces Uncle Nate to sell him the

house for $500, supposedly as a way for Nate to save on taxes. Mike also implies that if Nate

doesn’t agree to sell him the house, Mike will need to find a new place to live. As a result, Nate

signs a contract with Mike, promising to sell the house for $500.

On what basis may Nate’s daughter, who was going to inherent the house from her father,

seek to rescind the contract between Nate and Mike? Explain why you think she will either

win or lose.

8-11) Health Source, Inc., enters into negotiations to buy Medico Equipment Co. On June 1,

Medico gives Health Source copies of Medico’s financial statements for the previous year. The

statements show revenue of $10 million. On June 15, Medico discovers that the previous year’s

revenue was actually $6 million, but does not inform Health Source. On July 1, Health Source,

relying on the financial statements showing revenue of $10 million, buys Medico. On July 10,

Health Source discovers the truth.

On what basis may Health Source seek to rescind its agreement to purchase Medico? What

must Health Source establish to win? Explain why you believe Health Source will either

win or lose.