Contracts Quiz: Key Cases and Principles

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Questions and Answers

What does the Lost Volume Rule allow a volume seller to recover?

Only the profits from reselling a product

The profit lost from a sale plus related overhead and incidentals (correct)

All sales made before the breach of contract

Only the costs incurred during the contract period

Which of the following is a key indicator that a stipulated damages clause may be considered enforceable?

The injury caused by the breach is difficult or impossible to estimate (correct)

Stipulated damages must be higher than actual damages

The clause must always be a fixed amount

The damages must be agreed upon before the contract is signed

What is the employee’s duty regarding mitigation of damages once a stipulated damages clause is enforceable?

The employee must negotiate a new contract with the employer

The employee has no duty to mitigate damages (correct)

The employee must prove actual damages were incurred

The employee must seek alternative employment immediately

In the case of a breach where the contract includes a stipulated damages clause, what aspect is evaluated to determine if the clause is a penalty?

Whether the amount is a reasonable forecast of harm Signup and view all the answers

What justifies D's claim that the employment offer was inferior in terms of mitigating damages?

The terms and conditions of employment were worse Signup and view all the answers

Which of the following accurately reflects a common misconception regarding an employee's obligation to seek alternative employment?

An employee should reject any employment they consider inferior Signup and view all the answers

What principle dictates that the employee is entitled to recover damages despite earning after the breach?

Stipulated damages clause Signup and view all the answers

In situations where an employee is fired before their contract ends, what is the typical recovery they might seek?

Stipulated damages as outlined in the contract Signup and view all the answers

What is required for liquidated damages to be enforceable?

They must be a reasonable estimate of likely damages at contract formation. Signup and view all the answers

In cases of breach of contract regarding unique items, what must be demonstrated to obtain specific performance?

The item must hold peculiar sentimental or unique value. Signup and view all the answers

What is the default remedy for breach of a land sale contract?

Specific performance awarded to the buyer. Signup and view all the answers

Which scenario does NOT generally allow for the award of specific performance?

The goods are of generic quality commonly found in stores. Signup and view all the answers

How is the amount of damages determined for a breach of contract when considering costs spared?

It is calculated as the contract value minus the costs that were saved by not completing the contract. Signup and view all the answers

What principle applies to a seller who incurs costs but is ultimately denied a sale in a specific performance case?

They could suffer unjust enrichment if awarded damages below their expenditures. Signup and view all the answers

In the context of the lost volume seller rule, what must a seller show?

That the buyer's failure to complete the purchase did not reduce future sales potential. Signup and view all the answers

What is a characteristic of a penalty in a contract context?

Usually disproportionate to the harm caused. Signup and view all the answers

In the context of a requirements contract, what is a valid reason for a seller to refuse performance?

Good faith reductions in quantity despite previous demand Signup and view all the answers

What is NOT a characteristic of a valid requirements contract?

A clear agreement on price Signup and view all the answers

Which rule allows a buyer's acceptance of goods despite terms that differ from the initial offer?

UCC § 2-207 Signup and view all the answers

In which of the following situations would a seller NOT typically be entitled to specific performance?

The seller refuses based on commercial impracticality Signup and view all the answers

What does the term 'good faith' imply in a contract context?

Parties are to act honestly and fairly in performance Signup and view all the answers

Which of the following best describes 'liquidated damages' in a contract?

A predetermined amount stated in a contract for breach Signup and view all the answers

Which circumstance would likely violate the UCC provisions regarding requirements contracts?

The buyer drastically reduces their order for no valid reason Signup and view all the answers

What must be established for parties to recognize the existence of a contract based on conduct?

Performance indicating acceptance of terms Signup and view all the answers

Study Notes

Contracts

Contracts are legally binding agreements
Key facts and rules are necessary to understand contract principles.

Nature and History of Contract

Shaheen v. Knight:
- P contracted with D for sterilization, but it failed and resulted in an unintended child.
- P claimed damages, but D argued there was no warranty of cure.
- Implied warranty of cure does not exist in contracts.
- No damages awarded if there is no harm stemming from the breach.
Hawkins v. McGee:
- P contracted with D for a 100% good hand surgery and was dissatisfied with the result.
- Damages were awarded based on difference between the promised result and the actual result. (expectation interest), excluding pain and suffering.
- Law of Contract formation means an enforceable contract is made if a reasonable person believes the defendant was making a firm offer.
Nurse v. Barns:
- P contracted with D for the use of iron mills.
- D breached the contract resulting in damages.
- If the damages are natural and foreseeable due to the breach, then reliance damages can be recovered even if they exceed damages based on the expectation interest of the contract.
Hadley v. Baxendale:
- P and D were in a contract dispute, and D was to deliver a spare part.
- Breach of contract only results in foreseeable damages at the time of the contract.

Remedies for Breach

Chicago Coliseum Club v. Dempsey:
- P and D contracted for a boxing match.
- D breached the contract and P sought damages.
- Damages must be proven with reasonable certainty in an action for breach of contract.
- Only recoverable damages include post-signing damages.
Winston Cigarette co:
- Details are unknown from the text.
Mistletoe Express v. Locke:
- P contracted with D for a year long business contract.
- D breached and P sought reliance interest damages.
- Reliance interest damages are awarded if the breaching party was deprived of an opportunity due to the breach of contract.
Rockingham County v. Luten Bridge Co:
- D accepted a contract to build a bridge, but the county breached.
- The non-breaching party is only entitled to damages up to the point they received notice of breach of contract.
Parker v. 20th Century Fox:
- D breached the contract and P sought damages.
- To mitigate damages, a party is obligated to seek other available employment of a different or inferior kind that are equally reasonable.
Neri v. Retail Marine:
- A buyer contracted to purchase a boat but became hospitalized and wanted to breach the contract, to get a refund for deposit.
- A lost volume seller is entitled to recover the profit (reasonable overhead plus incidentals) they would have made on a lost sale, regardless of resale.
Wassenaar v. Towne Hotel:
- P had a contract with a stipulated damages clause.
- The employee had no duty to mitigate damages after a breach.
- Damages are not reduced if the damages after breach are greater than damages during the contract.
Lake River:
- P contracted with D for the supply of abrasive for steel.
- D breached the contract and P sought damages.
- A court will look at reasonable damages at the time of the contract, and will not impose unrealistic damages.
Loveless v. Diehl:
- P contracted with D to lease a farm for three years with an option to purchase.
- D breached the contract, and P sought specific performance.
- Default remedy for breach of land-sale contract is specific performance.
Cumbest v. Harris:
- D breached a contract to sell equipment to P, and P sought specific performance.
- If an item has unique/irreplaceable value specific performance is granted.
Sedmak v. Charlies Chevrolet Inc.:
- P contracted with D to buy a Corvette and put down deposit.
- D breached the contract and P sought specific performance.
- Specific performance may be granted when the goods are unique and special/there is no other/similar available item.
Dallas Cowboys v. Harris:
- P contracted with D to play football but D breached by agreeing to play for another team.
- P sought an injunction.
- Courts may issue an injunction to prevent a breach of personal service contract if they are a person of exceptional skill or knowledge, but will not enforce specific performance of service contracts.
Britton v. Turner:
- P worked for D for 9.5 months and then claimed quantum meruit.
- Quantum meruit is calculated by the reasonable value for services provided.
- If an employee voluntarily breaches a service contract, the amount of work accomplished is factored into the calculated damages.
Vines v. Orchard Hills:
- P contracted to buy a condo.
- P breached, then sought restitution.
- The buyer is entitled to restitution only when the buyer’s overpayment exceeds damages to the seller or is considered unjust enrichment.
Cotnam v. Wisdom:
- P contracted with D for medical services, but D died.
- P sought damages but D opposed the claim.
- Damages must be proven by appropriate calculation of reasonable value of services provided if the contract is deemed successful.
Martin v. Little, Brown & Co.:
- P notified D of plagiarism in a published work.
- P sought restitution for unjust enrichment.
- A plaintiff can recover for unjust enrichment, if the defendant illegally gains a profit from the use of another party's material in their project/work.
Lucy v. Zehmer:
- P attempted to purchase land from D.
- D said the deal was a joke, but it was still valid in court.
- Intentions during an agreement are determined by outward expression in the agreement, not by the inward thoughts of the parties.
Nebraska Seed Co. v. Harsh:
- P sent letter to D offering to buy seeds.
- D refused to deliver seeds and P sought a resolution to the contract.
An offer must be specifically stated to be legally binding.

-Lefkowitz v. Great MN Surplus Stores: - D made an advertisement for sale of furs. - P attempted to buy, but D stated item was only for women. - Advertisements don't always constitute offers, whereas specific offers do.

Leonard v. Pepsico:
- P brought a suit for specific performance of a promotional ad for a Harrier jet.
- P claimed the promotional advertisement constituted a valid offer.
- Advertisements, such as those for promotional items, do not automatically constitute offers.
Ardente v. Horan:
- P contracted with D to buy D's house
- P put down deposit and made offer for house, and D declined. The buyer's request for included items did not imply valid and binding acceptance of the offer.
Carlill v. Carbolic Smoke Ball:
- D published an advert offering reward for using a product.
- P used the product and got sick.
- The advert constitutes a unilateral offer, not simply an invitation to an offer.
Petterson v. Pattberg:
- P tried to pay off a mortgage to D in person, but D had already sold the mortgage to someone else.
- D did not have to provide notice that the offer was revoked because there was no binding contract yet.
Dickinson v. Dodds:
- D offered to sell land to P.
- D revoked offer before P accepted.
- An offer can be revoked before acceptance.
Hobbs v. Massasoit Whip Co.:
- P consistently sent eelskins to D, who sometimes did not reply.
- D later disposed of and damaged P's eelskins.
- P brought claim against D, but D argued silence does not constitute acceptance.
- Silence can, on occasion, constitute an implied acceptance if a party has reason to know of the offer and that the other party will be benefited by their acceptance.
Nguyen v. Barnes and Noble:
- P contracted with D to buy tablets.
- D offered an option to arbitrate in their contract terms.
- A user is bound to a contract that is presented to them and they do not refuse.
Raffles v. Wichelhaus:
- P and D were in contract dispute because of differing connotations of the same term.
- Contractual agreements require parties to have a mutual understanding of the terms.
Oswald v. Allen:
- P and D disagreed on the definition of "swiss coins" in a contract for the sale of items.
- A contract can be voided if the parties had differing understandings of the terms that were contained within the agreement.
Weinberg v. Edelstein:
- P had an agreement to sell items, D breached.
- Restrictive covenants are generally considered to be part of a contract which can be enforced.
Frigaliment Importing Co. v. BNS International Sales Corp:
- D and P had a contract for the shipment of chickens.
- A court may look at performance history to interpret contracts when there is more than one definition of a term.
Sun Printing v. Remington Paper:
- P and D contracted for the sale of paper.
- P argued that critical terms of the contract were vague, forcing the court to rule.
- The law requires that contracts have specific details, especially the price and quantity, to be valid.
N.Y. Cent. Iron Works v. US Radiator:
- D and P were in a long-standing contract and P exceeded the expected number of products ordered..
- P would not be entitled to more items that were not part of the existing contract unless additional modifications are made.
Eastern Air Lines v. Gulf Oil Corp:
- An existing contract was interpreted as a valid requirements contract based on prior dealings between the parties' prior consistent performance.
Diamond v. Krack:
- P brought a suit against D for breach of warranty of title because of a disclaimer for damages clause D had proposed.
- If both parties' actions after a contract shows acceptance, then the contract is considered signed and valid.
Step-Saver Data Systems v. Wyse Tech:
- P seeks for breach of warranty, D provided a warranty box and D argues the box top warranty is a material alteration.
- Unilateral contracts require acceptance of an offer as presented; material alterations require separate, explicit acceptance to become part of the agreement.
ProCD v. Zeidenberg:
- P had a contract with D for the sale of software.
- D argued a license agreement found inside the software box was not valid.
- A license agreement found inside the product is considered, and binding, if the buyer retains and uses the product.
Hill v. Gateway:
- D included an arbitration clause in the packaging of a computer.
- P argued there was no agreement/no explicit acceptance/that arbitration clause is not valid.
- The product's packaging materials represent a valid conditional contract.
Klocek v. Gateway:
- D included an arbitration clause in the packing of a computer.
- P argued the products were delivered, but there was no acknowledgement of the provided terms.
- The acceptance of the product implies acceptance of the terms in the agreement.

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Test your knowledge of the key principles of contract law with this quiz covering important cases such as Shaheen v. Knight and Hawkins v. McGee. Explore the implications of contract breaches and learn about enforceable agreements. Perfect for law students or anyone interested in legal principles.