ENGR 413 Chapters 7-12 Test With
Complete Solution
When does a breach of contract occur? - ANSWER When one of the parties
fails to meet its obligations under the contract.
What is the most common remedy for breach of contract? - ANSWER
Damages
Who intercedes when parties are unable to come to an agreement? -
ANSWER Arbitrator
What happens when parties disagree over a contract? - ANSWER the party
who is later determined to have been wrong will be liable if they breached
the contract based on their wrong understanding of it
Owners often ask contractors to provide this to address AFL breaches -
ANSWER Performance Bond
Why may a party intentionally breach a contract? - ANSWER Anticipated
financial losses: the consequences for doing so will be less severe than for
completing it
Define Damages - ANSWER Compensation
Define Specific Performance - ANSWER a court order requiring completion of
the contract
Define Injunction - ANSWER a court order requiring a named party not do
something
,Define Declaratory Order - ANSWER statement by the court of the rights and
obligations of the parties
How are damages calculated? - ANSWER Damages are calculated as the
compensation required to put the innocent party in the financial position,
they would have been in but for the breach of contract.
Define Mitigation - ANSWER the innocent party must take reasonable steps
to minimize the loss suffered
Define Causation - ANSWER the innocent party can only recover losses that
were caused by the breach of contract
Define Remoteness - ANSWER only damages that are reasonably proximate
to the breach can be recovered
Define Consequential Damages - ANSWER cover indirect losses, such as
business interruption losses
Define Liquidated Damages - ANSWER compensation agreed to by the
parties at the time of contract formation
What are some key aspects of liquidated damages? - ANSWER Must be a
genuine pre-estimate of damages and if excessive will likely be
unenforceable
Define Bonus Clause - ANSWER additional payment for performance that
exceeds minimum requirements
What is Diminution of Value? - ANSWER where the cost of rectification will
be excessive compared to the benefit rectification will bring
What is an example of Diminution of Value? - ANSWER A car after a collision
, is worth less than before the accident.
What is a fundamental breach of contract? - ANSWER It deprives the
innocent party of all or substantially all of the benefit of the contract
What are options for the innocent party in a breach of contract? - ANSWER
Continue contract and sue or terminate contract and sue
What is a simple breach of contract? - ANSWER Less significant than a
fundamental breach. Does not entitle the innocent party to put an end to the
contract. Does entitle the innocent party to sue for damages
What happens when the innocent party terminates a contract over a simple
breach? - ANSWER If the innocent party terminates the contract because of a
simple breach, that will be a fundamental breach by the "innocent" party
Define Repudiation - ANSWER When one party, by words or actions, makes it
known that it does not intend to perform its fundamental obligations under
the contract
Define Anticipatory Breach - ANSWER When one party lets the other know,
before the time for performance, that it will not be performing its obligations
What are termination clauses and how are they used? - ANSWER To help
distinguish between fundamental and simple breaches, the parties may
incorporate a termination clause into the contract Termination clauses
specify acts that justify termination of the contract Termination for
convenience: may be used by the owner or, by either party to terminate the
contract without cause or reason
What is objective intention? - ANSWER what reasonable parties would have
intended by agreeing to the specified terms
Complete Solution
When does a breach of contract occur? - ANSWER When one of the parties
fails to meet its obligations under the contract.
What is the most common remedy for breach of contract? - ANSWER
Damages
Who intercedes when parties are unable to come to an agreement? -
ANSWER Arbitrator
What happens when parties disagree over a contract? - ANSWER the party
who is later determined to have been wrong will be liable if they breached
the contract based on their wrong understanding of it
Owners often ask contractors to provide this to address AFL breaches -
ANSWER Performance Bond
Why may a party intentionally breach a contract? - ANSWER Anticipated
financial losses: the consequences for doing so will be less severe than for
completing it
Define Damages - ANSWER Compensation
Define Specific Performance - ANSWER a court order requiring completion of
the contract
Define Injunction - ANSWER a court order requiring a named party not do
something
,Define Declaratory Order - ANSWER statement by the court of the rights and
obligations of the parties
How are damages calculated? - ANSWER Damages are calculated as the
compensation required to put the innocent party in the financial position,
they would have been in but for the breach of contract.
Define Mitigation - ANSWER the innocent party must take reasonable steps
to minimize the loss suffered
Define Causation - ANSWER the innocent party can only recover losses that
were caused by the breach of contract
Define Remoteness - ANSWER only damages that are reasonably proximate
to the breach can be recovered
Define Consequential Damages - ANSWER cover indirect losses, such as
business interruption losses
Define Liquidated Damages - ANSWER compensation agreed to by the
parties at the time of contract formation
What are some key aspects of liquidated damages? - ANSWER Must be a
genuine pre-estimate of damages and if excessive will likely be
unenforceable
Define Bonus Clause - ANSWER additional payment for performance that
exceeds minimum requirements
What is Diminution of Value? - ANSWER where the cost of rectification will
be excessive compared to the benefit rectification will bring
What is an example of Diminution of Value? - ANSWER A car after a collision
, is worth less than before the accident.
What is a fundamental breach of contract? - ANSWER It deprives the
innocent party of all or substantially all of the benefit of the contract
What are options for the innocent party in a breach of contract? - ANSWER
Continue contract and sue or terminate contract and sue
What is a simple breach of contract? - ANSWER Less significant than a
fundamental breach. Does not entitle the innocent party to put an end to the
contract. Does entitle the innocent party to sue for damages
What happens when the innocent party terminates a contract over a simple
breach? - ANSWER If the innocent party terminates the contract because of a
simple breach, that will be a fundamental breach by the "innocent" party
Define Repudiation - ANSWER When one party, by words or actions, makes it
known that it does not intend to perform its fundamental obligations under
the contract
Define Anticipatory Breach - ANSWER When one party lets the other know,
before the time for performance, that it will not be performing its obligations
What are termination clauses and how are they used? - ANSWER To help
distinguish between fundamental and simple breaches, the parties may
incorporate a termination clause into the contract Termination clauses
specify acts that justify termination of the contract Termination for
convenience: may be used by the owner or, by either party to terminate the
contract without cause or reason
What is objective intention? - ANSWER what reasonable parties would have
intended by agreeing to the specified terms
