Self-test questions: Breach of Contract

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. Which one of the following statements concerning void and voidable contracts is not true?

A voidable contract is a contract under which a party has a right to rescind it; it remains valid until the party exercises that right. correct incorrect

A void contract is automatically of no effect from the very beginning. correct incorrect

When a voidable contract is rescinded, it comes to an end only prospectively and a party may claim damages on the ground that the other party has committed a breach before the rescission. correct incorrect

Where a voidable contract is set aside, no right of action for damages can arise from the contract. correct incorrect

The process of rescission is different to the discharge of a contract, because if a voidable contract is rescinded, the contract is then treated as having no effect from the beginning. correct incorrect

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. Which one of the following events will not automatically discharge a contract or contractual obligations?

The realisation of a condition subsequent. correct incorrect

A repudiatory breach of contract by one of the parties. correct incorrect

A release and replacement. correct incorrect

Due performance by both parties. correct incorrect

A binding variation. correct incorrect

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. Annie Ltd enters a contract with Botch Ltd, under which Botch Ltd is to develop a software product specifically tailored for Annie Ltd for a fixed price. Before Botch Ltd starts the development or incurs any expense under the contract, Annie Ltd cancels the contract, alleging a fundamental change of its business strategy. Botch Ltd ignores Annie Ltd's cancellation and continues to complete the development of the software. Supposing the performance of the contract will not enhance Botch Ltd's reputation, which one of the following statements most accurately summarises the legal position between the parties?

Botch Ltd is entitled to the contract price because it may freely decide whether to terminate or to affirm the contract following Annie Ltd's anticipatory breach. correct incorrect

Botch Ltd is bound to terminate the contract following Annie Ltd's anticipatory breach because Botch Ltd has no legitimate interest in affirming the contract and continuing its performance. correct incorrect

Botch Ltd is entitled to the contract price irrespective of whether it can complete its performance of the contract without the cooperation of Annie Ltd. correct incorrect

Botch Ltd is entitled to the contract price because its performance of the contract does not require the cooperation of Annie Ltd. correct incorrect

The burden is on Botch Ltd to show that is has a legitimate interest in performing the contract rather than claiming damages. correct incorrect

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. Jenny affirms a contract between herself and Alessandro following Alessandro's anticipatory breach, and then Jenny herself commits a breach of contract unconnected to Alessandro's anticipatory breach. Which one of the following statements concerning Jenny's rights is true?

Jenny can use the previous anticipatory breach as an excuse for her own subsequent breach. correct incorrect

Jenny has, by committing the subsequent breach, lost her right to accept Alessandro's previous anticipatory breach. correct incorrect

Jenny is liable to Alessandro if the latter institutes a claim for damages on the ground of the subsequent breach. correct incorrect

Jenny will not be liable for the subsequent breach if, after having committed that breach, she accepts Alessandro's previous anticipatory breach as terminating the contract. correct incorrect

Jenny might be liable to Alessandro for the subsequent breach, but any damages payment will be reduced by a just sum to take account of Alessandro's anticipatory breach. correct incorrect

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. On 1 June, Kayley Ltd contracts to sell a quantity of goods to Barry Ltd to be delivered by 1 July. On 15 June, as Kayley Ltd is still making arrangements for the shipment of the goods, it receives an email message from Barry Ltd stating that the goods are no longer wanted. Which one of the following statements concerning Kayley Ltd's rights is true?

Kayley Ltd is not entitled to terminate the contract or to claim damages until 1 July. correct incorrect

Kayley Ltd is entitled to claim damages immediately, but is not entitled to terminate the contract until 1 July. correct incorrect

Kayley Ltd is entitled to terminate the contract and claim damages immediately, but must mitigate from the date of termination. correct incorrect

Kayley Ltd is entitled to terminate the contract immediately, but is not entitled to claim damages until 1 July. correct incorrect

Kayley Ltd is entitled to terminate the contract and claim damages immediately and there is no need to mitigate. correct incorrect

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. Which one of the following statements most accurately describes the legal effects of a repudiatory breach by one of the parties to the contract?

The breach will not affect the subsistence of any exemption or arbitration clauses in the contract. correct incorrect

If the non-breaching party elects to affirm the contract, the breach will always cause the secondary obligation to pay damages as compensation to accrue. correct incorrect

The breach will terminate the primary obligations of the contract. correct incorrect

The breach will not cause the secondary obligation to pay damages as compensation to accrue until the non-breaching party elects to accept the breach. correct incorrect

Where a contract is frustrated prior to the due date of performance, a party who has previously committed an anticipatory breach is still liable to pay damages for that breach, provided the breach has not been accepted before the frustration. correct incorrect

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. Tobias and Sasha have a commercial contract. Tobias has accused Sasha of a repudiatory breach of contract and requested that Sasha cures the breach. In relation to such a situation, which one of the following most accurately summarises the parties' position?

The request by Tobias that Sasha cures the defect amounts to an unequivocal affirmation and so the contract cannot be terminated. correct incorrect

The request by Tobias that Sasha cures the defect does not amount to an affirmation and the right to terminate is not lost. correct incorrect

The right to accept the breach as terminating the contract is probably lost by estoppel. correct incorrect

Tobias has lost the right to treat the breach as terminating the contract because of an unreasonable delay. correct incorrect

The contract has been affirmed because Tobias did not expressly reserve the right to terminate. correct incorrect

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. Peelio Ltd has a long-term contract with Patrick Ltd. Peelio Ltd becomes aware that Patrick Ltd is in breach of contract and informs Patrick Ltd of this fact. There is then a short delay before Peelio Ltd's board meeting, at which point Peelio Ltd decides it wishes to treat the contract as terminated. Patrick Ltd claims Peelio Ltd has lost its right to bring the contract to an end. In relation to such a situation, which one of the following most accurately summarises the parties' position?

Peelio Ltd should have informed Patrick Ltd of its final position earlier because time is of the essence and so the right to terminate has probably been lost. correct incorrect

Peelio Ltd has behaved in a way that is commercially improper and so the right to terminate has probably been lost. correct incorrect

Peelio Ltd has unequivocally affirmed the contract in its earlier communication with Patrick Ltd and so the right to terminate has probably been lost. correct incorrect

Peelio Ltd is probably entitled to a period in which to make up its mind whether to terminate or affirm the contract, during which time it does not lose its right to terminate. correct incorrect

Peelio Ltd is probably estopped from treating the contract as terminated. correct incorrect

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. Which one of the following statements most accurately summarises the decision in Vitol SA v Norelf Ltd, The Santa Clara [1996] AC 800?

The election to accept a repudiatory breach must be communicated to the party in breach. correct incorrect

Silence and inaction may, in particular circumstances, constitute an effective termination of the contract following a repudiatory breach. correct incorrect

The election to accept a repudiatory breach need not be clear and unequivocal in all cases. correct incorrect

Generally speaking, silence and inaction may constitute an effective affirmation of the contract following a repudiatory breach. correct incorrect

Silence and inaction may constitute an effective affirmation of the contract following a repudiatory breach if the contractual obligations are qualified, as opposed to strict, obligations. correct incorrect

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. Which one of the following statements relating to the legal effect of a failure to perform a strict contractual obligation is true?

The general rule is that any departure from a strict performance obligation will constitute a breach of contract. correct incorrect

The general rule is that a departure from a strict performance obligation will constitute a breach of contract only when it prevents the purpose of the contract being fulfilled. correct incorrect

The general rule is that a departure from a strict performance obligation will not constitute a breach of contract unless it amounts to a failure to exercise reasonable care and skill. correct incorrect

The distinction between strict and qualified contractual obligations is that the former is an obligation to exercise reasonable care and skill, while the latter is an obligation to achieve a guaranteed result. correct incorrect

Where the performance obligation is strict, a departure from it will always constitute a breach of contract even if the departure falls within the de minimis rule. correct incorrect

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. Tarrant accuses Chrissie of a repudiatory breach of contract. Chrissie claims that Tarrant has conducted himself in a way that meant Chrissie reasonably believed that Tarrant had affirmed the contract and Chrissie has relied upon this belief to her detriment. In relation to such a situation, which one of the following most accurately summarises the parties' legal position?

Even if Tarrant has affirmed the contract, he is entitled to change his mind and Chrissie's reliance is at her own risk. correct incorrect

Tarrant is entitled to be given time to decide whether to treat the contract as terminated, and so any reliance by Chrissie is at her own risk during that time irrespective of Tarrant's conduct. correct incorrect

The right to accept the breach as terminating the contract will not be lost, provided Chrissie was under a strict contractual obligation. correct incorrect

The right to accept the breach and treat the contract as terminated might have been lost on the basis of estoppel. correct incorrect

Whether the right to accept the breach as terminating the contract has been lost depends on whether the parties were operating in times of economic uncertainty. correct incorrect

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. Which one of the following statements most accurately summarises the decision in L Schuler A-G v Wickman Machine Tools Sales Ltd [1974] AC 235?

Whether a right of termination arises from a breach of an innominate term depends on whether the effects of the breach will deprive the innocent party of substantially the whole of the benefit that it is intended that it should obtain from the contract. correct incorrect

The parties are free to classify any term as a condition so that any breach of the term will give rise to a right to terminate the contract. correct incorrect

A term may not be recognised as a condition if the parties could not have contemplated it as having the effect of a condition, even if the parties expressly used the word 'condition' to describe the term. correct incorrect

A time stipulation in a commercial contract is usually treated as a condition, even if the parties do not expressly classify it as such. correct incorrect

The general power to affirm the contract in a case of anticipatory breach cannot be exercised by a person who had no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages. correct incorrect

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. Which one of the following statements relating to entire or severable obligations is true?

A breach of an entire obligation may not entitle the innocent party to terminate the contract, provided the party in breach has rendered substantial performance under the contract. correct incorrect

In a building contract under which the construction work is to be paid by a lump sum, it is usually the case that any breach by the constructor will entitle the other party to terminate the contract. correct incorrect

According to s. 31(2) of the Sale of Goods Act 1979, obligations under a contract for sale and delivery of goods in instalments are severable and breach of these obligations will not give rise to a right to terminate the contract. correct incorrect

The entire obligations rule means that the parties have not relied on any term that is not contained in the written contract and so it prevents arguments that there are oral terms and/or that a collateral contract exists. correct incorrect

Where a breach of an entire obligation occurs and the innocent party lawfully terminates the contract, the party in breach may still be entitled to reasonable payment for the value of its actual performance. correct incorrect

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. Foal Ltd accuses Runner Ltd of delivering defective goods under their contract several months ago. Runner Ltd claims that Foal Ltd has failed to take a reasonable opportunity to inspect the goods and so has accepted the goods without objection. In relation to such a situation, which one of the following most accurately summarises the parties' legal position?

The right of Foal Ltd to accept the breach as terminating the contract cannot be lost by a failure to inspect the goods. correct incorrect

The right of Foal Ltd to accept the breach as terminating the contract cannot be lost as the contract is not a consumer contract. correct incorrect

The right to of Foal Ltd accept the breach as terminating the contract is not lost because there has been no unequivocal affirmation. correct incorrect

The right of Foal Ltd to accept the breach as terminating the contract is not lost because this is a contract containing strict contractual obligations. correct incorrect

If Foal Ltd has failed to take a reasonable opportunity to inspect the goods, the right to accept the breach as terminating the contract is lost and Foal Ltd is deemed to have accepted the goods. correct incorrect