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A buyer and supplier have a contract and the supplier has committed a major breach. However, as they are the sole supplier to the buyer, the buyer has decided not to terminate the contract and instead to work with the supplier to remedy the situation. What is this called?

A. affirmation of the contractB. conflict resolutionC. assigning liabilityD. awarding damages

Answer: A

This is affirmation of the contract. When a breach occurs the injured party has two options; termi-nate the contract or affirm the contract. In this example they have affirmed the contract- they have chosen to continue working with the offending party. See p.60.


Which of the following will you put into box 2?

A. payment termsB. specificationC. fundamental breachD. anticipatory breach

Answer: A

The correct answers are as follows:

This is payment terms- the clues here are 'financial' and 'progress payments'


Verity Fashion is a clothing manufacturer and has an order to create 10,000 pairs of flipflops for a retailer for the summer. The order was placed over the phone in February. The order has been completed and has been boxed up ready for delivery. The retailer calls Verity Fashion in June and says that the order is no longer required. What action can Verity Fashion take?

A. claim on insuranceB. subcontract the manufacturing of the flipflops to a third partyC. sue for damages as the flip flops have already been made and this incurred costsD. nothing- there is no written contract in place

Answer: C

Verity can sue for damages. The order was placed over the phone meaning that there was a verbal contract in place. Contracts do not need to be written to be enforceable so option 2 is incorrect. There is no termination clause mentioned in the question so you can assume that there isn't one. This means that the retailer is committing a breach of the verbal contract by cancelling the order. Verity could therefore apply for damages. (Whether or not they'd be awarded is a different matter!). This question tests your understanding of when contracts can be terminated and remedies for breaches. See p. 134.


Which of the following statements about 'Specific Performance' are TRUE? Select TWO.

A. Orders for Specific Performance can be a cheap and quick way to remedy a breach in contractB. If a party is ordered to complete a 'Specific Performance' and doesn't, they can be ar-restedC. The innocent party must mitigate all lossesD. Orders for Specific Performance can be a lengthy and costly process

Answer: B,D

1+3 are correct. Specific Performance tend to go through the courts so this is a lengthy and costly process. Because it's mandated by the courts it means that if the offending party doesn't comply, this is a criminal offence and they can be arrested. Option 2 is incorrect as it is the opposite of option 1. Option 4 is incorrect because there is no need for the innocent party to mitigate any losses. See p. 132 for more information on Specific Performance