Multiple Choice Questions s1

Multiple Choice Questions 1. CPA QUESTION Master Mfg., Inc. contracted with Accur Computer Repair Corp. to maintain Master’s computer system. Master’s manufacturing process depends on its computer system operating properly at all times. A liquidated damages clause in the contract provided that Accur would pay $1,000 to Master for each day that Accur was late responding to a service request. On January 12, Accur was notified that Master’s computer system had failed. Accur did not respond to Master’s service request until January 15. If Master sues Accur under the liquidated damage provision of the contract, Master will: (a) Win, unless the liquidated damages provision is determined to be a penalty (b) Win, because under all circumstances liquidated damage provisions are enforceable (c) Lose, because Accur’s breach was not material (d) Lose, because liquidated damage provisions violate public policy Answer: A. CPA Examination, May 1993, #25.

2. CPA QUESTION Kaye contracted to sell Hodges a building for $310,000. The contract required Hodges to pay the entire amount at closing. Kaye refused to close the sale of the building. Hodges sued Kaye. To what relief is Hodges entitled? (a) Punitive damages and direct damages (b) Specific performance and direct damages (c) Consequential damages or punitive damage (d) Direct damages or specific performance Answer: D. CPA Examination, May 1992, #35.

3. A manufacturer delivers a new tractor to Farmer Ted on the first day of the harvest season. But, the tractor will not start. It takes two weeks for the right parts to be delivered and installed. The repair bill comes to $1000. During the two weeks, some acres of Farmer Ted's crops die. He argues in court that his lost profit on those acres is $60,000. If a jury awards $1000 for tractor repairs, it will be in the form of ______damages. If it awards $60,000 for the lost crops, it will be in the form of ______damages. (a) direct; direct (b) direct; consequential (c) consequential; direct (d) consequential; consequential (e) direct; incidental Answer: B.

4. Julie signs a contract to buy Nick's 2002 Mustang GT for $5,000. Later, Nick changes his mind and refuses to sell his car. Julie soon buys a similar 2002 Mustang GT for $5,500. She then sues Nick and wins $500. The $500 represents her ______. (a) expectation interest (b) reliance interest (c) restitution interest (d) none of the above Answer: A.

5. Under the Uniform Commercial Code, a seller ______generally entitled to recover consequential damages. Under the UCC, a buyer ______generally entitled to recover consequential damages. (a) is; is (b) is; is not (c) is not; is (d) is not; is not Answer: C.