CAF-4 · Chapter 10
Remedies for breach of contract MCQs with Answers
12 multiple-choice questions on Remedies for breach of contract for CAF-4 Business Law Dynamics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for:
- A) Any loss which is indirect or remote.
- B) Any loss which naturally arose in the usual course of things from such breach.
- C) Any emotional distress caused by the breach.
- D) Any penalty he wishes to impose.
Show answer & explanation
Answer: B) Any loss which naturally arose in the usual course of things from such breach.
According to Section 73, the injured party is entitled to compensation for loss which naturally arose in the usual course of things, or which the parties knew, when they made the contract, to be likely to result from the breach.
Question 2
Compensation is NOT to be given for any ___________ loss or damage sustained by reason of the breach.
- A) Direct
- B) Remote and indirect
- C) Foreseeable
- D) Financial
Show answer & explanation
Answer: B) Remote and indirect
Under Section 73, damages are not awarded for losses that are too remote or indirect (the rule from Hadley v Baxendale).
Question 3
When a contract contains a clause stating a specific amount to be paid in case of a breach, this is known as:
- A) Liquidated damages or penalty.
- B) Nominal damages.
- C) Exemplary damages.
- D) Restitution.
Show answer & explanation
Answer: A) Liquidated damages or penalty.
Section 74 deals with cases where a sum is named in the contract as the amount to be paid in case of breach.
Question 4
Under Section 74, if a sum is named as the amount to be paid in case of breach, the party complaining is entitled to:
- A) The full amount named, regardless of actual loss.
- B) Reasonable compensation not exceeding the amount so named.
- C) Nothing, unless he proves criminal intent.
- D) Double the amount named.
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Answer: B) Reasonable compensation not exceeding the amount so named.
Unlike English law, Pakistani law allows the court to award 'reasonable compensation' up to the limit of the sum named, whether actual damage is proved or not.
Question 5
The primary purpose of awarding damages for breach of contract is:
- A) To punish the party who broke the contract.
- B) To enrich the injured party.
- C) To place the injured party in the same financial position as if the contract had been performed.
- D) To cancel all future contracts between the parties.
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Answer: C) To place the injured party in the same financial position as if the contract had been performed.
The object of damages is compensatory, not punitive. It aims to restore the injured party's 'expectation interest'.
Question 6
What are 'nominal damages'?
- A) Large sums meant to punish.
- B) Small sums (e.g., Rs. 10) awarded when a right is broken but no actual financial loss is suffered.
- C) Compensation for emotional pain.
- D) Payments made in advance.
Show answer & explanation
Answer: B) Small sums (e.g., Rs. 10) awarded when a right is broken but no actual financial loss is suffered.
Nominal damages are awarded to acknowledge that a legal right was violated, even if no money was lost.
Question 7
An order of the court requiring a party to carry out their specific promise as per the contract is known as:
- A) Injunction.
- B) Damages.
- C) Specific Performance.
- D) Rescission.
Show answer & explanation
Answer: C) Specific Performance.
Specific performance is an equitable remedy where the court orders the party in breach to actually perform their contractual obligation.
Question 8
In which cases is 'Specific Performance' usually NOT granted?
- A) Contracts involving personal skills or services.
- B) Contracts where monetary compensation is an adequate remedy.
- C) Contracts involving the sale of generic goods available in the market.
- D) All of the above.
Show answer & explanation
Answer: D) All of the above.
Specific performance is only granted when money is 'not' an adequate remedy (like for unique property). It is not granted for personal services or common goods.
Question 9
A court order restraining a person from doing a particular act (like working for a rival) is called an:
- A) Specific Performance order.
- B) Injunction.
- C) Quantum Meruit.
- D) Restitution.
Show answer & explanation
Answer: B) Injunction.
An injunction is a preventive remedy used to stop a party from doing something they promised not to do (negative covenant).
Question 10
The term 'Quantum Meruit' literally means:
- A) As much as is deserved.
- B) A fair price.
- C) Absolute profit.
- D) No payment.
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Answer: A) As much as is deserved.
Quantum Meruit allows a party who has performed part of a contract to recover the value of the work done when the other party prevents further performance or the contract becomes void.
Question 11
Ordinary damages are also known as:
- A) General damages.
- B) Punitive damages.
- C) Liquidated damages.
- D) Deferred damages.
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Answer: A) General damages.
General (ordinary) damages are those that arise naturally in the normal course of things from the breach.
Question 12
Duty to 'mitigate' loss means that the injured party:
- A) Must sue for the maximum possible amount.
- B) Must take reasonable steps to minimize the loss resulting from the breach.
- C) Must ignore the breach.
- D) Must pay the other party's legal fees.
Show answer & explanation
Answer: B) Must take reasonable steps to minimize the loss resulting from the breach.
The law requires the victim of a breach to act reasonably to keep their losses as low as possible; they cannot recover for losses they could have avoided.