Crucial Exams

Multistate Bar Examination Practice Question

A graphic design company entered into a contract with a restaurant to rebrand its logo and produce marketing materials. Midway through the project, the restaurant informed the company it would no longer need its services due to budget cuts. Despite being notified, the company completed the design work and demanded payment under the contract. The restaurant refused, arguing that the company failed to act reasonably after it canceled the contract. Under principles of contract law regarding the duty to mitigate damages, how should the court likely rule?

  • The restaurant is not liable for damages because the cancellation eliminated the restaurant's further obligations under the contract.

  • The court will limit the company's recovery to the costs and expenses it incurred before being notified of the cancellation.

  • The company is entitled to payment for work completed prior to the notification of the cancellation.

  • The company is entitled to payment unless the restaurant demonstrates it had a legal defense for canceling the contract.

Multistate Bar Examination
Contracts
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