Common Law Remedies for Breach of Trust: A Comprehensive Guide for Law Students

Question 1

Which of the following is NOT a recognized common law remedy available to beneficiaries for breach of trust?

Accepted Answer

Tracing

Answer

Damages

Answer

Rescission

Answer

Injunction

Question 2

In the context of a breach of trust, what type of damages aims to compensate the beneficiary for actual financial losses incurred as a result of the breach?

Accepted Answer

Compensatory damages

Answer

Nominal damages

Answer

Exemplary damages

Answer

Consequential damages

Question 3

When may a beneficiary be entitled to the equitable remedy of rescission for a breach of trust?

Accepted Answer

If the breach is considered to be fundamental and the beneficiary acts promptly

Answer

Only if the trust property can be restored to its original condition

Answer

Never, as rescission is not a remedy available for breach of trust

Answer

When the trustee agrees to the rescission

Question 4

What is the primary purpose of an injunction in the context of breach of trust?

Accepted Answer

To reverse the effects of the breach and prevent future breaches

Answer

To compensate the beneficiary for losses suffered

Answer

To punish the trustee for the breach

Answer

To appoint a new trustee to administer the trust

Question 5

Which of the following statements regarding the limitation period for bringing an action for breach of trust is accurate?

Accepted Answer

It is 15 years from the date the beneficiary discovers the breach or ought to have known about it with reasonable diligence

Answer

It is six years from the date of the breach

Answer

It is 12 years from the date of the breach

Answer

It varies depending on the specific circumstances of the breach, but is typically around 10 years

Question 6

When may a beneficiary be considered to have constructive knowledge of a breach of trust?

Accepted Answer

When they could reasonably have discovered the breach through due diligence

Answer

When they were actually informed of the breach by the trustee

Answer

When the trustee admits to the breach in writing

Answer

Constructive knowledge is not a relevant concept in the context of breach of trust

Question 7

What is the significance of the 'rule in Keech v Sandford' in the context of tracing trust property?

Accepted Answer

It prevents tracing into mixed funds where the trust property has been commingled with the trustee's own funds

Answer

It only applies to tracing claims against third parties who have received the trust property

Answer

It limits tracing to the initial stage of the breach and does not allow for tracing through subsequent transactions

Answer

It has no relevance to tracing claims

Question 8

What is the primary objective of equitable compensation?

Accepted Answer

To restore the beneficiary's position as if the breach had not occurred, by providing a monetary award equivalent to the losses suffered

Answer

To punish the trustee

Answer

To deter future breaches of trust

Answer

To compensate the beneficiary for emotional distress and inconvenience

Question 9

Which of the following is NOT a common law remedy available to beneficiaries for breach of trust?

Accepted Answer

Restitution

Answer

Damages

Answer

Rescission

Answer

Injunction

Question 10

In the context of breach of trust, damages are typically awarded to:

Accepted Answer

Compensate the beneficiary for the financial loss suffered as a direct result of the breach

Answer

Punish the trustee for their wrongdoing

Answer

Deter future breaches of trust

Answer

Restore the trust property to its original state

Question 11

True or False: Injunctions can be used to prevent a threatened breach of trust.

Accepted Answer

True

Answer

False

Question 12

True or False: The beneficiary's contributory negligence can bar a claim for breach of trust.

Accepted Answer

True

Answer

False

Question 13

Rescission is a discretionary equitable remedy granted by the court upon the application of a beneficiary.

Accepted Answer

True

Answer

False

Question 14

Which of the following is NOT a type of constructive trust?

Accepted Answer

Express trust

Answer

Resulting trust

Answer

Presumed trust

Answer

Implied trust

Question 15

A resulting trust arises:

Accepted Answer

When property is transferred without a clear intention as to the beneficial ownership

Answer

When a trustee wrongfully profits from the trust

Answer

When a beneficiary murders the trustee

Answer

When a trust is created for an illegal purpose

Question 16

Which of the following is NOT a requirement for a successful claim for damages for breach of trust?

Accepted Answer

The breach of trust was committed intentionally

Answer

The breach of trust caused the beneficiary to suffer a loss

Answer

The loss suffered by the beneficiary was reasonably foreseeable

Answer

The beneficiary took reasonable steps to mitigate the loss

Question 17

When can a beneficiary rescind a transaction entered into by a trustee in breach of trust?

Accepted Answer

In any case where the breach of trust rendered the transaction voidable

Answer

Only if the transaction was voidable

Answer

Only if the trustee acted fraudulently

Answer

Only if the transaction was entered into for undervalue

Question 18

Which of the following is NOT a factor that a court will consider when deciding whether to grant an injunction to restrain a trustee from committing a breach of trust?

Accepted Answer

The trustee's intention

Answer

The balance of convenience

Answer

The likelihood of the beneficiary suffering irreparable harm

Answer

The beneficiary's conduct

Question 19

Under what circumstances can a beneficiary obtain a constructive trust over property acquired by a trustee in breach of trust?

Accepted Answer

When the trustee has committed a breach of trust in acquiring the property

Answer

Only if the property was acquired with trust funds

Answer

Only if the beneficiary can demonstrate that the trustee intended to acquire the property for the trust

Answer

Only if the beneficiary has no other adequate remedy

Question 20

Which of the following is NOT a common law remedy available to beneficiaries for breach of trust?

Accepted Answer

Specific performance

Answer

Damages

Answer

Rescission

Answer

Injunction

Question 21

In what fundamental way does the law of trusts differ from the law of contract?

Accepted Answer

Trusts are governed by equitable principles, while contracts are governed by common law principles

Answer

Trusts can be created orally, while contracts must be in writing

Answer

Trusts can be enforced against third parties, while contracts cannot

Answer

Trusts are always fiduciary in nature, while contracts are not

Question 22

According to the "prudent man" rule, trustees must adhere to what standard of care?

Accepted Answer

The standard of care exercised by a reasonable person in similar circumstances

Answer

The highest possible standard of care

Answer

The standard of care set by the settlor of the trust

Answer

The standard of care set by the beneficiaries of the trust

Question 23

Which characteristic distinguishes a resulting trust from other types of trusts?

Accepted Answer

It arises automatically by operation of law

Answer

It is created through an express declaration

Answer

It benefits the person who transferred the property to the trust

Answer

It requires a written agreement

Question 24

Can a beneficiary enforce a trust against a third party who knowingly received trust property?

Accepted Answer

Yes

Answer

No

Question 25

When determining the amount of damages to award for breach of trust, the court does not consider:

Accepted Answer

Emotional distress

Answer

Loss of income

Answer

Value of the trust property lost

Answer

Reasonable reliance on the trustee's advice

Question 26

Which type of trust arises automatically by law when property is transferred without specifying a beneficiary?

Accepted Answer

Resulting trust

Answer

Express trust

Answer

Implied trust

Answer

Charitable trust

Question 27

The primary duty owed by a trustee to a beneficiary is known as:

Accepted Answer

Fiduciary duty

Answer

Duty of prudence

Answer

Duty of loyalty

Answer

Duty of care

Question 28

To be awarded damages for breach of trust, which of the following must be established?

Accepted Answer

The beneficiary suffered actual loss as a direct result of the breach of trust

Answer

The breach of trust resulted in a profit for the trust

Answer

The breach of trust occurred intentionally

Answer

The trustee derived personal benefit from the breach of trust

Question 29

In an action for damages for breach of trust, the amount of damages awarded is typically based on:

Accepted Answer

The actual loss suffered by the beneficiary as a direct result of the breach of trust

Answer

The value of the trust property at the time of the breach of trust

Answer

The value of the trust property at the time of the trial

Question 30

A trustee invests trust funds in a high-risk venture, which subsequently fails, causing financial loss to the beneficiaries. Which common law remedy would be most appropriate for the beneficiaries to seek?

Accepted Answer

Damages

Answer

Injunction

Answer

Rescission

Answer

Specific performance

Question 31

A trustee sells a valuable painting belonging to the trust for a price significantly below market value. What common law remedy could the beneficiaries seek to reverse the sale and recover the painting?

Accepted Answer

Rescission

Answer

Injunction

Answer

Damages

Question 32

A trustee is about to sell a valuable piece of land belonging to the trust at an undervalue. Which common law remedy could the beneficiaries seek to prevent this sale?

Accepted Answer

Injunction

Answer

Rescission

Answer

Specific performance

Answer

Damages

Question 33

A trustee agrees to sell a property to a beneficiary at a pre-determined price but later refuses to complete the sale. Which common law remedy could the beneficiary seek to compel the trustee to fulfill this agreement?

Accepted Answer

Specific performance

Answer

Damages

Answer

Rescission

Question 34

When deciding whether to grant specific performance as a remedy for breach of trust, courts consider various factors. Which of the following is NOT a key factor in this decision?

Accepted Answer

The trustee's intention in breaching the trust

Answer

The availability of alternative remedies

Answer

The hardship to the trustee

Answer

The nature of the property involved

Question 35

How do common law remedies relate to equitable remedies in breach of trust cases?

Accepted Answer

Common law remedies are typically used when equitable remedies are not suitable.

Answer

Common law remedies are always the preferred remedy for breach of trust.

Question 36

A trustee misappropriates trust funds for personal use. The beneficiaries seek damages to compensate for the financial loss. What principle is most relevant in determining the amount of damages?

Accepted Answer

The beneficiaries should be restored to the financial position they would have been in had the breach not occurred.

Answer

The trustee's intent in misappropriating the funds.

Question 37

A beneficiary seeks rescission of a contract entered into by a trustee who failed to disclose a conflict of interest. What condition must be met for rescission to be granted?

Accepted Answer

The beneficiary must choose to rescind the contract within a reasonable timeframe.

Answer

The contract must have been commercially unfair to the beneficiary.

Answer

The trustee must have acted with dishonesty.

Question 38

A trustee invests trust funds in a risky venture without obtaining proper consent from the beneficiaries. The venture fails, and the beneficiaries suffer losses. Which common law remedy would be most appropriate in this situation?

Accepted Answer

Damages

Answer

Injunction

Answer

Rescission

Answer

Specific performance