A and B Enter into a Contract Whereby a Agrees

question 51

Multiple Choice

A and B enter into a contract whereby A agrees to supply B with 10,000 tins of tuna at the rate of 1000 tins per month from his tuna factory in Bayport, Nova Scotia, and B agrees to pay A $2 per tin. A supplies 1000 tins of tuna and before he can collect, his factory is destroyed by fire. If the contract is discharged by frustration, which of the following statements is correct?

• A) All obligations under the contract are discharged, A and B's obligations are both discharged, and B does not have to pay A the sum of $2,000.
• B) B will not have to pay A the sum of $2,000 because there is no longer a contract.
• C) Only future obligations are discharged and B must pay A the sum of $2,000.
• D) A must obtain the tuna from another source to satisfy the contract.
• E) B will have to pay A the sum of $2,000 because there was no deposit.

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Definitions:

Cash Discount

A reduction in the invoice price offered by sellers to buyers as an incentive for early payment before the established due date.

Prompt Payment

The practice of paying invoices on time, which can help build good relationships with suppliers and might qualify the payer for discounts.

Lower Price

The reduction of cost or charge for a product or service, making it more affordable.

Performance Bond

A bond issued by a bank or insurance company that guarantees satisfactory completion of a project by a contractor, mitigating risk for the project owner.