Gerald Was a Subcontractor,bidding on a Contract for XYZ Corp

question 12

Multiple Choice

Gerald was a subcontractor,bidding on a contract for XYZ Corp.,the general contractor.When adding up the total of materials and labor,Gerald's secretary made a clerical error with a total of $45,000 instead of $450,000.Gerald then submitted his bid for $45,000.XYZ accepted Gerald's bid of $45,000,mostly because all the other bids were over $400,000.When Gerald learns of his mistake,he tells XYZ that he cannot perform the contract.If XYZ sues to enforce this contract,what is the most likely result?

• A) The contract is fully enforceable because there was a valid offer and acceptance.
• B) This is a bilateral mistake,so either party can rescind the contract.
• C) This is a unilateral mistake,which can usually be rescinded by the mistaking party.
• D) Because XYZ should have known that this was an error,Gerald will be allowed to rescind the contract.
• E) This is a case of economic duress and Gerald will be allowed to rescind the contract.

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Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs, which vary with the level of output.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the amount of goods or services produced, such as rent or salaries.

Selling Price

The amount of money for which something is sold to a customer.

Operating Cash Flow

The cash generated by a company's normal business operations, indicating whether a company is able to generate enough positive cash flow to maintain and grow its operations.