How Does the Doctrine of Business Efficacy Impact the Interpretation

question 13

Multiple Choice

How does the doctrine of business efficacy impact the interpretation of contracts?

• A) by permitting judges to strike out contractual terms that are commercially unreasonable
• B) by permitting judges to imply terms necessary to make the contract workable
• C) by permitting the parties to vary the wording of their contract to suit changing circumstances
• D) by permitting the parties to ignore contractual terms that are commercially unreasonable

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Definitions:

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Manufacturing Margin

The difference between the sales revenue of manufactured goods and the direct costs associated with producing them.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and generate profit.

Absorption Costing

A costing technique that incorporates all costs associated with production, including both fixed and variable expenses, into the product's price.