Fred's Fireplaces Enters into a Contract with Miguel's Patio Supply

question 48

Multiple Choice

Fred's Fireplaces enters into a contract with Miguel's Patio Supply in which Miguel's agrees to purchase 20 fireplaces. Miguel fails to pay and Fred's Fireplaces cancels the contract. Fred's does not notify Miguel. Did Fred's Fireplaces act appropriately?

• A) No because cancelling a contract is never appropriate.
• B) No because filing a lawsuit is required before cancelling a contract.
• C) No because a contract can be cancelled in the event of breach only if the contract is for at least 50 units of goods.
• D) No, because the UCC requires sellers to notify buyers of a cancellation if the seller cancels the contract due to a breach.
• E) Yes, because a seller always has a right to cancel a contract before performance is due.

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Definitions:

Minimum Discount Rate

The lowest rate at which future cash flows are discounted to determine their present value.

Project

A deliberate arrangement of tasks that are interconnected, aimed to be finalized within a designated time frame and under particular cost and constraint conditions.

Accounting Rate

Typically referred to as the rate of return, it measures the profitability of investments or projects based on accounting information, rather than the current market value.

Limited Economic Resource

A scarcity or limitation of resources that possess utility or value, which restricts their availability for use in production, consumption, or investment.