Under the Economic Loss Rule, When a Breach of Contract

question 328

Multiple Choice

Under the economic loss rule, when a breach of contract does not include a tort, such as injury to persons, the damages:

• A) only relate to economic losses suffered from the breach
• B) are limited to half the economic losses suffered from the breach
• C) are not related to the monetary losses suffered from the breach
• D) must exceed the direct costs suffered from the breach
• E) none of the other choices are correct

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Definitions:

Net Present Value

The disparity between cash inflows' present value and cash outflows' present value through a certain time frame, utilized to determine an investment's profitability.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.

Cash Break-even Point

The point at which a business's cash inflows equal its cash outflows, excluding financing.

Degree of Operating Leverage

A ratio that quantifies the sensitivity of a company's operating income to its sales, demonstrating the impact of fixed and variable costs on profitability.