Sam Entered into a Contract for the Purchase of a Used

question 51

Multiple Choice

Sam entered into a contract for the purchase of a used dump truck from Joe's Heavy Duty Trucks. The written contract clearly specified, among other things, that "it shall be a warranty to this contract that the truck has the capacity of carrying and properly dumping loads of up to 4000 kg of gravel." In fact, when Sam loaded the truck with 4000 kg of gravel, he discovered that the hoist on the truck was not capable of dumping it. Only if the load was reduced to 3000 kg could the gravel be dumped. Sam obtained an estimate stating that it would cost $8000 to reinforce the hoist mechanism of the truck so that it could handle dumping 4000 kg of gravel. When Sam approached Joe demanding satisfaction, Sam pointed out another term of the agreement that stated that in the event of a breach of contract the "maximum damages payable to the purchaser are limited to $5000." Sam sued. Which of the following statements is correct with respect to the legal position of the parties?

• A) Sam must keep the truck and sue for damages, but those damages are limited to $5000.
• B) Sam can treat his obligation as over, return the truck, and demand the return of his purchase price.
• C) Sam must keep the truck but can obtain the $8000 in damages or what it takes to repair the hoist mechanism.
• D) Sam can get an order of specific performance, which will force the seller, Joe, to fix the truck even if it does cost $8000.
• E) There is nothing Sam can do as this was a breach of warranty.

---

Definitions:

Planning Horizon

describes the time period over which future events are considered for planning and decision-making purposes.

Aggregate Planning

A process in operations management aimed at determining optimal production levels, inventory levels, and workforce levels to meet fluctuating demand over a medium-term horizon.

Variables

Elements, features, or factors that are likely to vary or change and can be measured in an experiment or model.

Services Inventory

The concept of quantifying and managing the availability of intangible service capacities, such as hours of labor or access to resources.