Woody Entered into a Contract with Jezebel

question 59

Multiple Choice

Woody entered into a contract with Jezebel.She promised to pay $10 000 and he promised to build a sun deck in her backyard.The contract contained specific terms regarding the quality of the materials that Woody would use.Woody built a sun deck, but many of the materials that he used fell below the standard required by the contract.As a result of that breach, the deck is worth $1000 less than Jezebel expected.It will cost $9000 to replace the defective materials with materials that satisfy the terms of the contract.Which of the following statements is TRUE?

• A)A court will always award cost of cure damages if the defendant deliberately used materials that did not satisfy the terms of the contract.
• B)A court will probably refuse to award cost of cure damages because the difference between Jezebel's loss of value and the expense of repairing the defect is very large.
• C)If Jezebel is awarded cost of cure damages, she must use that money to cure the defect.
• D)Cost of cure damages are classified as a form of punitive damages because they often require the defendant to pay for more than the plaintiff's actual loss of value.
• E)If Woody deliberated breached the contract by using inferior materials, Jezebel will receive total damages worth $18 000.

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Definitions:

Normal Balances

The side (debit or credit) of an account that is expected to have a positive balance.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, including the balance sheet, income statement, and statement of cash flows.

Debit

An entry in the accounts that represents an increase in assets or expenses or a decrease in liabilities, equity, or revenue in a double-entry bookkeeping system.

Salary Expense

The total amount paid by a business to its employees for their services over a specific period.