Spokes Bicycles Has a Contract with Trail Parts,Inc

question 57

Multiple Choice

Spokes Bicycles has a contract with Trail Parts,Inc.that requires Spokes to buy 200 bicycle gears from Trail at a price of $50 per gear.For an unknown reason,Spokes cancels the contract after Trail has already finished manufacturing all 200 gears.Trail offers the gears to ACE Bikes for $20 each.ACE is shocked by the great deal because these types of gears normally retail for $50.ACE agrees to purchase the gears.Trail then sues Spokes for its lost profits.Which of the following is true?

• A)ACE bikes must pay Trail $50 per gear.
• B)Trail is not entitled to damages because it was able to resell the goods.
• C)Trail's damages will be limited because its resale was not in good faith and in a commercially reasonable manner.
• D)Trail will be able to recover damages for the difference between the resale price and the price the buyer agreed to pay in the contract.

---

Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, before deducting overheads, payroll, taxation, and interest payments.

Net Profit

The financial gain produced after subtracting all expenses, taxes, and costs from total revenue.

Exercise Option

An option in derivatives trading that allows the holder to buy or sell an asset at a predetermined price before or on a specific date.

Convertible

A type of financial security that can be changed into a different form, most commonly a bond that can be converted into shares of the issuing company.