Allen Hired Beth to Do a Marketing Survey

question 42

Multiple Choice

Allen hired Beth to do a marketing survey. The contract provided that she would start the work on January 15 and finish it by March 15, the date for completion being a condition on the contract. She would be paid $2,000. After one month of work, when the work was half completed, Beth assigned the $2,000 contract price to Charlie, from whom she had bought computer hardware. Charlie gave written notice of the assignment to Allen on the same day. The second month's work went badly. Information entered into the computer was lost and Beth could not finish on time. She was five days late, and each day cost Allen $100. His total foreseeable loss was $500 because of her breach. On these facts, which of the following is true?

• A) Charlie could receive only $1,000 from Allen because only half the work was done when the assignment was made.
• B) Charlie could receive only $1,000 from Allen because half of the $2,000 project was finished when he gave notice of the assignment to Allen.
• C) Charlie gets $0 from Allen because one can assign contractual obligations but not contractual rights.
• D) Charlie could receive $1,500, because when the contract was completed, that was all that was legally owed to Beth.
• E) Charlie could receive $2,000 from Allen because that is the amount owed to Charlie and the amount assigned by Beth.

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Definitions:

Firm's Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 means the stock is more volatile than the market, while a beta less than 1 means it is less volatile.

Single-Factor Market Model

A financial model that explains a security's returns as the outcome of a single market-wide factor and the security's sensitivity to that factor.

Unsystematic Risk

The risk associated with a specific company or industry that can be mitigated through diversification.

Residuals

Residuals are differences between observed and predicted values in statistical models, used to assess the fit of models to data.