It's Fall, and lots of people are selling used jet-skis. You decide to buy one, store...

 

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It's Fall, and lots of people are selling used jet-skis. You decide to buy one, store it through the winter, and use it on Lake Mendota next summer. You find one you like; it's worth $2,900 to you and $2,500 to its owner, and you sign a contract with the owner to buy the jet-ski for $2,750. Your friend has a truck and extra space in his garage, and says he'll help you transport the jet-ski and store it at his place for free. However, your friend is not completely dependable, and if he forgets to show up, you'll be unable to buy the jet-ski. (a) How much do you benefit from the contract to buy the jet-ski, assuming your friend shows up with his truck? How much does the seller benefit? (b) Under a remedy of expectation damages, how much money would you owe the seller if your friend doesn't show up? How much worse off would it make you if your friend didn't show up, relative to if he did? (c) Another buyer had offered the seller $2,550 for the jet-ski, but bought a different one after the seller accepted your offer. Under a remedy of opportunity cost damages, how much money would you owe the seller if your friend doesn't show up and you don't buy the jet-ski? How much worse off would it make you if he didn't show up, relative to if he did? If you don't do anything, it's 90% likely that your friend will show up. In addition, you could wake up extra early, drive out to where he lives, and pound on his door to remind him. This would make it 100% certain he would show up; but between the inconvenience of waking up early and the extra gas to drive to his place, this would cost you $25. Think of this as an investment in performance - it's money you can spend to make it more likely you're able to live up to the contract. (d) How much social value is created by your friend showing up? Is the investment in performance efficient or inefficient? (e) Under a remedy of expectation damages, would you make this investment in performance? What about under a remedy of opportunity cost damages? It's Fall, and lots of people are selling used jet-skis. You decide to buy one, store it through the winter, and use it on Lake Mendota next summer. You find one you like; it's worth $2,900 to you and $2,500 to its owner, and you sign a contract with the owner to buy the jet-ski for $2,750. Your friend has a truck and extra space in his garage, and says he'll help you transport the jet-ski and store it at his place for free. However, your friend is not completely dependable, and if he forgets to show up, you'll be unable to buy the jet-ski. (a) How much do you benefit from the contract to buy the jet-ski, assuming your friend shows up with his truck? How much does the seller benefit? (b) Under a remedy of expectation damages, how much money would you owe the seller if your friend doesn't show up? How much worse off would it make you if your friend didn't show up, relative to if he did? (c) Another buyer had offered the seller $2,550 for the jet-ski, but bought a different one after the seller accepted your offer. Under a remedy of opportunity cost damages, how much money would you owe the seller if your friend doesn't show up and you don't buy the jet-ski? How much worse off would it make you if he didn't show up, relative to if he did? If you don't do anything, it's 90% likely that your friend will show up. In addition, you could wake up extra early, drive out to where he lives, and pound on his door to remind him. This would make it 100% certain he would show up; but between the inconvenience of waking up early and the extra gas to drive to his place, this would cost you $25. Think of this as an investment in performance - it's money you can spend to make it more likely you're able to live up to the contract. (d) How much social value is created by your friend showing up? Is the investment in performance efficient or inefficient? (e) Under a remedy of expectation damages, would you make this investment in performance? What about under a remedy of opportunity cost damages?

Answer rating: 100% (QA)

Lets break down the scenario into the questions asked a The benefit of the contract to buy the jetski for you is the difference between its value and the price you pay So if you get the jetski your be... View the full answer