John needs a new car and goes to the local dealer for Worldwide Motors,a global car manufacturer.John negotiates a deal with the local dealer to buy a new midsize model,the Albatross,for $22,000.The dealer cost on this car is $19,000.John then decided against the Albatross and breached the contract.John had not yet made any payment to the dealer.Later,the dealer then sold this car to another customer for $21,600.The dealer also incurred $200 in costs connected with John's canceled order.Assuming that the dealer is allocated only twelve Albatrosses for the year and can get no more,how much can it recover in damages from John?

Question

Quizplus · Accepted Answer

To calculate the damages that the dealer can recover from John, we need to first determine the actual damages suffered by the dealer as a result of John's breach.

The dealer's actual damages include the difference between the contract price and the resale price of the car, plus any other incidental expenses.

In this case, the contract price was $22,000, but the dealer cost was only $19,000. Therefore, if John had not breached the contract, the dealer would have made a profit of $3,000 ($22,000 - $19,000) on the sale.

However, since John did breach the contract, the dealer had to find another buyer for the car. The resale price was $21,600, which means the dealer suffered a loss of $400 ($22,000 - $21,600) on the resale.

In addition, the dealer incurred $200 in costs connected with John's canceled order.

Therefore, the total actual damages suffered by the dealer are $600 ($400 + $200). This is the amount that the dealer can recover from John as compensation for breaching the contract.

Option B is the correct answer as it represents the damages that the dealer can recover from John.

John Needs a New Car and Goes to the Local