Question

which of the following will not discharge the obligation to perform a contract? a. rampant inflation that increases prices 33 percent b. force majeure when there is a force majeure clause c. death on a personal services contract obligation d. bankruptcy

Answer 1

Out of the options provided, rampant inflation will not discharge the obligation to perform a contract.

Step-by-step explanation:

In the context of contracts, certain events or circumstances can discharge the obligation to perform a contract. However, in this case, the question is asking about the situation that will not discharge the obligation. Out of the options provided:

a. Rampant inflation that increases prices by 33 percent: This can be considered as an example of an external event that may make the performance of a contract more difficult, but it does not discharge the obligation to perform the contract.

b. Force majeure when there is a force majeure clause: A force majeure clause is typically included in contracts to address events that are beyond the control of the parties, such as natural disasters or political unrest. If there is a force majeure clause and the event falls within its scope, it may discharge the obligation to perform the contract.

c. Death on a personal services contract obligation: The death of the person who is obligated to perform a personal services contract will typically discharge the obligation, as it becomes impossible to perform.

d. Bankruptcy: Bankruptcy can discharge the obligation to perform a contract if the bankrupt party is unable to fulfill their obligations as a result of their financial situation.

Therefore, option a., rampant inflation, will not discharge the obligation to perform a contract.

Answer 2

The impact of a 5% rise in inflation varies depending on the specific situations: a union member with a COLA wage contract is likely unaffected, someone with cash savings is hurt, a bank lending at a fixed interest rate is hurt, and a person not receiving a pay raise soon is also hurt.

Step-by-step explanation:

If inflation rises unexpectedly by 5%, the economic impact on each of the actors mentioned would vary depending on their situation:

• A union member with a COLA wage contract is likely unaffected or possibly helped, as COLA (Cost of Living Adjustment) would typically adjust wages in response to inflation, maintaining purchasing power.
• Someone with a large stash of cash in a safe deposit box would be hurt, as inflation erodes the purchasing power of cash over time.
• A bank lending money at a fixed rate of interest is also likely to be hurt because the real value of the interest payments received decreases as the general price level increases.
• A person who is not due to receive a pay raise for another 11 months is hurt since their income remains the same while the cost of goods and services goes up, leading to reduced purchasing power.