Question

Tom and Burt enter into a contract. Burt agrees to sell Tom 50 widgets, and Tom agrees to pay $10 per widget. The cost of making widgets then skyrockets. Burt calls Tom a week before the widgets are due, and tells Tom that he won't be supplying the widgets to Tom. what will doing tom with this the problem?

Answer 1

Tom can seek specific performance or damages due to Burt's breach of contract. The contract's specific terms will be crucial in determining Tom's remedies. Economic principles like profit-maximizing employment of labor illustrate the potential impacts of cost changes on businesses.

Step-by-step explanation:

Addressing the Breach of Contract

When Burt informs Tom that he will not be supplying the widgets as per their contract, Tom faces a breach of contract issue. In such a situation, Tom has several remedies available. He could seek specific performance, which is a court order for Burt to fulfill the terms of the contract, or he might look for damages, which would compensate Tom for the losses incurred due to the breach. If the cost of widgets skyrocketed, it could be argued that Burt's performance has become impracticable, which can be a defense in a breach of contract case. However, this would depend on the specific terms of the contract and whether it includes any clauses that address such circumstances (e.g., force majeure or hardship clauses).

In terms of economics, it's worth noting that the profit-maximizing employment of labor is when an employer pays a worker up to the point that their labor generates revenue for the firm. If widget workers receive $10 per hour and can produce two widgets per hour sold at $4 each, they generate $8 in revenue for the firm per hour. Given that the agreed price per widget in the contract is $10, it implies significant changes in the cost of production or market conditions have occurred.