Question

3- what is tort?

6-Describe the two major theories used by the courts to determine damages?

7-Sam contract to buy an asset from Pam for $205,000, but six months later, Pam says no to the sale. The asset is now worth $325,000. What would the damages be under the benefit-of bargain rule?

8-What five major factors are required for the benefit-of the bargain computation?

9-Describe the four major ways to calculate lost profits?

Answer 1

3-Tort - Tort is any non-criminal,wrongful action other than breach of contract,for which there is a civil remedy.

6- The two major theories used by the courts to determine damages are - a) The out of pocket loss refers to the difference between the actual value received and the actual value conveyed.

b) The benefit of bargain theory(or expectations remedy),the damages include not only the money invested but also other expenses such as cost/expenses,lost profits,and decrease value of the investment.

7- under the benefit-of-the-bargain theory(or expectations remedy),the damages include not only the money invested but also other expenses such as increased costs,lost profits,and decreased value of the investment- $325,000 - $205,000=$120,000.

8- The benefit-of-the-bargain computation requires the following major factors -

1. method

2. damages period

3.growth rate

4. definition of profit

5. discount rate.

9- The four ways to calculate lost profits are -

1. before-and-after-method - Take sales or sales growth before the act and compare to the comparable figures afterward.

2. yardstick approach- Compare sales and sales growth of the company to other companies or to other industry averages.

3. the "but-for" method- The difference in the estimated profits(but-for actions of the defendant)and the actual profits.

4. The direct method- Any agreement may indicate how to calculate.