Question

In: Accounting

Haply Inc. contracts with Barksdale LLC to have an engine repaired. After much negotiation, the parties...

Haply Inc. contracts with Barksdale LLC to have an engine repaired. After much negotiation, the parties agree that the engine will be repaired and reinstalled at Haply’s facilities in 5 days. Haply plans on losing $40,000 a day for each day the engine is not delivered after the five-day window (this is the cost for a replacement engine).

Haply tells Barksdale’s representatives that if the engine is not repaired on time that bad press will cause Haply to lose a client’s business totaling $3,000,000. Barksdale does not complete the contract until day 7.

It cost Haply $500 to secure the delivery of a replacement engine. The actual rental of the replacement engine cost $40,000 a day. And Haply lost the business of a client totaling $3,000,000. Haply sues Barksdale for incidental, consequential and compensatory damages. The court finds that there is a breach of contract. What are the consequential, incidental, and compensatory damages that Barksdale is liable for in this case? Be sure to define each of those terms.

The requirements below must be met for your paper to be accepted and graded:

Write between 500 – 750 words (approximately 2 – 3 pages) using Microsoft Word.

Attempt APA style, see example below.

Use font size 12 and 1” margins.

Include cover page and reference page.

At least 60% of your paper must be original content/writing.

No more than 40% of your content/information may come from references.

Use at least two references from outside the course material, preferably from EBSCOhost. Text book, lectures, and other materials in the course may be used, but are not counted toward the two reference requirement.

Solutions

Expert Solution

1. Consequential Damages : Consequential damages are indirect in naturewhich are incurred not as a result of the breach itself, but due to the end result of the breach.

Here, losing the client's business totalling to $3,000,000 is the consequential loss to Haply Inc

2.Incidental Damages : Incidental damages are reasonable expenses incurred by one party to a contract as a result of the other party’s breach of the contract.

Here since the engine is not repaired in 5 days therefore Haply Inc. had to make the rental expenditure of $40000 per day for 2 days.

Hence the incidental loss incurred by Haply Inc. is $80,000

3.Compensatory Damages : It refers to a sum of money awarded to an individual who suffers damages or losses directly caused by the acts of another. It is a loss which could be exactly measured in money.

Here Haply Inc. incures $500 to get the engine repaired which is the compensatory loss.

Hence, Barksdale is liable to give $3,000,000 as consequential damage, $80,000 as Incidental damage and $500 as compensatory damage.


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