Question

Define, explain and give a case study example of the following terms:

• Remedies of Breach

• Implied Warranties

• Intangible Property

Answer 1

Remedies of Breach

A contract is an agreement between two or more parties which creates certain legal obligations. If one or more parties to a contract do not perform according to the terms of the agreement, then there is a breach of a contract. The five types of remedies for breach of contract are:

Compensatory damages: This is the most common breach of contract remedy. When compensatory damages are awarded, a court orders the person that breached the contract to pay the other person enough money to get what they were promised in the contract elsewhere.

For example, suppose you hire and pay someone to clean your house for $100, but he is unable to do it. You search for a new cleaning service, and the cheapest one you find will clean your house for $150. If this cost is found to be reasonable, your first cleaner would have to pay you $150 in compensatory damages, allowing you to get your house professionally cleaned as the contract intended.

Restitution: When a court orders restitution, they tell the person that breached the contract to pay the other person back. In the example above, the court would order the first cleaner to pay you back $100, since that's what you paid him to clean your house

Rescission;

Reformation; and

Specific Performance.

Implied Warranties

1)An implied warranty is an unwritten guarantee that a product or service works as expected.

2)Implied warranty states that in every sales transaction, the good sold must be fit for the ordinary purposes for which the good is used, would pass without objection in the trade, is adequately packaged and labeled, and reflects the promises made on the label. Sometimes an implied warranty also exists when the seller knows what the buyer is going to use the good for and the buyer relies on the seller's judgment when choosing the goods. If the buyer is a knowledgeable buyer, however, the implied warranty doesn't always exist, especially if the buyer knows as much or more about the product than the seller does.

3) Example: when you buy a new car from a car dealer, the implied warranty is that the car works. When you order a hamburger at a restaurant, it comes with the implied warranty that it is edible.

Intangible Property

1)An intangible asset is an asset that is not physical in nature, such as a patent, brand, trademark, or copyright.

2)Businesses can create or acquire intangible assets.

3)An intangible asset can be considered indefinite (a brand name, for example) or definite, like a legal agreement or contract.

4)Intangible assets created by a company do not appear on the balance sheet and have no recorded book value.

Example: Business such as Coca-Cola wouldn't be nearly as successful if it not for the money made through brand recognition. Although brand recognition is not a physical asset that can be seen or touched, it can have a meaningful impact on generating sales.