CIPS L5M3 Exam - Topic 3 Question 44 Discussion

Actual exam question for CIPS's L5M3 exam

Question #: 44
Topic #: 3

[All L5M3 Questions]

Terry's Toys is a Toy Manufacturer who has an agreement to provide Toys to an online re-tailer. The retailer has ordered 500 toys from Terry and Terry has incurred costs of 3000 manufacturing the toys. Halfway through production the retailer calls Terry to cancel the order. Terry reads through the contract and sees a liquidated damages clause of 1000. What should Terry do?

ATerry can apply to the court to increase the liquidated damages to 3000

BTerry can sue the retailer for the additional costs incurred above the liquidated damages

CTerry can deliver the toys as agreed as there is a contract in place

DTerry can do nothing and must pay the additional 2000 out of his own pocket

Show Suggested Answer

Suggested Answer: C

DEF must deliver the pasta required by ABC is the correct answer. Specific performance is when the innocent party is rewarded by receiving what was initially negotiated - in this case the delivery of pasta. It's basically a posh way of saying that the court mandates you to do what the contract says. See p. 129 for information on Specific Performance.

by Martina at Dec 10, 2024, 06:53 AM

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Florinda

3 months ago

But what if the retailer just refuses to pay the liquidated damages?

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Tyra

3 months ago

Yeah, he should just stick to the contract and deliver the toys.

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Margarita

3 months ago

Wait, he has to pay 2000 out of pocket? That seems unfair!

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Paulina

4 months ago

I think the liquidated damages are set, so he can't change that.

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Herminia

4 months ago

Terry should definitely sue for the extra costs!

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Denise

4 months ago

I’m really torn between options C and D. I know contracts are binding, but I also remember something about having to cover losses.

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Carma

4 months ago

I feel like Terry should just deliver the toys since there’s a contract. But what if the retailer doesn’t want them anymore?

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Long

4 months ago

I think option B sounds familiar from a practice question we did. It mentioned suing for additional costs, but I’m not entirely confident that’s allowed here.

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Adria

5 months ago

I remember discussing liquidated damages in class, but I'm not sure if Terry can actually increase them in court. That seems tricky.

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Hayley

5 months ago

Hmm, I'm leaning towards option B. The additional $2,000 in costs that Terry incurred seems like a reasonable claim, even with the liquidated damages clause in place. I'll need to double-check the contract language, but that's my initial take.

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Evangelina

5 months ago

This seems straightforward to me. The contract has a liquidated damages clause, so Terry should just accept the $1,000 and move on. No need to overcomplicate things.

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Heike

5 months ago

I'm a bit confused on this one. The liquidated damages clause seems pretty clear, but I'm not sure if that's the only option. I'll need to think through the pros and cons of each choice before deciding.

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Bulah

5 months ago

Okay, so the key facts are that Terry has incurred $3,000 in manufacturing costs, and the contract has a liquidated damages clause of $1,000. I think the best option is to go with B and sue for the additional costs.

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Tuyet

5 months ago

Hmm, this seems like a tricky one. I'll need to carefully review the contract details and the liquidated damages clause to determine the best course of action.

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