Financial Management Assignment: Post-Investment Holdup & Contracts

This assignment solution addresses the concept of post-investment holdup as a sunk cost problem within the context of managerial economics and contract law. It explores the implications of contract-specific fixed investments and the challenges of unforeseen issues in long-term contracts. The solution analyzes scenarios to identify instances of post-investment holdup, contract breaches, and the application of contract law principles. The assignment covers key terms such as sunk costs, contract formation, and damages, providing a comprehensive understanding of financial management principles. The analysis includes examples like assembling automobile seats and breach of contract, which are then related to specific scenarios. The assignment provides a framework for evaluating and understanding the complexities of financial management and contracts.

Running head: FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT
Name of the Student
Name of the University
Author Note

1
FINANCIAL MANAGEMENT
The post-investment holdup problem does arise when there is a part of return upon
the agent’s relationship that is quite specific investments which is ex post expropriate through
the trading partner. Sometimes, the post-investment holdup problem does play an important
role which does work as a foundation upon the modern contract, also the organizational
theory, which has been associated inefficiencies that has been justified with the prominent
organization and contractual practices. The example of post investment holdup is of the
assembling of automobile seats which is for the number of luxury models.
Sunk Cost can be described at the money which is already been transferred or send;
that cannot be recovered. Thus, the business does have the policy in spending and making
money that will help in the reflection of phenomenon of sunk cost (Chen, Loke & Ong,
2016). At the time of making any business decisions, the organizations do have to consider
the relevant cost which can be included in future costs which will be needed and still be
incurred. Thus, as the sunk cost do not change sometimes it is not considered. As per the
scenarios the sunk cost can be seen in the scenario a.
The contract can be defined as the relationship, which does have evidence upon the
offer, acceptance of offer, which is under the consideration of valid legal and valuable. Thus,
each party does have a contract, that helps in acquiring the rights and duties of the other
parties (Endriyani, 2018). Moreover, both the parties will have a fair benefit through which it
cannot follow each party that will benefit in that equal context. The contract act is being
applicable in scenario c.
The breach of contract can be defined as the violation of terms and conditions that
both the terms and conditions have been agreed upon as per the contract. Thus, there is a
breach that will not do anything from the late payment, that will be a more serious violation
that will be a failure to deliver and a promised asset (O'connor, 2018). There is one party that

2
FINANCIAL MANAGEMENT
break the terms of the agreement between the two parties. Thus, it does include an obligation
that will be stated in the contract and will be completed in time, which can be unfulfilled, or
in case of the tenant vacates in the apartment in owing the six months back rent. The breach
of contract is relatable to scenario c.
The damages which can be attempted in measuring the financial terms, in which there
is extent upon the harm of plaintiff which has been suffered upon the defendant’s actions.
The purpose of damages can be restored as the injury party, to the position in which the party
was harmed. Thus, the damages can be regarded as the remedial which is rather than the
preventive. The damages is relatable to scenario a.

3
FINANCIAL MANAGEMENT
References
Chen-Wishart, M., Loke, A., & Ong, B. (Eds.). (2016). Remedies for Breach of Contract.
Oxford University Press.
Endriyani, F. (2018). THE LIMITATION OF THE BREACH OF CONTRACT AND TORT
IN ONE LAWSUIT.
O'connor, T. M. (2018). Understanding Government Contract Law. Berrett-Koehler
Publishers.