Larry is the sole owner and employee of Complete Time Repair, Inc., a business specializing in the repair of a wide variety of timekeeping devices. Irving is a collector of antique cuckoo clocks. Irving drops by Larry’s office and asks whether he can fix an antique black forest cuckoo clock that has a broken spring. Larry says that he has repaired many similar cuckoo clock springs in the past and tells Irving his cost is $500 for the service. A week later, Larry finds Irving’s cuckoo clock in his mailbox with a note that says "good luck, Irving." Larry has a busy schedule, and would like to start work immediately, but decides to wait until he obtains a signed contract from Irving. Discuss the possible costs and benefits of Larry’s decision.

Please refer to Explanation

Explanation:

Larry is a very busy man and so cannot afford to waste his time. It would be most PRUDENT of him to wait for an official confirmation / aggrement before he can start working on the Cuckoo clock. Judging by the price tag that Larry put on the fixing of the clock, this is not an easy job as well and one that could take up the time that Larry needs to fix other things. In other words, the Opportunity Cost of fixing the clock is quite high so he needs to know for a fact that this OPPORTUNITY COST will translate to profit before he takes the job on.

Larry would also be able to DEFEND HIMSELF in LITIGATION should anything happen to the clock if a contract is signed because there can be stipulations protecting him if damage comes to the clock. If this contract is not signed and something happens, Irving can potentially claim all manner of things that Larry would not have evidence to refute.

Larry as already mentioned, is quite busy meaning that he has other work to do that can earn him cash. This means that he is not losing from not working on the clock so it is most advisable to wait.

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