Lucy Brought Her Badly Stained Persian Rug in to Be

question 53

Multiple Choice

Lucy brought her badly stained Persian rug in to be cleaned. The cleaners gave her a receipt in which a clause disclaimed all liability for damage arising from normal handling. When Lucy returned for the rug, it was in an advanced state of deterioration. The cleaners claimed it was exempted from damages by its written disclaimer. The courts would

• A) exempt the cleaners from liability based on the exemption clause.
• B) side with Lucy's claim for damages.
• C) explain why the exemption clause would not apply.
• D) require a reasonable explanation as to why the damage was not the result of negligence.
• E) interpret the clause most strongly against the plaintiff.

---

Definitions:

Unlevered Cost

Refers to the cost a company would incur without the benefit or cost of debt financing.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity and preferred equity, which is used to finance its overall operations and growth.

Economic Expansion

A phase of the business cycle where the economy grows and increases in activity, marked by rising GDP, employment, and income.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profitability that includes all expenses except interest and income tax expenses.