Nigel Was Interested in a Stereo System That He Saw

question 24

Multiple Choice

Nigel was interested in a stereo system that he saw at Nikita's garage sale. She asked if he wanted to take it inside to her basement to test it out, but he said "no" because he felt uncomfortable with the idea of listening to music in a stranger's house. He nevertheless bought it for $100. When he got it home, however, he noticed three problems. First, there are several small scratches in the stereo's exterior finish. Second, he was disappointed to discover that the stereo did not have a radio. Nikita had not said anything about a radio, but he assumed that one was included in the unit. And third, Nigel is very upset that the CD player skips badly. Which of the following statements is TRUE with respect to the implied term of merchantable quality?

• A) Nigel cannot sue Nikita unless he relied upon her advice when he decided to buy the stereo.
• B) Nigel cannot sue Nikita because he would have noticed all of the defects if he had reasonably inspected the stereo unit before buying it.
• C) Nigel cannot sue Nikita unless she normally is in the business of selling stereos.
• D) Nigel cannot sue Nikita because the implied term of merchantable quality does not apply to used goods.
• E) Each of the problems that Nigel noticed prevents the stereo from satisfying the implied term of merchantable quality.

---

Definitions:

Required Rate

Often referred to the required rate of return, it is the minimum expected rate of return on an investment deemed acceptable to an investor.

Payback Period

The duration of time it takes for an investment to generate an amount of income or cash flow equal to the cost of the investment.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Old Equipment

Refers to machinery or technology that has become outdated or has surpassed its effective service life but may still be in use.