Digital Video Company Contracts to Deliver One Hundred Television Sets

question 71

Essay

Digital Video Company contracts to deliver one hundred television sets to a new retail customer, Electric Warehouse, on May 1, with payment to be made on delivery. The seller tenders delivery in its own truck. The buyer's manager notices that some of the cartons have scrape marks. Electric's owner phones Digital's office and asks whether the sets might have been damaged as they were being loaded. Digital assures Electric that the sets are in perfect condition. Electric tenders a check, which Digital refuses, claiming that the first delivery to new customers is always for cash. Electric promises to pay the cash within two days. Digital leaves the sets with Electric, which stores them in its facility pending its "Grand Opening Sale" on May 15. Two days later, Electric's stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. Digital claims that Electric accepted the sets and is in breach for failing to pay on delivery. Will Digital succeed on these claims? Explain.

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Definitions:

Vacation Cost

Expenses incurred by an individual or family during a vacation or by companies for employees' vacation benefits.

Quick Ratio

A liquidity metric that measures a company’s ability to meet its short-term obligations with its most liquid assets, excluding inventory.

Accounts Receivable

Unsettled customer debts for goods and services a company has delivered but has not received payment for.

Accounts Payable

A bookkeeping record indicating a business's responsibility to settle a short-term financial liability with its lenders or vendors.