Henry and Xavier Are Merchants Under the UCC and Are

question 12

Multiple Choice

Henry and Xavier are merchants under the UCC and are determining what should be included in their liquidated damages clauses. Xavier wants to include punitive damages as part of their contract. What is the UCC rule regarding punitive damages?

• A) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is less, as punitive damages.
• B) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 20 percent of the purchase price or $500, whichever is more, as punitive damages.
• C) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is less, as punitive damages.
• D) That the nonbreaching seller may claim against a breaching buyer who is guilty of malice 30 percent of the purchase price or $1,000, whichever is more, as punitive damages.
• E) The UCC does not address punitive damages, other than voiding liquidated damages that are punitive in nature.

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Definitions:

DFL

Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.

ROCE

Return on Capital Employed; a financial ratio that measures a company's profitability and the efficiency with which its capital is used.

Financing Charges

Interest and other costs associated with borrowing funds or purchasing goods and services on credit.

ROE

Return on Equity; a financial ratio that measures the profitability of a company in relation to the amount of equity, indicating how effectively shareholder equity is being utilized to generate profits.