Miguel, a Buyer Becomes Insolvent and Has Breached His Contract

question 34

Multiple Choice

Miguel, a buyer becomes insolvent and has breached his contract by not paying for goods that are in transit. Which of the following statements is true?

• A) The carrier may stop delivery on the entire shipment.
• B) The carrier may stop delivery only if the quantity shipped is a large shipment such as a carload or truckload and can easily be stopped.
• C) The carrier may stop delivery only if a signed writing exists by which the buyer agreed to the remedy of stopping shipment in a liquidated damages clause.
• D) The carrier may stop delivery only if ordered to do so by the bankruptcy judge.
• E) The carrier may not stop delivery under any circumstances.

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Definitions:

Completed-Contract Method

An accounting method used where revenue and profit are deferred until a contract is completed, particularly useful in long-term projects.

Percentage-Of-Completion Method

An accounting method used to recognize revenue and expenses of long-term contracts proportionally to the amount of work completed.

Extractive Industry

Industries involved in the extraction of natural resources from the earth, such as mining, drilling for oil, or logging.

Allowance Method

A method of accounting for bad debts that involves estimating and recording the amount of uncollectible accounts receivable.