Signal Sets Company Contracts to Deliver One Hundred 52-Inch Plasma

question 25

Essay

Signal Sets Company contracts to deliver one hundred 52-inch plasma high-definition television sets to a new retail customer,Tuner TV Store,on May 1,with payment to be made on delivery. Signal tenders delivery in its own truck. Tuner's manager notices that some of the cartons have scrape marks. Tuner's owner phones Signal's office and asks whether the sets might have been damaged as they were being loaded. Signal assures Tuner that the sets are in perfect condition. Tuner tenders Signal a check,which Signal refuses,claiming that the first delivery to new customers is always for cash. Tuner promises to pay the cash within two days. Signal leaves the sets with Tuner,which stores them in its warehouse pending its "Grand Opening Sale" on May 15. Two days later,Tuner's stocker opens some of the cartons and discovers that a number of the sets are damaged beyond ordinary repair. Signal claims Tuner has accepted the sets and is in breach by not paying on delivery. Will Signal succeed on these claims? Explain.

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Definitions:

Risk-Averse

A characteristic of individuals preferring outcomes with certain, lower returns compared to outcomes with uncertain, potentially higher returns.

Risk Aversion

The behavior of individuals who, when exposed to uncertainty, would prefer to choose an outcome with a more certain but possibly lower payoff over an outcome with a higher payoff but more uncertainty.

Equilibrium Premium

The price level at which supply and demand for a financial instrument, such as insurance, are balanced, minimizing the risk of loss for insurers.

Equilibrium Quantity

The volume of products or services on offer equals the volume sought by consumers at the equilibrium price in the market.