XYZ Company, a Distributor of Auto Parts, Is in Debt

question 108

Multiple Choice

XYZ company, a distributor of auto parts, is in debt to the bank for $35,000, due on February 25, 2017. The company is having difficulties and wants to negotiate with the bank to pay only $33,000 as payment in full. With these facts in mind, which of the following statements is False?

• A) If the bank agrees to accept the $33,000 as payment in full if paid early, by February 15, and the company does as requested, the bank could not later sue for the remainder because the company gave good consideration for the bank's forgiveness of the debt.
• B) At common law, if the bank accepted the $33,000 as payment in full, even absent additional consideration, it could not later sue for the remainder because such promises are always binding.
• C) If the company obtained from the bank the bank's promise to forgive the $2000 under seal, the bank could not later sue for the remainder.
• D) In some jurisdictions, a statutory provision provides that the creditor who accepts less than full payment as payment in full cannot later sue for the remainder.
• E) So long as they don't take the money, the bank can still sue for the entire amount.

---

Definitions:

Accounting Profits

The difference between total revenue and explicit costs of a business, as calculated for financial reporting and tax purposes.

Explicit Costs

Direct, out-of-pocket payments for wages, materials, rent, and other expenditures incurred in the conduct of a business.

Equilibrium Interest Rate

The interest rate at which the quantity of money demanded equals the quantity of money supplied.

Loanable Funds

The total amounts of capital available for borrowing, which includes savings and any additional credits created by financial institutions.