When Gary Went into Computer Heaven, Ltd

question 126

Multiple Choice

When Gary went into Computer Heaven, Ltd. to get a better manual for the program he was trying to master, he was caught by a demonstration of a computer created by StarSystem Inc. He was fascinated by its performance. The salesman, Ross, told Gary that he should have this machine; that "it was the last computer, no other will ever be better"; that "UBC, Simon Fraser University, and BCIT just ordered over 1000 of them"; that he only had "a few left and the demand is so great it will take almost a year for the next shipment to arrive." When Gary said he needed a computer with at least 1 terabyte of hard drive space, Ross said this model had 2.5 terabytes. Gary was persuaded and contracted for it. Later Gary learned that every statement made by the salesman Ross was untrue, including the statement about the memory capacity. The model only had 400 gigabytes. On these facts, which of the following is true?

• A) Gary could be awarded the equitable remedy of rescission even if Ross, the salesman, honestly believed everything he said was true.
• B) Only if Ross, the salesman, knew that all the statements he made were False could Gary get a remedy.
• C) Merely the exaggerated claim "it was the last computer, no other will ever be better" is enough, according to the case law, to allow Gary to get out of the contract.
• D) Statements that induced Gary to contract, but that are not the terms of the contract, are not significant enough for the courts to award a remedy by case law or by statute.
• E) Such misrepresentations could only result in contractual remedies, legal or equitable, but not in tort remedies.

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Definitions:

DSO

Stands for Days Sales Outstanding, a measure of the average number of days that a company takes to collect payment after a sale has been made.

Lockbox Plan

A banking service provided to companies for the receipt of payment from customers, utilizing a special address where payments are collected and processed quickly.

Net Operating Working Capital

A measure of a company's liquidity and refers to the difference between operating current assets and operating current liabilities.

Marketable Securities

Financial instruments that can be easily sold or converted into cash at a price close to their intrinsic value within a short period.