Good-Nite Inns, a Chain of Mid-Quality Hotels, Entered into a Contract

question 8

Multiple Choice

Good-Nite Inns, a chain of mid-quality hotels, entered into a contract with Hospitality Supply Company (HSC) for the purchase of soaps.Those soaps were intended to be provided to customers of the hotel.Shortly after receiving the first delivery, however, Good-Nite Inns discovered that the soaps caused a dry, itchy rash on even the most thick-skinned customers.The hotel chain therefore wants to sue HSC under the Sale of Goods Act.Which of the following statements is TRUE?

• A)There is no implied term of fitness for purpose because, given the nature of its business, Good-Nite Inns should know enough about its customers to select the correct soaps.
• B)There cannot possibly be an implied term of fitness for purpose if Good-Nite Inns mentioned the soap by brand name when it placed its order.
• C)Good-Nite Inns may be able to rely upon an implied term of merchantability even if it placed its order after selecting the soaps from among a variety of samples.
• D)If Good-Nite Inns selected the soaps from among a variety of samples, HSC may be held liable even if the hotel chain would have discovered the defect in the soaps if it had reasonably inspected the soaps before creating the contract.
• E)The Sale of Goods Act does not apply because the contract was created between two companies.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the company.

Inventory

The total value of a company's raw materials, work-in-progress, and finished goods that are considered assets on a balance sheet.

Account Receivable

Amounts owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity of a business.