A Contract Containing an Adjustment Provision Which Allows the Supplier

question 56

Multiple Choice

A contract containing an adjustment provision which allows the supplier to recover a fraction of his additional costs when input prices cross a certain level, is considered efficient because:

• A)it reallocates the supplier's risk while checking his activities.
• B)it reallocates risks completely to the buyers.
• C)it allows the supplier to take up risks.
• D)it allows the buyers to partially reallocate their risks.

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Definitions:

Principal

In finance, this term refers to the original sum of money borrowed in a loan, or the amount of the investment itself, excluding any interest or profit.

Agent

A person or entity authorized to act on behalf of another person or entity in contractual or legal matters.

Purporting

Presenting or claiming something to be true, often without offering proof or evidence.

Express Authority

The power granted intentionally to an agent by a principal, often in written form, to perform specific acts on the principal's behalf.