XYZ Company,a Distributor of Auto Parts,is in Debt to the Bank

question 58

Multiple Choice

XYZ company,a distributor of auto parts,is in debt to the bank for $35 000 due on February 25,2012.The company is having difficult times 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 of the law 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.

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Definitions:

Fixed Cost

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, or loan payments.

Cost Behavior

The manner in which a cost changes in relation to its activity base (driver).

Activity Changes

Variations or alterations in the level of operations, processes, or actions within an organization that can impact performance and outcomes.

Total Variable Costs

The cumulative expenses that vary directly with the level of production or business activity.