Mikael Recently Started a Home-Based Business Selling Custom Fishing Lures

question 62

Multiple Choice

Mikael recently started a home-based business selling custom fishing lures.He decided that he could make a lot more money selling his homemade lures on the internet.Mikael is not the least bit technologically inclined,but he knows that his next-door neighbour,Perm,does web design on the side.He decides to hire her to create a website for his new venture.Perm has him sign an agreement that includes an exemption clause that limits her liability in cases of negligence.In the course of designing the website,Perm becomes annoyed at Mikael because his dog keeps digging up her rose bushes.Rather than confront Mikael directly,Perm deliberately puts the wrong pricing information on Mikael's website to get him back.If Mikael suffered damages as a result and wanted to sue Perm,what would the likely result be?

• A) The exemption clause would protect Perm because of the principle of "freedom to contract."
• B) The exemption clause would be severed as being an illegal restraint of trade.
• C) Perm's actions were outside the scope of the contract, so Mikael would have no claim in law.
• D) Perm only did freelance web design; as a non-professional she would not face liability.
• E) Perm's acts were deliberate, not negligent, so Perm would not be protected by the exemption clause.

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Definitions:

Shareholders' Equity

The portion of the company's assets that belongs to the shareholders after all liabilities have been subtracted.

Dividends in Arrears

Unpaid dividends of cumulative preferred stock for the designated period.

Accumulated Other Comprehensive Income

A component of shareholders' equity that includes unrealized gains and losses on certain types of investments, not recognized in the income statement.