Discussion – Warranties and Accountant’s Liabilities
Before beginning work on this week’s discussion forum, please review the link “Doing_Discussion_Questions_Right,” the expanded grading rubric for the forum and any specific instructions for this week’s topic.
By the due date assigned, submit your answers for two scenarios to this Discussion Area. Start reviewing and responding to your classmates as early in the week as possible. You should review and critique the work of other students as outlined in the expanded rubric by the end of the week .
Select two of the scenarios listed below and explain the best solution for each. Include comments related to any ethical issues that arise. You should locate at least one scholarly source from the SUO Library or one case that has been decided or is currently pending to support your answer.
Scenario 1 – Sales Contracts
Precision Machinery, a company in Texas, sent a purchase order to Hydropump Manufacturing, a U.S. company in Alabama, for a 200 hydraulic pumps valued at $80,000. Precision needed the pumps to stock the distribution warehouse with replacement parts for construction equipment. The order did not specify how disputes between the parties would be settled. Hydropump returned a definite, unconditional acceptance that contained one additional term, which stated that disputes must be submitted to arbitration. Precision received the acceptance; however, he never agreed or objected to the additional term.
Hydropump orally contracted to sell 100 hydraulic pumps valued at $40,000 to Shakti Pump Company a large distribution center in India.
- Explain the status of the contract between Precision and Hydropump
- If a contract was formed, did the additional term in the acceptance become part of the contract?
- Is the contract between Hydropump and Shakti legally enforceable? (Additional research outside of the textbook may be necessary).
Scenario 2 – Risk of Loss
Allan contracted to purchase a 60-inch smart television from Big Buy, an electronics retailer. Big Buy agreed to deliver the television to Allan’s home. The truck delivering the television was hit by another truck and all of the contents were destroyed.
- Which delivery term best describes this delivery arrangement?
- Which party bears the risk of loss?
- What is the status of the contract and what are Allan’s options?
Scenario 3 – Warranties
Devon, a tractor technician, needs to install a 3000-pound piece of equipment in his shop. This will require lifting the equipment thirty feet up into a loft area. Devon goes to Rowe’s Hardware and tells the department manager that he needs some heavy-duty chain to be used in his tractor repair shop. The manager recommends an alloy steel chain hoist and some alloy steel chain. Devon purchases the materials and attempts to hoist the machine up into the loft. The chain breaks and the equipment crashes to the ground and is severely damaged. Devon files a suit against Rowe’s Hardware for breach of warranty.
- What type of warranty did Devon have?
- Discuss the arguments for Devon and the hardware store concerning the type of warranty involved.
- Which party will win the lawsuit and why?