Practice Quiz

MTEL Business Practice Exam

Category - Business Operations

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A clothing retailer signs a contract with a manufacturer to purchase 6,000 units of a particular style of dress shirt at a price of $12 per shirt. The contract specifies only that the shirts be a blend of 60 percent cotton and 40 percent polyester and that they be delivered by June 14. Which of the following would be a valid reason for the retailer to refuse to accept the shipment of shirts or pay the manufacturer?
  1. Cotton prices have risen sharply and the manufacturer asks the retailer to pay $12.50 per shirt.
  2. Sales of dress shirts have dropped and the retailer's store inventories are higher than expected.
  3. The retailer believes that some of the colors of shirts sent by the manufacturer will not sell well.
  4. The retailer found another manufacturer willing to provide identical shirts at a lower price.
Explanation
Correct Response: A. The contract price was clearly stated at $12 per shirt in the contract agreement and the seller is obliged to meet that price regardless of market conditions. The contract agreement did not discuss demand for shirts or inventory concerns (B), nor did it mention specific shirt colors (C). Once the contract was agreed upon, the retailer could not change manufacturers (D), even if the retailer found a manufacturer willing to sell at a significantly lower price.
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