Week 5 Written Assignment

 

Name: ___________________________________________

 

Chapter 6/29 - Short Answer Questions

 

1.      Bernie is a director of BALCO Co. Bernie has missed the last two director’s meetings. Can the shareholders remove Bernie if the corporate bylaws give the power of removal to the other directors?

 

2.      Flushes R Us, Inc. (FRU) is a corporation whose principal business is the manufacturing and sale of toilets.  Gert is the manager in charge of the employees in FRU's product delivery division.  Eddie is one of the employees in that division.  One day, while Eddie was en route to a retail customer's place of business (where he was to make a delivery of a large quantity of FRU toilets), Eddie negligently operated the truck he was driving and caused injury to a pedestrian.  In doing so, Eddie was violating a specific corporate directive that employees were not to be negligent.  The injured pedestrian filed suit against Eddie, Gert, and FRU in an effort to obtain money damages for her injuries.  Who is liable?  Why?

 

3.      Ellen is president of Ajax Co. Briefly describe Ellen’s duties to Ajax.

 

4.            Dana is treasurer of Smith Co. In her capacity as treasurer, Dana borrows a large sum of money from National Bank. Was Dana authorized to do this in her capacity as Smith Co. treasurer? What can the corporation do in this situation?

       

5.            Ace Motors, an automobile manufacturer, has been experiencing problems with a particular model. Several people have been killed in accidents resulting from poor design and location of the fuel line in the car. Could officers and directors of the corporation be held liable for these damages and deaths?

 

 

Chapter 6/29 - Case Problem

Following one year of negotiations, James McDougal signed an agreement to purchase the Bank of Kingston. The sellers were the majority shareholders in First National Bank of Huntsville, the only other bank in the county. The sales agreement included a provision prohibiting the buyer from moving the bank to Huntsville for a period of 1 0 years. McDougal signed the agreement to purchase the bank stock as “James B. McDougal, Agent.” About three months after the purchase, the board of directors of the Bank of Kingston changed the name of the bank to Madison Bank and Trust. Shortly thereafter, they began efforts to move the bank’s main office from Kingston to Huntsville. The sellers sought an injunction to force the bank to comply with the provision in the sales agreement that prohibited such a move. The bank defended on the grounds that McDougal,

its president, acted outside of his authority in signing the agreement. Is the covenant not to move to Huntsville enforceable against the bank? Explain.