1. Bernie is a director of BALCO Co. Bernie has missed the last two director’s meetings. Can the

| November 9, 2018

Week 5 Written Assignment


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.

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?

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

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