26 Jun Week 5 Written Assignment
Question
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 directors 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 Ellens 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 banks 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.
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