Chapter 36, Problem 7Q

The X Corporation manufactures machine tools. The five directors of X Corporation are Black, White, Brown, Green, and Crimson. At a duly called meeting of the board of directors of X Corporation in January, all five directors were present. A contract for the purchase of $10 million worth of steel from the D Company, of which Black, White, and Brown are directors, was discussed and approved by a unanimous vote. The board also discussed at length entering into negotiations for the purchase of Q Corporation, which allegedly was about to be sold for around $150 million. By a three-to-two vote, it was decided not to open such negotiations.Three months later, Green purchased Q Corporation for $150 million. Shortly thereafter, a new board of directors for X Corporation took office. X Corporation now brings actions to rescind its contract with D Company and to compel Green to assign to X Corporation his contract for the purchase of Q Corporation. Explain whether X corporation should succeed on…

Little Switzerland Brewing Company was incorporated on January 28. On February 18, Ellison and Oxley were made directors of the company after they purchased some stock. Then on September 25, Ellison and Oxley signed stock subscription agreements to purchase five thousand shares each. Under the agreement, they both issued a note that indicated that they would pay for the stock “at their discretion.” Two years later in March, the board of directors passed a resolution canceling the stock subscription agreements of Ellison and Oxley. The creditors of Little Switzerland brought suit against Ellison and Oxley to recover the money owed under the subscription agreements. Are Ellison and Oxley liable? Why or why not?

Michael Ross formed a limited partnership with his father-in-law, Robert Zane, to open a seafood restaurant in a mid-western town. Mr. Ross was the general partner and Mr. Zane was a limited partner and invested $100,000. After one year, difficulties in the restaurant’s operation caused business to drop off, and Mr. Ross called Mr. Zane for advice. After hearing of the difficulties and concerned with the security of his investment, Mr. Zane traveled to visit the operation. After observing the operation for two days, the two partners jointly decided to launch a large and expensive television ad campaign to increase lagging sales. Mr. Zane designed the campaign with the help of Brandon Advertising and Video, a local advertising agency specializing in television commercials. Despite an immediate increase in sales, volume continued to decline, and finally, three months after the ad campaign launched, the restaurant closed its doors. Total debts at the time the restaurant closed equaled…