Brad had recently inherited a significant amount of money and was seeking an investment opportunity when he saw his local mini-mart advertised for sale in the window of a real estate agent. He immediately made an appointment to meet with the current owners and review their accounts.

When Brad met with the owners they were pleasant but not really forthcoming with any information. They just told him to speak to their accountant and said 'He will be able to answer all your questions'. So Brad met with the accountant and was reassured by the positive report he was given. The accountant told him (correctly) that the shop had experienced a steady increase in profit over the previous 5 years and the accountant further stated that he could 'see no reason why this would change in the near future'. However he also cautioned Brad that business was a 'fickle thing', and warned him that he was 'not prepared to forecast future growth'. He said he was 'just an accountant' not 'an expert in the supermarket business' and suggested that Brad seek independent advice from an expert in supermarket retailing before proceeding with the purchase.

But Brad did not heed the accountant's advice. He was so encouraged by what he had heard about the business and its constantly improving profitability that he decided there and then to invest in it, without any further delay. After purchasing and taking over the business all went well for a year or so, until a large (full service) Woolworths store opened directly across the road and Brad's business rapidly dropped off.

Brad is now facing financial ruin and can only hope to sell the mini-mart for its land value. He has recently discovered that the Council had approved the Woolworths development shortly prior to his purchase of the business and that the previous owners had heard rumors' of this, which is why they had decided to sell. He would definitely not have gone ahead with his purchase of the business if he had been made aware that Woolworths would be opening a major new supermarket across the road. He suspects that, at the time he spoke to them, both the accountant and the agent were also probably aware that the Woolworths development had been approved by the Council and was, or was very likely to be, going ahead.

Advise Brad as to whether he can successfully make a claim for damages against either the vendors or the accountant for negligent misstatement.

1. What are the duties of corporate directors and officers? 2. Directors are expected to use their best judgment in managing the corporation. What must directors do to avoid liability for honest mistakes of judgment and poor business decisions?Which of the following is not true regarding the role of the directors of a corporation? ODirectors owe the corporation a fiduciary. O Directors are elected by the shareholders. Directors are generally protected from liability by the corporation. O Directors are responsible for making the major decisions on behalf of the corporation. Directors are involved in the day to day operations of the corporation. Question 3 (1 point) In order to avoid a claim of self dealing, what must a director do to ensure the contract is enforceable? Select all that apply. Disclose the self dealing in writing Not participate in the vote on the contract Ensure the contract is fair and reasonable None of these options are correct.Par value of common stock is established for a share of stock after it is issued. Q represents the original selling price for a share of stock. O represents what a share of stock is worth. is the value assigned per share in the corporate charter. QUESTION 2 All of the following statements regarding retained earnings are true except O retained earnings represents a claim on cash. a debit balance in Retained Earnings indicates a deficit. retained earnings is net income that a company retains in a business. retained earnings are a cumulative measure. QUESTION 3 The net effects on the corporation of the declaration and payment of a cash dividend are to decrease assets and decrease stockholders equity. increase stockholders' equity and decrease liabilities, increase assets and increase stockholders' equity. decrease liabilities and decrease stockholders equity. Click Save and Submit to save and submit. Click Save All Answers to save all answers. 9CASE SUMMARY 15.4 Grobow v. Perot, 539 A.2d 180 (Del. 1988) BUSINESS JUDGMENT RULE (particularly EDS), and cease any criticism of GM's H. Ross Perot became the single largest shareholder directors. A group of GM shareholders sued the direc- and a director of General Motors as a result of GM's tors under the theory that the directors had breached acquisition of Perot's highly successful company their fiduciary duty by wasting corporate assets in buy- Electronic Data Systems (EDS). A rift grew between ing Perot's silence. The directors asserted the business Perot and GM's other directors. and after appointing judgment rule as a defense. a subcommittee of directors to study possible alterna- tives, GM's directors offered to purchase back Perot's CASE QUESTIONS sock at a significant premium over market value. In 1. Who prevails and why? exchange for the payment. Perot agreed to leave his 2. What fiduciary duty is at issue? director's seat, not compete with any GM subsidiaryQuestion 4 (2 points) The ultimate goal of the incorporation process is issuance of a _.., a basic document of incorporation filed in the appropriate public office. deed of trust corporate veil doctrine of ultra vires corporate charter memorandom of association