Paul is the shareholder that owns most (90%) of the outstanding stock of Purple Machine, Inc. (a corporation). Paul is not involved in the day-to-day running of Purple Machine, Inc. However, last week he approached by Red Supply Corporation with what he believed to be a very favorable Supply Agreement for the purchase of inventory that Paul is certain Purple Machine, Inc. can use. Paul signs the Supply Agreement on behalf of Purple Machine, Inc.
• Is the execution of the Supply Agreement valid against Purple Machine, Inc.? Why?
• Suppose Paul approaches David, a director on the board of directors of Purple Machine, Inc., about the transaction with Red Supply Corporation, and David thinks it’s a great deal. David executes the agreement on behalf of Purple Machine, Inc. Is the execution of the Supply Agreement valid against Purple Machine, Inc.? Why or why not?