Robert Smith, a salesperson for Carter Manufacturing, Inc. (Carter Manufacturing), contracted to sell notebooks and pencils to Billy Shear. The pencils were not delivered by the agreed-upon date. Henry Alcott, a staff accountant at Carter Manufacturing, discovered the issue while reviewing the just-in-time inventory process. He has gathered the relevant information and prepared a memo to Mr. Carter, the CEO of Carter Manufacturing, summarizing the relevant information and consequences of the failure to deliver the goods on time. Henry has asked you to review the memo before he submits it. As you review the memo, assume only common law contract principles apply.

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To: Mr. Carter, CEO

Re: Carter Manufacturing, Inc.s Payables

Dear Mr. Carter:

While reviewing our firms accounts payable, I discovered some issues with our just-in-time inventory process.

One of our customers, Mr. Shear, needed to receive an order by a certain date, and we were unable to meet the deadline. After reviewing the situation, we concluded that Robert Smith committed constructive fraud.

After further reviewing Robert Smiths actions regarding Mr. Shears order, I discovered that the price Smith was willing to pay for pencils was in excess of current market prices. Under the common law of contracts, Smiths offer to purchase pencils from Montage Supply Company can be rescinded because it was legally insufficient.

An attorney in Wisconsin is threatening legal action because Mr. Shear was unable to perform his contractual obligations. This attorney is requesting that we pay his client, Coralinda Paris, $673 to settle her claim. Under the common law of contracts, Carter Manufacturing will be liable for this amount because Coralinda Paris is an incidental beneficiary of our contract with Mr. Shear.

Henry Alcott

Staff Accountant

Carter Manufacturing, Inc.

Select from the option list provided the advantages and disadvantages of each entity type below. Each choice may be used once, more than once, or not at all.

A B C

1

Entity type

Advantage

Disadvantage

2 Limited partnership

3 General partnership

4 Limited liability company