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Linda, Susan and Robert decided to establish a business dedicated to designing computer software; it was to be named Cetra Corp. They hired an attorney to prepare articles of incorporation and take any other steps necessary to bring the corporation into existence. The articles provided that the corporation would have a board of directors consisting of three members. The Articles of Incorporation were filed with and accepted by the office of the Secretary of State on 4 October 2007.
After the corporation was formed, Linda, Robert and Susan became the corporation’s directors. Each of them owned one-third of the outstanding shares of stock.
On 30 September 2007 Linda entered into a written contract to borrow $1 million from Mr. Moneybags. Linda signed the contract Linda as agent for Cetra Corporation. The contract provided that Moneybags would provide the funds to Cetra no later than 30 October 2007. On 27 October Moneybags issued a check for $1 million payable to Cetra. Susan, who had been appointed to serve as treasurer of Cetra, deposited this check into Cetra’s bank account.
On 2 October 2007 Robert entered into a written contract with Socal Properties LLC providing that Cetra would lease office space in a building in Northridge owned by Socal for a period of 2 years with a monthly rental of $1000. Robert signed this contract Robert as agent for Cetra Corporation. On 15 October the Board of Directors discussed the contract that Robert had negotiated with Socal but decided to reject it since they preferred to rent space in a building owned by another landlord. Cetra never took possession of the space in the building owned by Socal and never paid rent to Socal.
On 15 January 2008 Ben, who had no authority to act on behalf of Cetra, entered into a written contract with Valley Finance Capital LLC to borrow $1 million for Cetra. This contract was signed Ben on behalf of Cetra Corporation. On 2 February 2008 Robert, the President of Cetra, learned all facts concerning the contract negotiated by Ben with Valley Finance Capital LLC. He provided all of this information to the Board of Directors at its next meeting. Susan then said: I move that we accept and be bound by the contract with Valley Finance Capital LLC that Ben negotiated on behalf of Cetra Corporation. Linda then said: I second that motion. A vote was then held; all directors voted in favor of the motion.
(a) On 5 March 2008 Socal sued to collect the unpaid rent for the space in the building in Northridge. Who (if anyone) could be held liable for breach of the contract negotiated between Robert and Socal? Explain.
By 2009 Cetra Corp. was in financial difficulties.
(b) Against whom might Mr. Moneybags successfully assert liability for repayment of the amount owed to him? Explain.
(c) Against whom might Valley Finance Capital LLC successfully assert liability for repayment of the amount owed to it? Explain.
plz solve this case in I.R.A.C style.
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