A, B, C, D, and E constituted the board of directors of the X Corporation. While

Question

A, B, C, D, and E constituted the board of directors of the X Corporation. While D and E were out of town, A, B, and C held a special meeting of the board. Just as the meeting began, C became ill. He then gave a proxy to A and went home. A resolution was then adopted directing and authorizing the X Corporation’s purchase of an adjoining piece of land owned by S as a site for an additional factory building. A and B voted for the resolution, and A, as C’s proxy, cast C’s vote in favor of the resolution. The X Corporation then made a contract with S for the purchase of the land. After the return of D and E, another special meeting of the board was held with all five directors present. A resolution was then unani- mously adopted to cancel the contract with S. May S recover damages from X Corporation for breach of contract?

Explanation / Answer

The answer is yes. S corporation can ask for compensation because X Corporation has breached the contract.

The earlier contract with free consent of A and B was done with S corporation. That was a legal contract. Although D,E were not present but it does not matter. A and B were major directors at the time of contract and had made contract and it if they want to breach it they have to pay compensation if S corporation sue them in the court of law.

Because law says if any of the party is failed t performs the predetermined acts and withdraws from the contract then the affected member of contract is liable to recover the damage.

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