Question

Case 8: Bon Vivant Foods, Inc. Acquisitions You are vice president of acquisitions for a medium-sized consumer food products company, Bon Vivant Foods, Inc. The company's board of directors has given you authority to negotiate acquisitions of consumer food brands on behalf of Bon Vivant. The board has told you in written and oral instructions that you have the power to acquire any consumer products brand if the acquisition price is not greater than $30,000,000, which is the authority typically held by most vice presidents of acquisitions for businesses like yours. The board's written instructions also indicate, however, that you have no authority to purchase or negotiate the purchase of a cola drink brand. Others in your position in the consumer food industry typically have authority to purchase a cola drink brand for their companies. The board also tells you that the company wants to buy the Eddie's ice cream brand from its owner, Eddie Ghahraman, at a price not greater than $28,000,000. The board is fearful, however, that if Eddie knows the company wants to buy the Eddie's ice cream brand, he will demand a higher price. The board tells you, therefore, not to disclose to Eddie that you are buying for Bon Vivant, and instead to make it appear that you are buying for your own company. They suggest you make up a name for this fictitious company. You decide to use the name LHIW, Inc.

You make a contract in the name of Bon Vivant to buy a snack-cracker brand for $15,000,000.

You make a contract in the name of Bon Vivant to buy a cola brand for $13,500,000.

You make a contract in the name of Bon Vivant to buy an organic canned soup brand for $40,000,000.

You make a contract for Bon Vivant to purchase the Eddie's ice cream brand for $26,200,000. The contract is signed by Eddie. You sign LHIW's name and also your own name as agent for LHIW.

TRUE OR FALSE WITH EXPLANATION

1. Bon Vivant is liable on the snack-cracker brand purchase, because you have express authority to acquire consumer product brands for more than $30,000,000.

2. Bon Vivant is not liable on the cola brand acquisition for $13,500,000, because you lack authority to purchase cola drink brands.

3. Bon Vivant is not liable on the contract to purchase the organic canned soup brand for $40,000,000, because your express authority (and the authority of other agents like you) is limited to $30,000,000.

4. You are not liable on the contract to purchase Eddie’s ice cream brand, because the party to the contract is LHIW, Inc., and Bon Vivant is not liable on the contract to purchase Eddie’s ice cream brand, because Bon Vivant is a totally undisclosed principal.

5. Eddie Ghahraman can withdraw from the contract to sell Eddie’s ice cream brand upon learning LHIW is a nonexistent principal and you were actually acting on behalf of Bon Vivant.

Answer 1

1. Bon Vivant is liable on the snack-cracker brand purchase, because you have express authority to acquire consumer product brands for more than $30,000,000.

Answer: False because Bon Vivant has actually given me the authority to acquire any consumer product brand and make deal not more than $30,000,000.

2. Bon Vivant is not liable on the cola brand acquisition for $13,500,000, because you lack authority to purchase cola drink brands.

Answer: True. Because it was expressly told to me that I should not purchase or negotiate the purchase of a cola drink brand

3. Bon Vivant is not liable on the contract to purchase the organic canned soup brand for $40,000,000, because your express authority (and the authority of other agents like you) is limited to $30,000,000.

Answer: True. Because the limit is $30,000,000 acquisition price .

4. You are not liable on the contract to purchase Eddie’s ice cream brand, because the party to the contract is LHIW, Inc., and Bon Vivant is not liable on the contract to purchase Eddie’s ice cream brand, because Bon Vivant is a totally undisclosed principal.

Answer: True. Because LHIW does not exist but I made contract from LHIW side because I was told to do so by Bon Vivant. If this is proved both of us that is me and the Bon Vivant will be liable.

5. Eddie Ghahraman can withdraw from the contract to sell Eddie’s ice cream brand upon learning LHIW is a nonexistent principal and you were actually acting on behalf of Bon Vivant.

Answer: True : Eddie Ghahraman can withdraw the contract to sell Eddie’s ice cream brand upon learning LHIW is a nonexistent principal and I was actually acting on behalf of Bon Vivant because it is a wrong in law of what Bon Vivant did.