Question

Rice is a promoter of a corporation to be known as Dex Corp. On January 1, 1985, Rice signed a nine month contract with Roe, a CPA, which provided that Roe would perform certain accounting services for Dex. Rice did not disclose to Roe that Dex had not been formed. Prior to the incorporation of Dex on February 1, 1985, Roe rendered accounting services pursuant to the contract. After rendering accounting services for an additional period of six months pursuant to the contract, Roe was discharged without cause by the board of directors of Dex. In the absence of any agreements to the contrary, who will be liable to Roe for breach of contract?

a. Both rice and Dex
b. Rice only
c. Dex only
d. Neither rice nor Dex

Answer 1

The answer is: a. Both Rice and Dex

Step-by-step explanation:

Since Rice was a promoter acting on behalf of Dex Corp., they share liability on the contracts that he negotiated on behalf of them. Of course Dex Corp. is also liable in this case since Roe worked for them and they were the ones that fired Roe without cause.