Question

Alice worked for Fountain Valley, Inc., a corporation that manufactured baby supplies. According to her employment contract with the corporation, Alice was to be paid $78,000/year plus a 5% bonus of all sales in excess of the previous 12 months sales. The corporation sold baby supplies worth $200,000 in 2017 more than in 2016. Alice was then terminated at the end of December 2017. Is Alice entitled to a bonus of $10,000

Answer 1

Alice is entitled to the $10,000 bonus if her employment contract awards her 5% of the corporation's sales exceeding the previous year's sales, which amounted to $200,000. The calculation based on this excess sales figure entitles her to the bonus, provided her contract does not include other stipulations that would affect this payment upon termination.

Step-by-step explanation:

Whether Alice is entitled to a bonus depends on the specific terms stipulated in her employment contract with Fountain Valley, Inc. If her contract specifies that she receives a 5% bonus on all sales exceeding the previous year's sales, and given that the corporation achieved $200,000 more in sales in 2017 than in 2016, then we would calculate her bonus by applying 5% to this excess amount.

5% of $200,000 is $10,000, which means that Alice is indeed entitled to a $10,000 bonus for the increased sales unless there are additional provisions in her contract specifying otherwise or applicable to her termination.

In the absence of any such provisions, and assuming the contract was effectively followed, Alice should receive her bonus as part of her final compensation upon termination.

Answer 2

Question Completion with Answer Options:

A. Yes, according to the terms of her contract.

B. Yes, according to the duty of good faith and fair dealing.

C. No, according to the at-will termination provision in her contract.

D. No, because subsequent conduct of the parties modified the contract.

Answer:

Fountain Valley, Inc. and Alice

B. Yes, according to the duty of good faith and fair dealing.

Step-by-step explanation:

Alice is entitled to the bonus of $10,000 because the duty of good faith and fair dealing requires Fountain Valley not to deny Alice the benefits arising from their valid contract. Since Alice's employment contract included a 5% bonus of all sales in excess of the previous 12 months' sales, the Fountain Valley, Inc. should not deny Alice's claim to the benefits.

b) Employment contract terms = $78,000/year plus 5% bonus of all sale in excess of the previous 12 months' sales. The value of sales in 2017 is $200,000 more than in 2016. 5% of $200,000 = $10,000. Therefore, Alice is entitled to the bonus.