An equitable or constructive obligation arises when:
A) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits.
B) Management makes a discretionary decision to make a future sacrifice of economic benefits.
C) Management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
D) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
E) All of the given answers.

Question

Quizplus · Accepted Answer

An equitable or constructive obligation arises when social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits, and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned. Both conditions must be present for an equitable or constructive obligation to arise. Therefore, Option D is the best choice because it includes both conditions. Option A is only partially correct, as it only includes one of the conditions, while options B and C miss one of the two essential conditions. Option E is incorrect since Option B and C are incomplete.

An Equitable or Constructive Obligation Arises When