Gerhardt is the president of the Speedway Bicycle Company.He also serves as a director of the Flexible Tire Company.It occurs to Gerhardt that both companies could benefit from a contract in which Flexible agrees to supply Speedway with tires for its bicycles.If Gerhardt wishes to negotiate a contract between Speedway and Flexible, which of the following is correct?
A)The contract will be void as a conflict of interest.
B)In most states, the contract might be permitted if it is fair and reasonable to both corporations and if Gerhardt fully discloses all information relating to the transaction.
C)The contract is a clear conflict of interest and will be avoidable by either company even with disclosure.
D)None of these.

Question

Quizplus · Accepted Answer

In most states, a contract involving a potential conflict of interest can be valid if it is fair and reasonable to both parties and if the interested director fully discloses the conflict and relevant information to both companies.

Gerhardt Is the President of the Speedway Bicycle Company