Gerhardt is the president of the Pacer 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 Pacer with tires for its bicycles. If Gerhardt wishes to negotiate a contract between Pacer and Flexible, which of the following is correct?

Question

Quizplus · Accepted Answer

Under the Revised Model Business Corporation Act (RMBCA), a contract or transaction between a corporation and one of its directors or another corporation with which the director is affiliated is not automatically void or voidable due to the director's interest in the transaction. It can be permitted if the material facts about the director's interest in the transaction and the transaction itself are disclosed or known to the board of directors or shareholders, and they approve or ratify the transaction in good faith. Additionally, the transaction must be fair and reasonable to the corporation at the time it is authorized, approved, or ratified.

Gerhardt Is the President of the Pacer Bicycle Company