Lewis Is a Wealthy Entertainer

question 7

Multiple Choice

Lewis is a wealthy entertainer. While watching a telethon that was aimed at raising money for medical research, he was overwhelmed by a sense of grief and sorrow. He consequently picked up the telephone, dialed the number on the screen, and promised to donate $5 000 000 within one month. The volunteer on the other end of the line thanked Lewis and assured him that "the money will be put to good use." Two days later, before Lewis had sent in a cheque, the telethon organizers announced that, because of the public's overwhelmingly positive response, and in particular because of Lewis's generous promise, their organization would be able to build a research facility that they previously believed was beyond their budget. They also announced that they would name the facility the Jerry Medical Research Park, after Thomas Jerry, a local surgeon who recently had died. Lewis became very angry. He had long hated Jerry and he was horrified at the thought of paying for a building named in his enemy's honour. He therefore informed the telethon organizers that he had changed his mind and that he would not be sending any money. The telethon organizers have now sued for breach of contract. Which of the following statements is TRUE?

• A) Lewis is required to honour his promise as a result of the doctrine of promissory estoppel.
• B) Lewis will be contractually obliged to honour his promise as long as the telethon organizers agree to drop Thomas Jerry's name from the new research park.
• C) There is no contract in this case because Lewis merely promised to pay, and did not actually pay any money, and therefore did not provide consideration.
• D) Lewis is contractually obliged to honour his promise if the telethon organizers can prove that, in reliance upon his promise, they already have hired architects and contractors to build the new facility.
• E) Lewis is not required to pay because his promise was a gratuitous promise.

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Definitions:

Raw Materials Cost

The expense associated with acquiring the unprocessed materials required in the manufacture of products.

Cash Collected

The total amount of money received from sales, services, or other business activities.

Accounts Receivable Balance

The total amount of money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Direct Labor Cost

The total cost of wages paid to employees who are directly involved in the manufacturing or production of goods or services.