Selene Is Planning to Incorporate a New Landscaping Company, "Evergreen

question 19

Multiple Choice

Selene is planning to incorporate a new landscaping company, "Evergreen and Growin'." She has held herself out as an agent for Evergreen and has contracted to buy a truck, tools, fertilizer, and seed and also has entered into a lease on behalf of Evergreen for an office. When she fails to get the loan from the bank, she cannot start the business, so she cancels all the contracts. What are the consequences?

• A) Selene can cancel all the contracts with no personal liability if she told them she was acting as an agent and expressly warranted that she would not be responsible.
• B) Selene may be held personally liable on the contracts because she misrepresented to third parties that she had authority to make contracts on behalf of a non-existent corporation.
• C) Since the company never existed, she gave no implied warranty.
• D) Selene will be held liable for the contracts only if she ever gets the loan.

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a certain time period.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specific time frame.

Long Straddle

A long straddle strategy involves simultaneously buying a put and call option on the same asset with the same strike price and expiration date, benefiting from a strong move in either direction.

Stock Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy a stock at a specified price within a certain period.