Dawn Sumi Hosts a National Call-In Radio Program

question 66

Essay

Dawn Sumi hosts a national call-in radio program.On a number of occasions,when the on-air discussion concerned computers and electronic devices,she spoke very favourably about the merchandise manufactured by Rabby Electronics Inc.As a result of those compliments,Rabby's business increased dramatically.Rabby was both delighted and surprised: delighted because it was making larger profits and surprised because it had never asked Sumi for the endorsements.As a gesture of thanks,the president of Rabby wrote to Sumi and promised to pay him $25 000 within six weeks.In reliance upon that promise,Sumi immediately entered into a contract with a builder to add a sun deck to her home at a cost of $25 000.Sumi never would have entered into that contract if she had not received Rabby's promise.A week later,however,the president of Rabby changed his mind and told Sumi that she would not be receiving the money after all.Is Rabby entitled to do so? Did a contract exist between the parties? If no contract existed between the parties,is Rabby nevertheless obliged to fulfill its promise? Explain your answer.

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Definitions:

Credit Entry

An accounting entry that increases a credit account or decreases a debit account, representing the source of funds or value entry in a financial transaction.

Direct Material Price

The cost of raw materials that are directly used in the manufacturing of a product.

Actual Production

The real, quantifiable output of goods or services produced by a company during a specific period, as opposed to theoretical or planned production levels.

Normal Production

The standard or average level of production volume that a company expects to achieve under normal operating conditions.