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

question 30

Multiple Choice

Clara 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)Clara 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)Clara 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)Clara will be held liable for the contracts only if she ever gets the loan.

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Definitions:

Cash Account

A financial account that tracks the flow of cash transactions, including receipts and payments, within a company.

Sales Discounts

Reductions in the sale price offered by a seller as an incentive for prompt payment by the buyer.

Cash Collection

The process of gathering and processing payments received from customers or clients.

Credit Terms

The conditions under which credit will be extended to a borrower, including repayment schedule, interest rate, and the lifespan of the loan.