Once the Explicit Rules and Implicit Understandings That Govern All

question 21

Multiple Choice

Once the explicit rules and implicit understandings that govern all the transactions of a firm are in place, there must be:

• A)a system of controls that rewards appropriate behaviour and punishes inappropriate behaviour.
• B)a discussion on the necessity of following ethical practices in business.
• C)weekly reminder seminars to enforce guidelines.
• D)commitment from customers to accept these rules.
• E)cooperation from competitors to avoid conflicting outcomes.

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Definitions:

Illusory Promise

A statement that appears to assure a commitment but lacks the essential elements to bind the promisor legally.

Option to Cancel

A clause in a contract that allows one or more parties to terminate the agreement under certain conditions.

Legally Sufficient Consideration

refers to something of value or a promise exchanged between parties in a contract that is recognized by law as adequate to establish a binding agreement.

Preexisting Duty

An obligation that a party is already legally required to perform, which cannot serve as the basis for new consideration in a contract.