Author Question: Overly optimistic statements by executives are: a. occasionally the grounds for private suits ... (Read 136 times)

Yolanda · **on:** Jun 24, 2018

Overly optimistic statements by executives are:
a. occasionally the grounds for private suits seeking damages based on a claim of securities fraud b. rarely the cause of private suits for damages based on a claim of securities fraud
c. one of the most common grounds for private suits seeking damages based on a claim of securities fraud d. encouraged by stock brokers
e. none of the other choices are correct

Question 2

Duress. In July 1965, Loral Corp was awarded a 6 million contract to produce radar sets for the Navy. For this contract Loral needed to purchase forty precision gear parts. Loral awarded to Austin Instrument, Inc, a subcontract to supply twenty-three of the forty gear parts. In May of 1966 Loral was awarded a second contract to produce more radar sets. Loral solicited bids for forty more gear parts. Austin submitted a bid for all forty but was told by Loral that the subcontract would be awarded only for items for which Austin was the lowest bidder. Austin's president told Loral that it would not accept an order for less than forty gear parts and, one day later, told Loral that Austin would cease deliveries on the existing contract unless (1) Loral awarded Austin a contract for all forty gear part units and (2) Loral consented to substantial increases for the prices of all gear parts under the existing contract. Ten days later Austin ceased making deliveries. Loral tried to find other suppliers to furnish the gear parts, but none were available. Because of deadlines and liquidated damage clauses (clauses providing for money damages to be paid in the event of delays) in the Navy contract, plus the possible loss of reputation by Loral with the government, Loral agreed to Austin's terms. After Austin's last delivery, Loral filed suit to recover the increased prices Austin had charged on the grounds that the agreement to pay these prices was based on duress. Discuss Loral's claim.

leeeep · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

c

Answer to Question 2

Duress
A contract is voidable on the grounds of economic duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of his or her free will. The complaining party must show that the other party to the contract has threatened to breach the agreement unless the complaining party agrees to some further demand. In addition, Loral must show that it could not obtain the parts elsewhere within a reasonable time and that a suit for damages would not be an adequate remedy. The facts show that Loral fulfilled all of these criteria. Loral had no choice but to accept Austin's terms. The court held that Loral agreed to the price increases in consequence of economic duress exercised by Austin and sustained Loral's right to seek damages.