University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

72

Pages:

2
Author:

bratrochanter

The provided case involving Chad and the Valley Area Anti-Smoking Foundation (VAAF) highlights key contract principles, including the requirement for valid consideration, enforceability of promises, and potential ethical considerations. Key Questions and Analysis: 1. Was VAAF contractually obligated to pay Chad for refraining from smoking? o Legal Obligation: A valid contract likely existed between VAAF and Chad. The offer made by VAAF promised payment if a resident refrained from smoking for one year, and Chad accepted this offer by performing the requested act (refraining from smoking). Since he completed the action as stipulated, VAAF was bound to fulfill its promise, barring any specific limitations initially set within the offer. 2. Was there consideration to support VAAF’s promise to pay $500? o Consideration: Yes, consideration existed. Chad’s forbearance from smoking, something he was legally entitled to do, constitutes a form of consideration because he gave up a legal right in exchange for VAAF’s promise to pay $500. This mirrors cases like Hamer v. Sidway, where refraining from certain activities for a reward was found to provide sufficient legal consideration. 3. Are other facts necessary to determine enforceability? o Further Details: It would be important to confirm that VAAF’s offer did not include conditions or disclaimers allowing for partial payments if demand exceeded available funds. Additionally, knowing if VAAF publicly communicated any limitations on its offer could affect the obligation to pay the full amount. 4. Is Chad entitled to the entire $500 or only $250? o Full Amount Entitlement: If no prior limitations were set by VAAF on the payout amount, Chad is likely entitled to the full $500. An offeror cannot change the terms unilaterally after the offer has been accepted and performance completed without mutual consent. While Chad accepted $250, this acceptance might be seen as agreeing under duress if he felt he had no other recourse. 5. Was VAAF ethically obligated to pay the entire $500? o Ethical Consideration: Ethically, VAAF should honor its original promise, particularly if the foundation did not include stipulations about payout limitations. Reducing the payment amount after participants have completed the required action could be seen as misleading. Ethical business practices would suggest honoring commitments to maintain trust and credibility within the community. Conclusion: Legally, VAAF likely owed Chad the full $500 based on contract principles, as long as no terms justified reducing the payout. Ethical practices also support fulfilling the original promise. If VAAF faced unexpected financial strain, it could communicate transparently with participants, perhaps offering options such as payment over time, rather than unilaterally reducing the agreed-upon reward.