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29. If the buyer sues the shareholder for breach of contract, is the buyer likely to prevail?
Assume that the parent company orally approved the contract, but that the shareholder changed her mind and refused to consummate the sale on two grounds: (1) when the agreement was made there was no consideration for her promise to sell; and (2) the parent company's approval of the contract was invalid.
A buyer contracted in writing with a shareholder, who owned all of XYZ Corporation's outstanding stock, to purchase all of her stock at a specified price per share. At the time this contract was executed, the buyer's contracting officer said to the shareholder, «Of course, our commitment to buy is conditioned on our obtaining approval of the contract from our parent company.» The shareholder replied, «Fine. No problem.»
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B is incorrect. The shareholder agreed to the condition; it is not a waiver.
C is incorrect. There is mutuality of obligation in that each party made a binding promise.
D is incorrect. The fact that the parent company's approval was not in writing does not render it invalid.