Alice worked for Fountain Valley, Inc., a corporation that manufactured baby supplies. According to her employment contract with

Question

3 years ago

8

Alice worked for Fountain Valley, Inc., a corporation that manufactured baby supplies. According to her employment contract with

the corporation, Alice was to be paid $78,000/year plus a 5% bonus of all sales in excess of the previous 12 months sales. The corporation sold baby supplies worth $200,000 in 2017 more than in 2016. Alice was then terminated at the end of December 2017. Is Alice entitled to a bonus of $10,000

Business

1 answer:

earnstyle [38] · Answer 1 · 2022-09-21T06:05:28+03:00

Question Completion with Answer Options:

A. Yes, according to the terms of her contract.

B. Yes, according to the duty of good faith and fair dealing.

C. No, according to the at-will termination provision in her contract.

D. No, because subsequent conduct of the parties modified the contract.

Answer:

Fountain Valley, Inc. and Alice

B. Yes, according to the duty of good faith and fair dealing.

Explanation:

Alice is entitled to the bonus of $10,000 because the duty of good faith and fair dealing requires Fountain Valley not to deny Alice the benefits arising from their valid contract. Since Alice's employment contract included a 5% bonus of all sales in excess of the previous 12 months' sales, the Fountain Valley, Inc. should not deny Alice's claim to the benefits.

b) Employment contract terms = $78,000/year plus 5% bonus of all sale in excess of the previous 12 months' sales. The value of sales in 2017 is $200,000 more than in 2016. 5% of $200,000 = $10,000. Therefore, Alice is entitled to the bonus.