Question

Which of the following was the ruling of the court in Nuss v. Sabad, the case in the text involving allegations that before a corporation came into existence, a promoter of the corporation misrepresented to another individual involved in forming the corporation information regarding the price of land to be purchased for the corporation?

A：That both before and after a corporation comes into existence, its promoter acts as a fiduciary of that corporation and its present and anticipated shareholders, and that concealing the true price of an asset the corporation was formed to acquire breaches that duty.

B：That a promoter has a fiduciary duty to a corporation only after it comes into existence and that while the promoter’s duty may have been actionable in some other respect, it was not a breach of fiduciary duty.

C：

That both before and after a corporation comes into existence, its promoter acts as the fiduciary of that corporation and its present and anticipated shareholders, but that concealing the true price of an asset the corporation was formed to acquire does not breach that duty because the promoter has the right to use discretion.

D：That a promoter has no fiduciary duty to a corporation either before or after it comes into existence and that while the promoter’s duty may have been actionable in some other respect, it was not a breach of fiduciary duty.

Answer 1

The correct option is=

A：That both before and after a corporation comes into existence, its promoter acts as a fiduciary of that corporation and its present and anticipated shareholders, and that concealing the true price of an asset the corporation was formed to acquire breaches that duty.

Reason= In the given case, the court decided that there is a fiduciary duty to protect and promote the interest of the promoters and fully disclose all the facts and information that can harm the interest of the promoters directly or indirectly in both the cases i.e. before the formation and after the formation of the venture.

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