Business reversals struck Continental Corporation, and it failed. Stage Corporation sues Rafferty. What defense, if any, has Rafferty?

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Business reversals struck Continental Corporation, and it failed. Stage Corporation sues Rafferty. What defense, if any, has Rafferty?

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Rafferty was the principal shareholder in Continental Corporation, and as a result, he received the lion’s share of Continental’s dividends. Continental Corporation was eager to close an important deal for iron ore products to use in its business. A written contract was on the desk of Stage Corporation for the sale of the iron ore to Continental. Stage Corporation, however, was cautious about signing the contract, and it did not sign until Rafferty called Stage Corporation on the telephone and stated that if Continental Corporation did not pay for the ore, he would. Business reversals struck Continental Corporation, and it failed. Stage Corporation sues Rafferty. What defense, if any, has Rafferty?

Explanation & AnswerSolution by a verified expert

Explanation

As per the Statute of Fraud rule, the agreement related to any specific fraud may be enforced by the law only if the agreement is in written form.
Individual R made an oral promise to Company S to pay the related debt. There is a lack of written agreement. So, Company S is unable to force Individual R for the payment of the debt.
The availability of the Main Purpose Doctrine may assist Company S to impose the related liabilities on Individual R.

Verified Answer

In this case, Individual R has not made the related agreement in written form, to pay the debt, and because of the non-written agreement, Company S is unable to impose the liability of debt payment on Individual R. Individual R is free from bearing any liability with respect to the debt.

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