Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc. to supply Quick's stationery on customary terms and at a cost less than that charged by any other supplier. Knox later informed Quick's board of directors that Knox was a majority stockholder in Tine. Quick's contract with Tine is:
　　a.Void because the disclosure was made after execution of the contract.
　　b.Valid because the contract is fair to Quick.
　　c.Valid because of Knox's full disclosure.
　　d.Void because of Knox's self-dealing.
　　Answer:B
　　Choice "B" is correct. If a corporation enters into a contract and a director has a conflict of interest in the transaction, the contract is voidable unless the director makes full disclosure of all of the facts to the disinterested directors or the shareholders, who then approve the transaction, or the director can prove that the transaction was fair to the corporation. The stationery purchase was fair to Quick, since it was purchased at a below-market price. Thus, the contract is valid.
　　Choice "d" is incorrect. A director's self-dealing does not automatically make a contract void. The contract can be upheld if it was fair.
　　Choice "a" is incorrect. A director's self-dealing does not automatically make a contract void. The contract can be upheld if it was fair.
　　Choice "c" is incorrect. If a corporation enters into a contract and a director has a conflict of interest in the transaction, the contract is voidable unless the director makes full disclosure of all of the facts to the disinterested directors or shareholders, who then approve the transaction, or the director can prove that the transaction was fair. Mere disclosure after the contract was adopted does not automatically render the contract valid.