ABC Investments Inc against Zulu Computer Corporation - Essay Example

If Zulu Computers did this intentionally, then it is an illegal act and quite unethical as it manipulates the inventory so as to attract potential investors by adding creditworthiness as well as increasing chances of being advanced a facility by a financial institution. It could also imply that increased inventory statements will equally reduce the cost of goods thus reducing the expense and subsequent reflection in high gross profit. Furthermore, overstatement of inventory statements leads to businesses overpaying tax since it increases the pre-tax net income.

Based on this, ABC Investments can therefore seek legal action for damages which can make them recover whatever they have lost which in this case amounts to $500,000 and any other damages. However, Zulu Computer Corporation can argue it as an innocent misrepresentation that leads to a rescission remedy which means that they assume the original status as though they had not signed the contract and will depend on the court whether the damages will be awarded depending on the nature of innocent misrepresentation and losses suffered. ABC Investments can use copies of the financial statements to file a petition of which individual responsibility or company responsibility will suffice. Read More