The science of decision making in the field of accounting and finance involve mental consistency in regards to the prevailing business laws. Managerial accountants must be well informed in decision making in order to protect the company from dubious consequences of misguided choice of action. Decisions in accounting must be backed by law. This research paper reflects on a decision criterion, legal facets of the decision, and consequences the decision has on a company.
For instance, company A enters into a contract with agency B who services their machines after every quarter of a year. Agency B has been in the business of servicing production machines for the last twenty years. The business relationship these two companies have can be described as cordial and professional. In act of faith, the two companies entered a contract and agency B was give the sole responsibility to execute any service in repair and maintenance of Company A’s production machines. The payments are to be made in a semi-annual arrangement. The contract is renewable after every one year depending on the performance of the outsourced agency. When signing the contract, company A promised in a written note, “in luau of the contract dated January 01, 2010, we shall pay agency B for any duty carried on behalf of the company six months from the date of such a duty”. This note was signed by the owner of company A whose name double as the name of the company. Unfortunately, company An experienced financial crisis is unable to settle the debt accruing to 20,000$ after the elapse of six months’ period. Walter, the management accountant for agency B is given the responsibility of recovering the accrued amount on behalf of the agency. What is the way forward?
In business law, this arrangement is negotiable. The promise of payment is not a condition as presented by the acceptance of consideration in promise of payment. Company A may present their argument on basis of the provision of section three-106(b) (ii) of the U.C.C which states that, “A promise or order s not made conditional, because payment is limited to resort to a particular fund or source” (Richard & Barry, 2002). Besides, company A may use the provision of U.C.C which dismisses the demand for payment on an instrument depending on completion of a duty. In section three-115, this instrument is referred to as an incomplete instrument. The contract is not yet completed as it is binding for a year. However, after the expiry of the contract, the terms can be negotiable as the instrument of contract is signed by the owner of the company whose name double as the company name. Thus, this contract is signed diligently by its maker. In section 3, cap 104 of U.C.C, “a signature may be made…by use of any name…to authenticate writing” (Richard & Barry, 2002). The fact that the owner uses his own name is immaterial. However, this section authenticates business papers or contracts if the signature is genuine. Irrespective of the position of the signature, the paper remains negotiable provided the time limits for the contract are observed. Thus, Walter can recover this amount in the court of law once the twelve-month contract elapses.
This decision influences the dynamics of operation on mere good faith. It is important for two parties signing a contract to exercise precaution in order to ensure conditional endorsement and transfer of negotiations. This protects the parties from misinterpretation and material alteration. When properly done, the parties can strike a deal on liability based on warranty model.
In summary, agency involved in business decision making should be ethical and controlled by legal detriments of business law. A legally binding and an informed decision should be based on pareto efficiency and business ethics. Decision making process is responsibility, professionalism and legal experience for efficient operation.
Reference
Richard, A, M,. & Barry S. R. (2002). Business law and the regulation of business, 10thEd, Alabama: South West/Thomson Learning.