Commercial Law, 2019 Bar — Question A.2-b

ESSAY

In May 2018, ABC Corp. entered into a merchandising contract the terms and conditions of which were totally lopsided in favor of the counterparty, XYZ, Inc. As a result, ABC Corp. suffered financial losses. A year after, or in May 2019, Mr. X became a stockholder of ABC Corp. Learning about the circumstances surrounding the merchandising contract, Mr. X filed a derivative suit against ABC Corp.'s directors to claim damages on behalf of ABC Corp. due to their mismanagement. (b) Was Mr. X's filing of a derivative suit proper? Explain.

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