Could a parent company be bound to a contract because a subsidiary is?
Full Question:
Answer:
It will be a matter of interpretation for the court, based on all the facts involved, to determine whether the two companies should be treated as a single entity. The separate corporate entity may be disregarded when it is used as a cover for fraud or illegality, when it is used to work an injustice, when it is deemed necessary to achieve equity, or when failure to achieve equity would enable the corporate device to be used to circumvent a statute. When courts have faced the question of whether or not a firm and its subsidiary amount to a single "person", they have answered it by examining the extent of common ownership and the degree of control that the one exercises over the other.