In a cross-corporate contract between two corporations with overlapping directors, the contract is valid if both boards approve including the common director.

• A. Valid
• B. Void
• C. Voidable
• D. Unenforceable

Answer: (A)

Inter-corporate contracts must be approved by the boards of both companies to be binding. When directors overlap, there is a heightened risk of conflict of interest, since the same person has duties to both sides. However, this overlap does not by itself make the agreement invalid. If both boards properly approve the contract and governance rules are followed—such as full disclosure of any conflicts and abstention by the director with the interest when appropriate—the arrangement is valid and enforceable. The core idea is that legitimacy comes from the boards’ authorization, not from the absence of overlapping directors. If there were no board approvals, or if conflicts weren’t properly handled, the contract could be void, voidable, or unenforceable, but with proper approval it remains valid.