Question

J & M, LLC, a small book publishing company, wrote off the debt of Desert View Academy, and The Basics of Learning, both small private schools, after it determined that the schools were facing serious financial difficulty. No notice of the action was sent to the schools; J & M simply stopped sending bills. Nearly a year later, The Basics of Learning was given a large endowment and a government grant. The resulting publicity brought the school to the attention of J & M, which immediately reinstated the account, and sent a new bill to the school, including interest for the entire time the debt was outstanding. No further action was taken regarding Desert View, which was still operational.

Questions:

1. Did J & M act ethically in reinstating the debt of one client, and not the other? Explain.

2. Is it ethical for J & M to add interest to the bill? Why or Why not?

Answer 1

Part 1

Yes, the action of J & M to reinstate the debt of one client, and not the other can be considered ethical. Because The Basics of Learning was given no notice by J & M regarding the writing off the debt. When the fact is known by J & M that The Basics of Learning becomes solvent after sometime and it is possible to collect one bad debt, there can be no obligation on it to make attempts for its collection.

Part 2

J & M’s addition of interest to the bill is questionable as no information regarding the addition of interest in previous bills given to clients is provided. If the details of interest were specified at the time of incurring debt and it was added in all previous bills, the addition of interest to the bills would be considered ethical. If there were no such actions, it would be purely unethical.