The last two cases are shown below....Thanks so much dkennedy!!
Joan and Don own “Hot Diggety Dogs,” (HDD) a vending cart business which sells gourmet hot dogs on the Streets of Richmond, Virginia. The partners operate four hot dog carts scattered at various points in the Downtown area close to the office and retail shops. They have a vendor’s license from the City to operate their business. HDD is very successful. Their best selling gourmet dog, “The French Doogle,” is so popular that it was the subject of a Food Network, “Show Down” with Iron Chef, Bobby Flay. The, “French Doogle,” won the competition. Joan and Don are understandably, very proud of their products.
Currently, the partnership has no formal agreement that outlines profit distribution, managerial responsibilities, and liabilities of the parties. Joan and Don want to expand the business. They have agreed to expand the cart business to include four new carts in the city and a kiosk in the mall. They also decide to franchise the cart business around the state. Joan has agreed to the expansion only if they bring in a new partner, with money, for the express purpose of getting the franchise contracts. Jack, one of Joan’s friends, has agreed to become a partner for the time it takes to set up the franchise business. Jack offers to contribute $50,000 to the partnership with the understanding that he will double his money by the end of the first twelve months of continuous operation of the four new carts in the city, the kiosk in the mall, and no less than 10 additional franchises around the state. No written agreement was made between the partners.
Every year The Women’s League sponsors an old fashioned Fourth of July Festival. It begins on the second of July and culminates with the fireworks display on July 4th. The proceeds of the festival are given to the local children’s hospital. The three day festival is a big money maker for HDD because of all the activity in the downtown area leading up to the festival and because of the large numbers of people who come to the festival. It comprises almost 25% of their annual income. Historically, HDD has had their usual four carts around the city during the festival. This income goes to HDD.
HDD also sponsors one cart during the festival which is located in the festival area, itself. The proceeds from this cart go the festival sponsors. This year, the sponsors anticipate an increased attendance of 15%. Joan and Don are excited about this, and hope that they can use the additional funds to help fund their business expansion.
One month before the Festival, Joan and Don received a mailed notice from the City of Richmond informing them that due to a new City Ordinance, brought about because of excessive traffic flow, licensed street vendors would no longer be able to set up in the immediate downtown area of Richmond. The city passed the ordinance at the last city council meeting without prior notice of any kind to the vendors affected by the law.
The ordinance was to go into effect on the 1st of July. Vendors could only sell their wares in a concentric circle some 15 blocks from the main street of Richmond. Not only would all the street vendors be more or less together, but the proposed area has very little foot traffic and customers. Failure to abide by the law would result in the loss of a vendor’s license for ten days and a five thousand dollar fine.
The HDD partners were angry and devastated. If this law were allowed to stand, they could no longer do business in the downtown area, they could not participate in the Festival, and their expansion plans would go up in smoke. Worse yet, in anticipation of the Festival, Joan and David ordered and made payment on thirty thousand hot dogs, thirty thousand buns of various types, and condiments from Salvo Food Distributors their usual supplier. After much discussion, Joan and Don decide that they were going to set up for the festival as usual and take the chance of getting a fine and suspension. Joan and Don make this decision because they think it will be cheaper to pay the fine and lose the ability to do business for ten days than to do business on the city’s terms. The serious financial pressure from having already prepaid Salvo for the hot dogs, condiments, buns, etc. has added real urgency to their decision to pursue business as usual.
From their point of view, it means that HDD can live to fight another day. Joan and Don agreed to this course of action without asking Jack who was not around.
July first arrives, and HDD set up for the Festival. Business at the Festival was going great. The money was pouring in and all the carts are really busy. People having seen the Show Down show were anxious to try the French Doodle. One customer was so excited that he raced to the cart, tripped over a nearby box of hot dogs which caused him to fall into the steaming water, seriously burning his arm and that of the young women manning the cart. Both sue HDD. The suits total $60,000. Moreover, in the midst of the accident, the police arrive. HDD receives a summons and ticket for violation of the new city ordinance. HDD was given a ticket on each remaining day of the festival.
As if this were not enough, three thousand of the buns delivered by Salvo Food on the second of July contained mold. This was not discovered until the final day of the festival. Once discovered HDD was forced to close two of their carts completely before the end of the festival. Joan and Don estimate they lost four thousand five hundred dollars of business.
In addition, while Joan and Don where busy with the festival happenings. Jack, signed three new HDD franchise contracts, and took deposits totaling fifty thousand dollars. Upon his arrival back in Richmond he finds out the problems with the festival and wants out of the partnership. He feels his partners did not include him in their decision-making and that he should not have to pay for their mistakes. He does inform them of the franchise agreements. However, he also informs them that he is leaving with the fifty thousand dollars he collected from the companies, because it is the same amount he put in to the business.
Joan and Don look to you for advice. They have come with the following list of questions for you to answer:
MULTIPLE CHOICE: 1pt each
Instructions: Select the correct answer and give a two-to-three sentence explanation as to why you believe it is correct
1. If the law suits are successful against HDD will Jack have to pay too?
- No, because he didn’t get to vote on the decision to participate in the festival.
- No, because no one knew that he had become a partner.
- Yes, only to the extent of his fifty thousand dollar contribution.
- Yes, because an incoming partner is personally liable for debts and obligations incurred by the partnership after becoming a partner.
2. Does the fact that there is no written partnership agreement for HDD mean that no partnership exists?
- No, a partnership may be oral or written.
- No, a partnership can be implied by the actions of the party toward others.
- Yes, because no one on the outside can tell if they are partners or not.
- Both a and b
3. If the law suits are successful, and if HDD does not have enough money to pay for what has been ordered, do the partners have to personally pay the difference?
- No, because the partnership is considered a person in the eyes of the law and the partners are not personally liable for what the partnership does.
- Yes, partners are both jointly and severally liable for torts against third parties.
- Yes, they will each be equally liable for torts against third parties.
- Yes, because partners are jointly liable for debts of the partnership.
4. Joan and Don feel that they should not be responsible for the customer’s damages, because they told all HDD employees never to leave the hot dog boxes lying around the cart. Will this fact get them off the hook?
- No, because as an agent of HDD the employee’s actions are deemed their actions.
- No, because the act was committed within the scope of employment.
- Yes, because the employee was acting outside the scope of employment by not adhering to the rules.
- Both a and b
5. Joan and Don do not want to continue with the Franchise business with Jack gone. Is it possible for them to get out of the contracts by claiming they did not know Jack was making them?
- Yes, because they can show how busy they were at the Festival.
- Yes, because they can show that they did not authorize Jack to make the contracts.
- No, because partners are agents of each other and the partnership.
- No, because contracts entered into on behalf of the partnership are binding on the partnership.
SHORT ANSWER: 2pts
Instructions: In six to eight sentences explain your answers to the following questions.
Joan and Don are also concerned about their contract with Salvo Foods. They would like to know if they can get reimbursed for the forty-five hundred dollars of business they lost and the money they paid Salvo for the buns and delivery. Under the UCC explain two of the best warranty theories that would help HDD to recover there losses.
ESSAY: 3 points
Instructions: Frame a complete definition of the legal question asked and explain how the law applies to the facts. Suggested length is two to three paragraphs
Joan and Don still have a very major concern left to ask you about. They can not continue doing business without a repeal of the city ordinance which has caused them to receive several citations from the city of Richmond. They want to fight the City and go to court with the citations. They feel that the ordinance is in violation of the constitutional right to do business and that were not even given a chance to protest the law. Do you agree? Define the constitutional law theory that would help Joan and Don to defeat the law and its application to their business. Make sure that you are complete in your analysis by incorporating any tests or defenses that may apply.
Darren Troll, CEO of Cash Cow Incorporated (CCI) brought CCI’s two Vice Presidents, John Quick and Dirk Driven, into his office to unveil his new plan for a CCI amusement park, called FUN-A-MANIA-USA (FAMUSA). It was to be located outside Washington D.C. and its design was to be based on the design of D.C., itself. He had pitched his idea to the Board of Directors, but it was not approved. However, Troll was confident that the project would be a cash cow. He felt sure that once the Board saw the project succeed, they would approve the 3.7 million dollar expenditure.
In Troll’s mind, the key was to get the project up and running before the next Board meeting some 11 months down the road. He assigns each VP tasks and tells them that this is their number one priority. John Quick, known for his fast work, is first up. He is assigned the task of finding the money to support the project from CCI’s budget and to set up accounts for a new separate corporation named Fun-A-Mania-USA, Inc. Quick is also expected to set up the corporation. Troll tells Quick that he has until the next day, Friday, to get the money and accounts in place. Troll emphasizes to Quick and Driven that everything has to be in the name of the new company because he doesn’t want the Board to get wind of things until they are all in place. “Think of it as a surprise gift for them,” he said. Troll then turned to Quick and said, “Your job is to find the site, buy the land, and construct the amusement park. You have 10 months to get the job done.” Both men roll their eyes as they leave the office. The deadline is impossible.
Back in his office, John Quick gets to work. John decides that he his first priority be to find the funding for the project. After careful review of the CCI budget, John decided that there are two ways he can raise the money for the project quickly. The first way is to sell the 2.8 million dollar corporate apartment in San Francisco. Overlooking the Golden Gate Bridge, this apartment should be very easily sold, even in today’s market. In fact, he thinks he knows the perfect person, Jack Yono. Yono had called Quick only the last week and asked if Yono knew a place in SF for sale as Yono was being transferred from Japan to the Bay area by his company. Quick feels certain that Yono can afford the apartment and knows that Yono can save real estate broker-fees if the sale is direct to Yono. He picks up the phone and called Yono who was more than delighted to get the apartment for 2.8 million. He would wire him half of the money as a deposit this afternoon, and pay the rest when he got the contract of sale and Deed. It would be a cash transaction. John told him the documents would come via e-mail this afternoon after the deposit wire had been received. He could close the deal by tomorrow. Everyone was pleased when they hung up the phones. Quick called the bank and arranged to set up a new account in the FAMUSA name.
The second part of John’s plan was to fire two upper management people, Joe Jolly and Jill Jackal. Joe was the Director of Sales and Dirk Driven’s gopher. The sales figures were down this year and this would be a perfect excuse to let him go. CCI could save $450,000 dollars by letting him go and promoting his immediate underling with a salary bonus of only $100,000. John wanted to make sure first that CCI wouldn’t have any problems with his employment contract. He pulled Joe’s file and found that he was correct in surmising that he had signed one of the old contracts. He was bound to a six year covenant not to compete even if he was fired. Furthermore, all disputes with the contract were to be handled through arbitration at Jolly’s expense unless Jolly won. John was sure that wouldn’t happen because CCI would get to pick the person. John decided if he let him go with two weeks notice and severance pay that would be enough to prevent any problems. What John forgot to check, because it wasn’t in the new contracts, was the clause on dismissal of the employee. It provided that when the employee was dismissed without thirty days notice and severance pay, any disputes would revert to the Court system for resolution.
Jill Jackal, though, was another matter. She had negotiated her own contract and was sharp and talented. Her, “Cow Time,” cartoon is a real hit. It brings millions to the company each month. Dealing with her would prove a headache for sure. Quick needed her $500,000 salary. Fortunately, for him, Jill entered his office at the moment and informed him that she was resigning her position as Creative Director. She was giving her two weeks notice. She also said that she wanted the $100,000 per month “Cow Time” royalty checks that Troll had promised her last month. The royalty checks were to begin that same month and continue as long as, “Cow Time,” was used by CCI. Quick wanted to laugh. Troll was always making promises like that to people, but he never paid. He said nothing. At least he no longer had to fire her.
John had one last thing to do before he could go home for the day. He had to get the corporation for FAMUSA formed. Normally, he would have gotten legal to handle this, but they had gone home for the evening. He would just take one of the corporate books from the shelf and scan the documents into the computer. He would edit the existing name and put Fun-A-Mania-USA in its place. He names Troll, Driven and himself the shareholders and Board of Directors with the thought that this can changed later to CII when the Board approves the park plan. He had accomplished the job Troll gave him in one day.
The Board of Directors, now very much aware of FAMUSA plan, and not too happy, come to you for advice. They want your legal opinion on the following questions.
MULTIPLECHOICE: 1 pt each
Instructions: select the best answer and give a two-to-three sentence explanation as to why you believe it is correct
1. Can Troll justify his action to start the amusement park project by asserting the best business judgment rule?
- Yes, because Troll had diligently researched the project and in good faith felt it to be in the best interests of the company.
- Yes, because he exercised his judgment in believing that other CEO’s like him would also make the same judgment that he did.
- No, because he failed to use care and diligence in executing his plan.
- No, because he failed to use care, and failed to do so in a manner that a prudent person would believe to be in the best interest of the company.
2. Will the company be able to rescind John’s sale of the condo to Yono?
- Yes, because John acted outside the scope of his employment by selling the condo to a friend.
- Yes, because Yono knew the condo was titled in the name of CCI not FAMUSA and that the proceeds of the sale were to go FAMUSA account.
- No, because Yono had no reason to believe that the FAMUSA account was not owned by CCI.
- No, because as Vice President, of CCI John had the implied, apparent authority to act as agent of CCI and bind CCI to the sales contract. Where the money went was irrelevant.
3. Joe Jolly has brought a suit in the state court against CCI to have the employment contract held void because he claims the contract was against public policy. The board wants to know if they can force him into arbitration as is stated in his contract.
- Yes, because the terms of the contract call for arbitration to settle disputes.
- Yes, because the courts will not hear contract cases when a contract calls for arbitration.
- No, because the Federal Arbitration Act will permit court suits in cases where equity or legal grounds exist to revoke them.
- No, because the terms of the contract, itself, allow him to bring the suit in the Court system as John did not give him thirty days notice.
4. Assuming that Jolly gets to keep the suit in the Court System, under what legal theory is he most likely to win his case.
- It is an adhesion contract, which, by definition, is a contract whose terms he was unable to negotiate.
- It is an unconscionable contract because CCI used their dominant position to impose an unfair, “covenant not to compete,” clause and Jolly had no other job alternative at the time.
- It is against public policy because the covenant not to compete is so long it approaches slavery.
- It is an adhesion contract, but its terms are so unfair that the court could use its equity power to make it fair.
5. Jill Jackal has also filed suit against CCI as she has not yet received her promised royalty checks. Will Jill win?
- No, because the oral agreement between Troll and Jackal cannot be heard by the court as it is not an exception to the parole evidence
- No, because even if the Court heard the evidence, the oral agreement is not supported by any consideration.
- Yes, because the cartoon was her creation and CCI should have to pay her for her ideas.
- Yes, because her employment contract was amended by Troll when he verbally agreed to pay the royalty premium.
SHORT ANSWER: 2 points
Instructions: In six to eight sentences explain your answers to the following questions
Can the Board sue Troll and John for corporate negligence?
If so, why?
If not, why not?
ESSAY: 3 points
Instructions: Frame a complete definition of the legal question asked and explain how the law applies to the facts. Suggested length is two to three paragraphs.
Is FAMUSA a viable corporate entity in the eyes of the law? Explain. Be sure to include in your answer a discussion of the nature of a corporation and and how it can be formed.