Running head: 7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 1

7-2 Final Project Submission: Case Study Analyses

Patricia Franks

BUS 206

August 25, 2019

Sharon Ramsay-McLoughlin
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 2

7-2 Final Project Submission: Case Study Analyses

Milestone One: Case Study One

The appropriate court for this lawsuit depends upon several factors. Three important

considerations including the following:

“Personal jurisdiction is where the court has the power over the person being sued.”

(Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). Generally, where personal jurisdiction

there is a geographical boundary of the state’s borders. The defendants availed themselves of the

state’s jurisdiction which is New York. The defendants advertised nationally using a website.

They also sold products via mail. The injury occurred in New York. In this instance New York

will most likely be the jurisdiction because it is able to use the long arm of the law to bring the

defendant to NY for court. The long-armed statute enables the court to serve non-residents as

long as the defendants have minimum contacts (Kubasek, Browne, Dhooge, Herron, & Barkacs,

2017). Defendants do not have to live within the jurisdiction of the plaintiff as long as they have

minimum contacts. “Minimum contact was established in 1945 by the Supreme Court. All

states have their own requirements but committing acts like tort or business in the states as

sufficient to allow the state to serve a non-resident defendant” (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017).

“Subject matter a court has the power to hear certain cases. It determines which court

which sees which case” (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). It determines

whether the case is going to be seen in either federal or state court. This case can also be heard in

fedearl guidelines because of the diversity of all the parties, but since state laws are less severe

than federral laws it is probably better to file in state court.

7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 3

“Alternative dispute resolution (ADR) may be an option to resolve their dispute. ADR is

the resolution of legal problem through methods other than in a court room. The most common

ones are negotiation, mediation, and arbitration” (Kubasek, Browne, Dhooge, Herron, &

Barkacs, 2017). If all parties can come to solution with their dispute through ADR, they could

possibly be saving not only time that would be tied up in court, but they could also save money.

I myself would choose arbitration. First off it is efficient and less expensive. It is a

private method therefore not going to bring attention to Funny Face. Litigation would public and

most likely harm the reputation of Funny Face causing loss of profits. Also, the decision in the

matter is more than likely going to be better with the arborator than with the judge. Mr.

Margolin would be able to have an outside party to determine the outcome on the case and not a

direct dispute with the defendants (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). He

may also agree with an option as long as he is compensated for damages, has his medical bills

paid, and paid for lost wages. The dispute is solved quickly with all parties being allowed to be a

part of the decision.

“Mediation is an intensive negotiation where both parties select a neutral third commonly

known as the mediator” (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). The mediator is

to help facilitate communication and suggest ways to resolve the dispute.

Mediation works to preserve the working relationship amongst the two parties during this

dispute. One of the disadvantages to mediation is that it not always a fair decision. “If one party

have more power over the other party the decision could be unfair and or unequal” (Kubasek,

Browne, Dhooge, Herron, & Barkacs, 2017).

7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 4

“Arbitration allows for the resolution through a third party that is neutral and not a

member of the judicial system known as the arborator. Arbitrators are more flexible in their

decision making whereas the judge is bound by precedent” (Kubasek, Browne, Dhooge, Herron,

& Barkacs, 2017). However, arbitration also has it disadvantages. Arbitration is losing its

advantages because it is being used more frequently. Individuals are becoming concerned that

using arbitration they are losing some of their civil rights

Language on the Funny Face website appears to limit any claim filed to arbitration as a

means of resolving the dispute (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). Since

Funny Face and Novelty Now used PYR which was not approved by the FDA therefore illegal.

The information on the website is null because they are in breach of contract. This issue can be

addressed in court. However

Common law states that a corporation cannot be liable because it does not have a “mind”,

therefore is not a person. “However, corporate executives can be held personally liable for the

crime under the “responsible corporate officer” doctrine” (Kubasek, Browne, Dhooge, Herron, &

Barkacs, 2017). Even though Chris is the one that told Novelty Now to use the PYR Matt and

Ian both could be charged also. Strict liability offenses do not require state of mind (Kubasek,

Browne, Dhooge, Herron, & Barkacs, 2017). Courts impose liability on corporations by

imputing the state of mind of the employees to corporations. Corporations can be held

criminally accountable for almost any crime except those punishable by a prison sentence

(Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

The primary crime that exists here is fraud. “Fraud is when someone that intentionally

deceives another to cause harm to them. In order to be classified as fraud generally you need to
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 5

have the following three elements: 1) materially false misrepresentation made with the intent to

deceive, 2) victim’s reliance of false representation, and 3) damage” (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017).

Chris met with Novelty Now Inc. and had them to use the PYR. In doing so he put not

only the customers at risk, but he also put Novelty Now Inc and his own company at risk. Mr.

Margolin has hospital bills that will need to be paid. Also, he is going to have lost wages since

he is a public speaker, it could put his business at risk also.

“The ethical process of decision-making involves consideration of three elements. This process

is also known as WPH process of ethical decision making. When considering this process, we

have to look at Who which are the stakeholders would be affected in this case would be the Mr.

Margolin, Funny Face, Novelty Now, and any other employees, Purpose is the values of the case

would be efficiency, which includes getting a higher profit margin for the substitution, and How

is the guidelines summarized as treating others as you would want to be treated” (Kubasek,

Browne, Dhooge, Herron, & Barkacs, 2017).

7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 6

BUS 206 Milestone Two

Various elements must be present to prove that a valid contract exists between Sam and

the chain store. The four elements to a contract are agreement, consideration, contractual

capacity, and legal object.

“The first element of a contract is the agreement” (Kubasek, Browne, Dhooge, Herron, &

Barkacs, 2017). The agreement consists of two parts the offer and the acceptance. One party

offers to enter the contract while an acceptance of the terms of the made by the offeror. If the

safety chain store made an offer to Sam with intent to be guaranteed to an agreement, definite

terms were agreed on, and if communication occurred between Sam and the chain store

(Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

“The second element is consideration” (Kubasek, Browne, Dhooge, Herron, & Barkacs,

2017). Consideration can be anything as long as it is bargained for exchange. In business this is

usually money. Consideration would be deemed to exist if the chain store discussed the type of

payment Sam would have received for delivering 1,000 units of his new invention. In a bilateral

contract the consideration is a promise for a promise and a unilateral contract it is a promise for

an act (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

“The third element is contractual capacity” (Kubasek, Browne, Dhooge, Herron, &

Barkacs, 2017). Contractual Capacity is the legal ability to enter into a legal binding agreement.

Most adults are of capacity (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). In all but

four states you are considered a minor until you turn 18 years old. Generally, any contract

signed by a minor is voidable.

7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 7

“The fourth element of a contract is a legal object” (Kubasek, Browne, Dhooge, Herron,

& Barkacs, 2017). Basically, it is a legal binding contract. In order for a contract to be legal and

enforceable it cannot be either illegal or against any public policy. It must also contain all four

elements of a contract. The information in this case study clearly states that the parties did not

sign a contract. Since no valid contract existed, we cannot determine if the subject matter in the

contract was legal. If the contract is illegal or against public policy, the contract is then void

(Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). These two defenses could cause a

contract to be void and no longer binding. Two valid defenses against the contract being

enforceable are lack of genuine assent and lack of proper form (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017). Lack of proper form means the contract lacks in writing or is not in

proper form (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

If elements of a contract did exist between these two parties, there could still be some

possible reasons why the contract might not be valid based on facts not given. For example, if

Sam was a minor at the he made the agreement with the chain store the contract would not be

valid because he has not reached the age of contractual capacity (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017).

Even if there is not a valid legal contract between Sam and the chain store, there may

still be a quasi-contract or elements of what is called a promissory estoppel summarized as

treating others as you would want to be treated. “A quasi-contract (not an actual) is defined as a

court imposed contractual obligation to prevent an unjust enrichment of the other party. In this

case a quasi-contract may exist if: Sam delivered the 1,000 units to the chain store and did not

receive payment. It would be unfair to Sam for the store to benefit from the sales of Sam’s new
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 8

invention. While Sam is not receiving payment for services rendered. A promissory estoppel is

defined as the legal enforcement of on otherwise unenforceable contract due to a party’s

detrimental reliance of the contract. This may apply to this case because Sam verbally promised

the 1,000 units to the store. Since he made a verbal agreement the store is relying on the delivery

of the units. In order for there to be a promissory estoppel you must have these three elements:

1. One party make a promise and either know or should know that the other party

will reasonably rely on it.

2. The other party does reasonably rely on the promise.

3. The only way to avoid injustice is to enforce the promise” (Kubasek, Browne,

Dhooge, Herron, & Barkacs, 2017).

The rights and obligations of both the landlord and tenant depend upon the term of their

contract. Such a contract may be verbal or in writing under a standard residential lease agreement

(Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

Some facts may support that Sam is in breach of contract are the noise level of his

invention is bothering the other tenants (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

Sam did not get a license before to make or sell inventions. All states require you to have a

license before practicing (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). We need more

information to determine if he is in breach of contract regarding conducting business in his

apartment. We are told that he told that Quinn about the invention and she wished him good

luck, but we are not told whether he actually discussed doing the business in the apartment. For

all we know he could have just discussed the invention and never mentioned doing business from
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 9

the apartment. Some facts that may support that Sam is not in breach of his contract if Sam was a

minor because a minor cannot enter into a legally binding agreement.

Based upon those rights and obligations Sam’s landlord has grounds to evict because

Sam violated the covenant of quiet enjoyment which states a tenant has the right to quietly enjoy

apartment (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). Since we do not know the

details of the conversation with Sam and Quinn, we cannot determine whether or not Sam

discussed only the invention with Quinn or if he discussed working on the invention out of the

home.

Quinn did not give Sam a notice with a warning about the possible breach of the

covenant of quiet enjoyment with an opportunity to remedy the situation. Sam has a defense

to the possible eviction. Also, Sam could raise the defense that Quinn wished him good luck

with his invention (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 10

BUS 206 Milestone Three

A Sole Proprietorship is a business that has one owner. In a sole proprietorship the owner is

solely responsible. These profits are taxed as the personal income of the sole proprietor. You are

personally liable for any losses or obligations associated with the business. If you accrue large

debts because of your business, you might have to sell your home to cover them. A sole

proprietor has complete control of the management of the organization, with freedom to hire

employees, determine business hours, and expand or change the nature of the business. There

are couple is disadvantages which are the owner is liable for all losses and the owner is fully

responsible for all funding. However, there are also several advantages: owner keeps all profits,

he is solely responsible for management and creation is easy (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017).

Partnership – There are two different types of partnerships that we will be discussing:

General Partnership – In a general the partners split everything is divided equally

between partners which includes profits, liability, management, and debts. Most partnership are

not recognized as a separate entity therefore, income for the partners is taxed individually. That

is why the partners can count the losses from the business on their taxable income.

Unfortunately, the partners are personally liable for any debt. Some of the disadvantages to a

partnership are easy to partners are liable for losses. The advantages to a partnership are easy to

create, you can deduct any business loss on your taxable income, and business income is

personal income (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

A Limited partnership is a partnership which consists of at least general partner and at

least limited partner. The general assume all liability and the limited partner are not liable for
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 11

anything above the amount they invested. The limited partners are not management. They do

have to pay taxes on all profits they receive (Kubasek, Browne, Dhooge, Herron, & Barkacs,

2017).

A Corporation is formed by selling shares of stock to investors known as shareholders

and the owner. Shareholders elect a board of directors and they are the ones who manage the

business. The corporation pays taxes on dividends and the stockholders pays taxes on their

profits also. The corporation limits the amount a shareholder to the amount they invested. The

disadvantages are being double taxed and choosing a name and keeping it. The advantages of a

corporation are shareholders have limited liability, issuing stock to raise capital, and profits are

taxed as income to shareholders (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017).

A Limited Liability Company is the most advantageous features of partnerships and

corporations. An LLC is not unincorporated combining the most advantageous features of

partnerships and corporations. Combines tax advantages and management flexibility of a

partnership with limited liability of a corporation. The IRS treats an LLC like a sole

proprietorship, so profits and losses are reported on your individual income tax. Each partner’s

liability is limited to his or her capital investments (Kubasek, Browne, Dhooge, Herron, &

Barkacs, 2017).

The best business organization for Arcadia Sports is a limited partnership. Jeb and Josh

have formed a partnership. Jeb is going to be a limited partner handling the financial aspect.

Josh is the general partner liable and responsible for all the daily operations and

responsibilities. Both have agreed to work together and split the profits equally (Kubasek,

Browne, Dhooge, Herron, & Barkacs, 2017). Jeb will be a not be equally responsible for the
7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 12

daily responsibilities and management. Jeb is a silent partner; a limited partnership would be the

recommended business organization.

Jane fell off the raft, suffered a severe concussion, and occurred permanent damage to her

spine, the members of a partnership and sole proprietor would be personally liable for the losses

they incur from her damages (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). A sole

proprietor could be personally sued since they are not considered a separate legal entity. In a

partnership, the partners are equally liable for the business debts (Kubasek, Browne, Dhooge,

Herron, & Barkacs, 2017). Since Jeb goes bankrupt, Josh will be held personally liable for the

debt. Josh would be held personally liable for the debts from Jane’s damages. Jeb would not be

personally liable, but still lose his financial investment in his business.

The personal creditors are looking to seize assets of Arcadia Sports since Jeb has gone

bankrupt. It would be easy for the creditors to seize his assets if he were a sole proprietor. A

sole proprietor is not incorporated and has no legal formalities, making it an easy target to be

sued and your assets to be taken (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). Jeb

does not much more protection in a general partnership then he does sole proprietor. A general

partner is still personally liable for losses and debts, which means when Jeb went bankrupt the

creditors can seize his assets (Kubasek, Browne, Dhooge, Herron, & Barkacs, 2017). Jeb would

have had much more protection of his personal assets from the personal creditors if he had

created an LLC or a corporation.

7-2 FINAL PROJECT SUBMISSION: CASE STUDY ANALYSES 13

References
Kubasek, N. K., Browne, M. N., Dhooge, L. J., Herron, D. J., & Barkacs, L. L. (2017). Dynamic
Business Law (4 ed.). New York, NY: McGraw-Hill Education.