BMGT380 Final Examination

BMGT 380 Business Law I

Final Examination

Instructions:

Multiple Choice Questions--

Please list the question number and a letter for the correct multiple-choice response to each multiple-choice question. Include a two-to-three sentence explanation as to why you believe it is the correct choice.

Essay Questions/Short Answer Question--

Please provide detailed responses to the essay and short answer questions that reflect your understanding of the subject matter and its application to the facts. You may consult the attachments. Your answers should be clear, complete and comprehensive. State your position/answer, and provide rationale and justification for your answer based on legal theory, rules, laws, etc. It is important to state your position AND justify your position. Check your spelling. Some questions have right/wrong answers. Some questions can possibly be argued from two (2) different positions, in which case it is most important to provide specific, comprehensive justification for your position. Number your answers clearly. Read the facts carefully, and do not assume any facts that are not given. Each essay question is worth five (5) points. Each short answer question is worth five (5) points.

Case One

Charlie Jones, a fireman for Boulder County, Colorado, saw an ad for the vacation ofhis dreams in the local, “Boulder County Gazette.” The ad read, “Seven days at the wonderful luxury Windell resort, ‘Cabo Mar,’ $1200 per person, all inclusive.” The ad featured a picture of the front of the hotel with a person receiving a massage by the pool superimposed over the hotel façade. The ad went on to say how the hotel was located on the beach at Cabo San Lucas, Mexico and in a wonderful tropical setting. The ad also listed the name of a local travel agency, Jennifer’s Tours, for booking purposes. In miniscule print at the bottom of the ad, blending with the pattern of the iron railing, the ad went on to make a short disclaimer to the effect that the amenities featured were not necessarily those provided. Jones knew Jennifer Hooley, the owner of the agency. Anxious for some time off in a warm climate, Jones decided to Google the hotel name to verify that it was indeed a Windell hotel as he knew Windell to be a reputable company. From Google, Jones was able to confirm that the, ‘Cabo Mar,’ was owned by Windell; he also noticed that the same picture appeared on this website as he had first seen in the newspaper. The site also showed pictures of what seemed to be spacious, well-appointed rooms with queen sized beds. Excited by what he saw, Jones called Jennifer’s Tours and booked the special he saw in the newspaper ad.

Upon arrival, Jones found that, while the hotel’s exterior looked like the pictures he saw, the hotel was located mostly in the town of “Cabo” with only a very small portion of the hotel facing beachfront. His room was smaller than on the website and had only a twin bed. Jones was told that if he wanted a bigger room he would have to pay an upgrade fee of $500 for the seven days. He paid the $500 because as a typical fireman, he was a tall, big man and needed more space to sleep. As the trip went on, Jones became increasingly uncomfortable with the, “not included,” fees that were mounting up, but when he went to check out on the seventh day he found that he was being charged for seven lunches. Furious with how the company had treated him, Jones stormed across the lobby to the manager’s office, but before he could get there, he slipped and fell on the wet marble floor having been just washed by the maintenance staff. The staff had placed a “wet” sign on the floor, but it was hidden from plain view behind a large leather chair.

Jones was taken to the nearest hospital where it was determined that surgery was necessary to place a pin in his broken ankle. Anxious to return home and leery of the Mexican hospital, Jones flew out of Mexico immediately after the surgery. He required two plane seats and an ambulance to meet him at the various airports. His health insurance would not cover his hospital stay in Mexico as it was outside the U.S. When back in Boulder, Jones was not able to work for twelve weeks and required another surgery to remove the pin as well as several weeks of therapy. In addition, Jones received his credit card bill with a thousand dollars, “additional charges,” that had been added during his stay at the, ‘Cabo Mar.’

Jones comes to you to consult about his options in this whole affair. He wants to sue for $575,000 to recover on the medical expenses; the cost of the trip (which, with the additional charges amounts to $2,200); his lost wages; and pain and suffering resulting from the injury.

In your research of the situation, you discover the following additional information:

1. Jennifer’s Tours is a sole proprietorship owned by Jennifer Hooley. At age 18, Jennifer took over the business from her mother, also named Jennifer Hooley. Just prior to reaching the age of 18, Jennifer had booked Jones’ tour. Jennifer Tours has an exclusive sales contract with Windell Travel, Inc. Jennifer Tours placed the ad in the Boulder Gazette. Similar ads were placed by Jennifer Tours in various newspapers around Colorado as well as on Jennifer’s Tours’ company web site.

2. Both Windell Hotels, Inc. and Windell Travel, Inc. are corporations registered and headquartered in Delaware. Windell Travel has no offices and no hotels in Colorado. It does have an exclusive agency contract with Jennifer Tours. Windell Hotels, Inc. owns and operates the Cabo Mar Hotel.

MULTIPLE CHOICE: 2 points each

Instructions: Select the best answer and give a two-to-three sentence explanation as to why you believe it is the correct choice.

1. Jones wants to sue Jennifer Tours, Windell Hotels, Inc, and Windell Travel, Inc together in Federal court for his injuries as a result of the fall. Can he do so?

a) Yes, because Federal Court has jurisdiction over citizens of different states.

b) No, because Federal Court does not have jurisdiction in cases that do not involve federal laws.

c) Yes, because the Federal Court has jurisdiction over citizens of different states and the suit involves monies greater than $75,000.

d) No, because the Federal Court has no jurisdiction over an accident that occurred in Mexico.

2. It would be easier for Jones to bring suit in Colorado State court, but he wonders if the court can get the Windell Hotel and Travel companies to come to Colorado. Can the court bring the defendants to Colorado?

a) No, because the subject of the suit took place in a foreign country.

b) No, because the corporations do not have sufficient contact with the state to allow the court to use the long arm statute.

c) Yes, because the Plaintiff is a citizen of Colorado and it is his suit.

d) Yes, because the corporations have sufficient minimum contact with the state to justify the court’s use of the long arm statute.

3. Windell Travel and Windell Hotel’s both claim that they did not have a contract with Jennifer because she was a minor at the time of her dealings with Jones and that they are therefore not responsible to Jones. The contract was void. Jones can refute this argument because:

a) the fact that Jennifer was only days away from becoming an adult negates her minor status.

b) being a minor doesn’t affect her agency relationship with Windell.

c) the privilege to renounce the contract lies with the minor.

d) both b and c

4. Jones wants to sue Jennifer’s mother personally because she has all the family money. Jennifer Hooley, the mother, says that she isn’t responsible because she doesn’t own the company anymore. Will Jennifer Hooley, the mother, win?

a) Yes, because Jennifer Travels is a sole proprietorship and if she doesn’t own it anymore. She isn’t personally responsible for its liabilities.

b) No, because she owned the business at the time of the contract with Jones.

c) No, because Jones knew her as the owner.

d) both b and c

5. Jones wants to get his money back for the trip including the additional charges for those items not included in his “all inclusive” vacation. Under what contract theory or theories will Jones prevail in his suit?

a) The advertisement and website created an express warranty that the trip would include all expenses, three meals a day, and a room with a queen bed.

b) Jones entered into the contract based on a mistake of material fact which the hotel knew to be untrue.

c) Under the UCC written disclaimers must be conspicuously displayed to be valid.

d) All of the above

SHORT ANSWER: 5 points

Instructions: In a minimum of six to eight sentences, please answer the following question:

Which contract law will the court most likely apply in making a decision in Jones’ attempt to recoup his trip costs; common law or the UCC and how will it affect the remedies he can obtain? Explain your response.

ESSAY: 5 points

Instructions: Frame a complete definition of the legal question asked and explain how the law applies to the facts. Suggested length is a minimum of two to three paragraphs.

Jones brings suit against all the defendants, Windell Travel, Windell Hotel and Jennifer Travels for Negligence. Explain the theory, the elements and how it would apply to Jones’ case. Will Jones be successful against all the defendants? Explain. Be sure to include any and all defenses if any that may lie in your discussion.

Concepts under discussion in this fact pattern are:

Jurisdiction, minimum contacts and long arm statutes

Minors and Contracts exceptions

Agency relationships and minors

Sole Proprietorships liabilities of the owner and implied behavior

Tort Theories in general

Negligence Theory

Negligence Defenses

Tort Theory of Fraudulent Misrepresentation

Contract: Mistakes

Case Two

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 hotdog 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. The 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 1^st 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 4^th. 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 number 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. The ordinance was written to go into effect on the 1^st 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 hotdogs that 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: 2 points 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 lawsuits are successful against HDD, will Jack have to pay too?

a. No, because he didn’t get to vote on the decision to participate in the festival.

b. No, because no one knew that he had become a partner.

c. Yes, only to the extent of his fifty thousand dollar contribution.

d. 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?

a. No, a partnership may be oral or written.

b. No, a partnership can be implied by the actions of the party toward others.

c. Yes, because no one on the outside can tell if they are partners or not.

d. Both a and b

3. If the lawsuits 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?

a. 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.

b. Yes, partners are both jointly and severally liable for torts against third parties.

c. Yes, they will each be equally liable for torts against third parties.

d. 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 hotdog boxes lying around the cart. Will this fact get them off the hook?

a. No, because as an agent of HDD the employee’s actions are deemed their actions.

b. No, because the act was committed within the scope of employment.

c. Yes, because the employee was acting outside the scope of employment by not adhering to the rules.

d. 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?

a. Yes, because they can show how busy they were at the Festival.

b. Yes, because they can show that they did not authorize Jack to make the contracts.

c. No, because partners are agents of each other and the partnership.

d. No, because contracts entered into on behalf of the partnership are binding on the partnership.

SHORT ANSWER: 5 points

Instructions: In a minimum of six to eight sentences, explain your answers to the following questions.

6. Joan and Don are also concerned about their contract with Salvo Foods. Can 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? Explain your response. Under the UCC, explain two of the best warranty theories that would help HDD to recover their losses

ESSAY: 5 points

Instructions: Frame a complete definition of the legal question asked and explain how the law applies to the facts. Suggested length is a minimum of two to three paragraphs

7. Joan and Don still have a very major concern left to ask you about. They cannot continue doing business without a repeal of the city ordinance that 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 they 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.

Concepts under discussion in this fact pattern are:

General Partnership Law

Agency - Tort Liability

UCC Warranty breach

Constitutional Law