Business Law: Methods Of Carrying On Business

1) Joe is shopping for a new TV at Big Screen City Ltd.  The company’s return policy applies to regularly priced products only.  The salesperson, new to the job, mistakenly tells Joe he may return any TV within seven days if he returns the box and packaging materials as well.  Joe relies on this representation when he chooses a very large plasma television on sale for 10% off the regular price. 

When Joe returns home, he learns his wife just lost her job.  He immediately returns to Big Screen City with the TV and the packaging materials.  The manager tells him the store policy does not allow for returns of the sale of merchandise.

(a)   In this example, who is the agent, who is the principal, and who is the third party? (3 marks)

(b)   Is this an example of the agency or apparent authority.  Explain your answer.  (2 marks)

2) Siblings Jack and Jill own a house-cleaning business, called “Jack and Jill”.  One day, Jack forgets to lock the door of a client’s house when he leaves.  The house is robbed, and the owners suffer a loss of approximately $20,000.00.  The homeowners decide to seek damages in Small Claims Court.

(a)   Who will the owners name as defendants in their lawsuit, and why? (2 marks)

(b)   How could Jack and Jill have organized their business to avoid personal liability for things like this loss? (1 mark)

3) Big Burping Burgers is a successful and well known fast food operation run by Rory Rib.  Rory started as a sole proprietor, and he still runs the business that way because it gives him total control and oversight of the business.  The store is always busy.  It is open long hours, has many employees, and a broad customer base.  People come from out of town for one of Rory’s burgers.  Rory is also innovative and has developed burgers made with products other than beef that appeal to customers across cultural lines.  Rory is thinking about expanding his business.

(a)   With respect to the form of business organization Rory is using, is there anything he should do before he considers expansion options? (1 mark)

(b)   For expansion, what are the pros and cons of franchising Big Burping Burgers? (4 marks)

(c)   What another form of business organization should he consider for expansion? (1 mark)

4) Well, it happened.  Big Burping Burger is in trouble.  At one of its new branches, an employee mixed a batch of burgers that contained bacteria.  The burgers were not cooked enough to kill off the organisms.  As a result, 40 people became gravely ill, and four of them died.  The municipal health unit shut the location down.  The business is going to be fined a large sum of money, and there are civil suits by victims whose combined claim is in the millions of dollars. 

What will the financial consequences be for Rory if the business were

(a)   A franchise (1 mark)

(b)   A sole proprietorship (1 mark)

(c)   A partnership (1 mark)

(d)   A limited company (1 mark)

 5) When is it mandatory to register the name of your business? (1 mark)

 6) What does “joint and several liabilities” mean? (1 mark)