Assignment 2: Legal Problems Managing a Small Business Part IRead the scenario and the questions...

Question

Assignment 2: Legal Problems Managing a Small Business Part I
Read the scenario and the questions that follow. Identify the legal issue(s) and apply legal concepts and possible arguments for each question. Prepare a solution for each question using laws, cases, examples and/or other relevant materials. Identify potential ethical issues and propose a solution for each issue. Support your answers with information from the textbook and at least two outside scholarly sources. By Week 3, Day 6, prepare a 5 to 8 page paper that identifies the legal issues and potential solutions and answers all questions presented, supported by relevant legal authority. Properly cite all sources using APA format.
This assignment requires application of the concepts learned in Weeks 1 – 3 and is worth significantly more than previous assignments.
Scenario
After being laid off from the construction firm where he has worked for 20 years, Dad started his little handyman business. With a downturn in the economy, Dad found that people repaired things instead of replacing them, so his services were always in demand. Chad worked with his father (Dad) in the afternoons and on the days he didn’t have classes in construction management at the university, since his father needed some help with the growing business. Chad enjoyed the work and it paid well, so he suggested they form a partnership and call it Dad and Chad Expert Handyman Service.
Although Dad prefers cash, a new customer paid for some plumbing work with a check for $330, made payable to Dad and signed by the customer. Dad takes the check to the bank after he completes the services and finds that the bank had issued a stop payment on the check.
Chad orders 15 windows from a wholesale dealer. The dealer comes out to measure for the windows and they agree on white vinyl insulated low-E with half screens for all windows. Since the windows were special ordered, Chad paid for the entire shipment. The windows arrived two weeks later; however, one window was shattered, two windows were missing and two windows did not fit.
Dad looks for deals on materials. A plumbing supply company offered to sell Dad 15 hot water heaters, 15 toilets and 5 Jacuzzi tubs for $5500 cash. Since Dad receives a lot of bathroom remodeling jobs and hot water heaters always need replacing, he thought this was a great deal. Dad and the seller entered into an oral contract whereby Dad would pay the seller $5,500 cash on delivery. In the meantime, Dad lined up two bathroom remodeling jobs and both wanted Jacuzzi tubs. When time came for delivery of the goods, the seller said that they had already sold the hot water heaters to another handyman and they were not able to get the Jacuzzis.
Dad and Chad installed a new hot water heater manufactured by American Water Products for JoAnn, a single mother with two children. Extensive warnings were provided on the water heater itself and in the manual Dad provided to JoAnn at the time of installation. The warning on the water heater read "CAUTION: Hot water increases the risk of scald injury." The heater itself contained a picture of hot water coming from a faucet with the words "DANGER" printed above it. In addition, the water heater had a statement on it:
Warning! Water temperature over 110°F can cause severe burns instantly or death from scalds. Children, disabled, and elderly are at highest risk of being scalded. Feel water temperature before bathing or showering. Temperature limiting valves are available, see manual.
Dad set the temperature to 105°F. The next day, 3 year old Benji was being bathed by his 12-year brother, Lou. When his cell phone rang, Lou left Benji alone in the bathtub with the water running. Benji was scalded by the water from the tap. Benji’s mother, JoAnn, brought suit against Dad and American Water Products alleging defects in the design of the water heater and Dad’s failure to warn her about the heater’s dangers.
Assignment
Based on the different situations described in the scenario, create a 5 to 8-page Microsoft Word document that includes the answers to the following:

Identify the types of business organizations for operating the handyman business and explain the advantages and disadvantages of each one. Select a type of business for the father/son team and provide support for your choice.
What are Dad’s options related to the stop payment on the customer’s check?
What are Chad’s options related to the damaged, undelivered and incorrect-sized windows?
What rights does Dad have related to the oral contract for plumbing supplies? Is the seller in breach of contract? Discuss why or why not.
Can JoAnn prevail in a product liability lawsuit against Dad or American Water Products? Explain why or why not for each party.
Consider any ethical concerns Dad and Chad may face related to the topics covered.
Conclude your paper by providing suggestions for Dad and Chad to help prevent future occurrences of these types of legal and ethical problems.

Support your answers with appropriate research, reasoning, cases, laws, and other relevant examples.
Submit the paper in APA format and properly cite sources on a separate page using APA.
Submission Details
Name your document SU_BUS3055_W3_A2_LastName_FirstInitial.doc.
Submit your document to the W3: Assignment 2 Dropbox by Tuesday, September 17, 2013.

005_apu2bjo-ce1akpnh.docx

David · Accepted Answer

Business organization is a group of people who are organized for some charitable or 
profitable purpose. The various types of business organization for handyman business are 
Corporate, Sole proprietorship, Partnership, Limited liability company. (Bevans, N. R. (2006))
Corporates 
Corporates are considered as separate or distinct legal entities that mean they will be 
entirely and exclusively liable and responsible against the actions. Corporates will be responsible 
for the act done by directors on corporate’s behalf. But in cases where directors fraudulently did 
something wrong due to which liability shifts on corporate than in that case corporate veil will be 
lifted and directors will be responsible or liable personally. (Bevans, N. R. (2006))
Advantages and disadvantages of corporation are:  
Advantages of Corporates are Transfer of ownership is easy in corporate form of 
business. It will be done by sale of stock, Death of any of the shareholder will not affect the 
continuity of business, and Personal assets of shareholders will not be utilized if the company is 
not able to pay off its liabilities.  
Disadvantages of corporates are Dissolution of corporates is not an easy task because of 
the high level of legal implications involved in it, the income earned by corporates is taxed at 
corporate level and then at shareholders level in the form of dividend, High levels of legal 
formalities are involved in the formation of corporates. Cost to organize a corporation is higher. 
(Bevans, N. R. (2006))
Partnership 
Partnership is the form of business organization which is entered between two or more 
persons to share profits and costs in the ratio specified in the agreement, if not specified then the 
cost and profits will be shared equally. In partnership there is a group of persons who have 
diverse expertise and skills and are called as partners. Since each partner possesses different 
skills, partnership firm can be managed efficiently. This is a form of business organization in 
which it is easy to accumulate the funds because there is more than one person who contributes 
capital or fund. This form carries very less formalities and regulations and formation of this is an 
easy task. (Bevans, N. R. (2006))
Advantages and disadvantages of partnership are formation of partnership is an easy 
task; the losses and risk in the business in case of partnership are shared by the partners. Hence 
the individual portion of risk of each partner is less if we compare their portion of risk in sole 
proprietorship. Since the partners meet quite frequently they can arrive at decisions promptly. 
Thus business opportunities requiring quick decision will not be lost. Diverse skills and 
expertise, Easy Formation, Sharing of risk, Secrecy i.e. partnership firms are not supposed to 
publish the accounts of the clients. They are supposed to maintain secrecy, Benefits of unlimited 
liability, Large Resources, Flexibility of operation, Protection of minority interest, Close 
Supervision, Promptness in decision making. Major disadvantages are Cautious approach i.e. the 
approach of unrestricted liability makes the partners over alert, and restricts partners from taking 
risky ventures, Risk of Implied Authority i.e. one partner has to act as an agent of firm; his 
actions bind the other partners and firms, The other partners will be in difficulty if the action of 
one partner is dishonest, Unlimited Liability, Limited Capital, Instability, Lack of harmony, Non 
transferability of interest i.e. partners are not allowed to transfer the interest to some other 
person. (Bevans, N. R. (2006))
Sole Proprietorship 
This is one of the forms of business ownership which is run by one individual for his or 
her own benefit. There is no existence of proprietorship apart from owners. The liabilities 
associated with the business are the personal liabilities of the owner, and the business terminates 
upon the proprietor's death.

Assignment 2: Legal Problems Managing a Small Business Part I Read the scenario and the questions that follow. Identify the legal issue(s) and apply legal concepts and possible arguments for each...

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