11 Jan Dan and Carla both

Week 7 discussion

DQ1 Rocking the Boat

Initial Text:Duchess Cruise Lines, Inc. dry-docked a ship, intending to have maintenance done. Melinda, the ship’s supply manager, decided to purchase some needed supplies from Marine Equipment Services, Inc., on the ship’s behalf while it was in dry-dock. She charged the supplies to her personal credit card. The supplies were delivered and used, but the cruise line refused to reimburse Melinda for the cost of the supplies because she hadn’t obtained the required approvals before making the purchase. Melinda takes the position that doing so would have delayed the purchase of the materials, because the person who normally grants approvals was on leave for several weeks. The cruise line takes the position that someone else would have handled the matter promptly if Melinda had simply followed company procedure. Melinda is threatening to sue to obtain reimbursement.

Meanwhile, Steve, a member of the ship’s maintenance crew, on shore leave for a day, came back to the ship late, after drinking to excess. Before retiring for the night, Steve turned several wheels on the dry-dock’s wall, which resulted in a flooding of the tanks on one side of the dry-dock. The ship listed, slid off the blocks holding it up, then crashed against the dry-dock wall, ruining much of the dry-dock. The dry-dock owner is suing Duchess Cruise Lines, Inc., for reimbursement of the damages to the dry-dock.

Paul was hired by Duchess Cruise Lines, Inc. as an independent project manager to coordinate the dry-dock maintenance project. He was not an employee of Duchess Cruise Lines, Inc. and was not authorized to make any purchases or enter into any contracts on the cruise line’s behalf. All of his proposals were to be submitted to a management team for approval. After Steve caused the ship to slide off the blocks and crash into the dry-dock wall, Paul met on the site with a crane company owner, Al, telling Al that he was Duchess’ project manager and requesting a bid from Al’s company to move the ship to a new dry-dock facility for repair. At the time, Paul was wearing a Duchess Cruise Lines, Inc. jacket and directing various employees on the dock. Al provided a bid, Paul accepted it, and Paul signed a services contract with Al’s company, signing his name followed by the words, “Project Manager, Duchess Cruise Lines, Inc.” Duchess Cruise Lines, Inc. did not approve the hiring of Al’s company and refuses to pay Al’s company on the contract. Paul claims he has no personal liability because he was acting on Duchess’ behalf in an emergency.

What agency law issues does this scenario raise?

How should the courts decide these disputes? Why?

How could all of this have been handled to prevent some of these issues?

DQ2 A Sweet Business Idea

Initial Text:Dan and Carla met as employees at a candy company and later married. Carla went on to study accounting and Dan earned a business degree. After working for various businesses and raising $10,000 to open their own business one day, Dan and Carla have settled on opening a business that makes custom centerpieces that look like floral arrangements but are made entirely of chocolates, marzipan, and other candy. They want to call their business “Edible Expressions,” and they have prepared a business plan. They are now faced with the decision of what form of business organization makes the most sense: a sole proprietorship, a partnership of some sort, or incorporating in some form.

Dan and Carla both plan to do design work in the business, while hiring confectionery employees to prepare and assemble the company’s products. Carla will keep the books, and Dan will do the hiring. Carla and Dan are considering whether it makes more sense for them to co-own the business, or if one should be the owner and the other an employee. They anticipate hiring just one other employee in the beginning, and grow as demand requires. Carla’s brother and sister-in-law also want to invest in the business, but do not want to be involved in its operations. Dan and Carla also want to give their daughter, Alissa, age 12, some ownership in the business at some point.

Dan and Carla want to establish their business with a minimum of paperwork and expense, but they also want to avoid high taxation of their business profits. They want to run the business jointly, without the need for a Board of Directors or other advisory group, though they don’t mind the idea of having an annual event to honor family members who have invested in their business.

Consider the types of business organizations in this week’s reading (sole proprietorship, general partnership, limited partnership, LLP, and corporation, LLC).

What are the pros and cons of each as they apply to Dan and Carla’s business goals?

If Dan and Carla were operating in your state, what form of business organization appears most desirable? Why?