You are the manager of Acme Fireworks, a fireworks retailer who sells fireworks,

Question

You are the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owners garage two years ago and now has 15 employees that you manage. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed you that the company has received inquiries from several large businesses wondering if the company could create several fireworks displays on a regular basis. The owner told the inquirers that the company could fill such display orders, and a price per display was agreed upon. It was discussed that most of the cost for a fireworks display is for skilled labor, insurance, and the actual service of setting off the fireworks. No other details were discussed. The owner is anticipating that new employees will need to be hired, but he is worried that if the large orders for fireworks displays do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity, but he does not know what entity to form or how to form it.

The owner has asked you to do the following:

Determine if the contracts with the businesses will be governed by common law or the Uniform Commercial Code (UCC), and explain why.

Analyze whether the owner formed a contract with the businesses, and apply the five essential elements of an enforceable contract.

Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display.

Discuss the different employment types and relationships relevant to agency law, and analyze the advantages and disadvantages of each type specific to Acme Fireworks.

Explain why Acme Fireworks should not operate as a sole proprietorship. Recommend a new business entity, and provide rationale to support your recommendation.

For each task, be sure to analyze the relevant law, apply the facts to the law, and make a conclusion.

Explanation / Answer

Introduction:

Any sale if classified as sale of goods for exchange is governed by the UCC. under the UCC unless expressly specified fireworks can be sold if the buyer has explicit permission to buy them and it is stated that fireworks will not be used for further resale as decided in STATE of Wisconsin, Plaintiff-Appellant, v. VICTORY FIREWORKS, INC., Defendant-Respondent.99-0243 to 99-0251.?Nos. Decided: September 30, 1999.

The Contracts with all fireworks firms are governed by the common law as all business which buy from the Acme fireworks will be performing under the common law of contracts and are bound by all forms of contract performances .When businesses to businesses deal they are found to be under strict conference with the contract law which is governed by common law statutes .

The elements of a valid and enforceable contract are

a. Offer

1. An offer must create a legal obligation.

2. The terms of an offer must be definite, clear and certain.

3. An offer may be made to a definite person or to the general public.

4. Mere enquiry is not an offer.

5. An offer is effective only when it is communicated to the offeree.

6. An offer should may contain any term or condition. The offeror may prescribe any mode of acceptance.

b. Consideration:

Presence of consideration is an essential of a valid contract. An agreement without consideration is said to be void ab initio .Consideration refers to something in return for a promise it is either some benefit conferred on one party or some detriment suffered by another party

Forms of consideration:

There are three kinds of consideration past, executed and executory consideration .When in return for the promise, the promise or any other person

a. has done or abstained from doing, the consideration is said to be past.

b. does or abstains from doing, the consideration is present or executed.

c. promises to do or abstains from doing the consideration is executor or future .

Whether the consideration is past, present or future it is very important that must have been given at the desire of the promisor.

c. Enforceability of a contract:

A contract can be enforced only when there is an offer, acceptance and consideration. Unless these three are present in a contract the contract is not valid and cannot be enforced. Since the purpose is illegal the contract cannot be enforced in a court of law.

Contract should be made in good intention. In this case the purpose of the contract was to burn down the barn hence the intention of the contract was not legal.

d. Should be in writing

e. the contract should be for a legal purpose only .

Since the purpose of entering into the contract is to buy fireworks from Acme the legal intent of the contract is to create a sale and a purchase.

Types of liability:

If spectators are injured during a fireworks display negligence of tort will be applied where it can be proved that the fireworks firm has not take due diligence to ensure that the display is free of risks .No matter how much care pyro technicians exercise they cannot eliminate the high risk inherent in setting off powerful explosives such as fireworks near crowds.

The liability arising cold be

Direct liability, negligence f tort

Compensatory liability

Indirect liability

Different employment types and relationships relevant to agency law,

The fireworks can have three types of employment law in action

a. permanent employee

b. contract employees

c. At will employees

Acme fireworks are bound by employment laws as all employees are governed by the laws of employment and agency relationship of the employer and employee. In case of contract employees

the firm needs to look at potential liability arising out of negligence.

Explain why Acme Fireworks should not operate as a sole proprietorship. Recommend a new business entity, and provide rationale to support your recommendation.

Acme fireworks should work as an LLC offers the liability protection benefits of the corporation without the corporation's burdensome formalities. It is this simplicity that has made the LLC an instantly popular business form with businesspersons operating smaller companies. Another attractive feature of LLCs that they are flexible . LLC management can elect to be taxed either as partnerships or as corporations. An LLC can be managed like a partnership (a member-managed LLC) or like a corporation (manager-managed LLC). LLCs can create a board of directors, and can have a president and officers just like a corporation. LLCs can choose to have periodic meetings of their membership, or they can choose to ignore such formalities altogether.

Conclusion:

Acme fireworks in the wake of opportunities is expanding into new horizons and needs to understand how best it can access the available opportunities and suit itself for expansion of business. Since the firm requires more employees it is pertinent to understand what kinds of employees it can hire so that it falls into some organized form of human resources activity. Every contract of Acme is bound by the contract act and falls under common law statutes.

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