Final Paper Instructions: You Are The Manager Of Acme Firewo ✓ Solved

Final Paper instructions: You are the manager of Acme Firewo

Final Paper instructions: 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 owner’s 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. Develop an introduction with a thesis statement for the Final Paper. Create an outline of the major headings with a two- to three-sentence description of what you will discuss under each heading. Provide a references page for the sources used in the Final Paper.

Paper For Above Instructions

Introduction

Thesis: This paper analyzes the legal framework governing Acme Fireworks’ prospective display contracts, evaluates whether enforceable contracts exist, assesses tort liability exposure for spectator injuries, compares employment/agency relationships, and recommends conversion from a sole proprietorship to a limited liability company (LLC) to mitigate personal liability and support growth. The analysis draws on common law contract principles, the Uniform Commercial Code (UCC), tort doctrines concerning ultrahazardous activities, agency law, and business-entity law to produce practicable recommendations for Acme Fireworks’ owner and management (Restatement (Second) of Contracts, 1981; UCC §2-102).

Outline of Major Headings

  • Governing Law: UCC or Common Law? — Explain the goods vs. services distinction and how the predominant purpose test determines whether the UCC applies. Discuss how fireworks displays, being service-oriented with ancillary goods, are typically governed by common law contract rules (UCC §2-102; Restatement (Second) of Contracts, 1981).
  • Contract Formation Analysis — Apply the five elements (offer, acceptance, consideration, capacity, legality) to the facts and evaluate whether the price agreement constitutes an enforceable contract under common law standards and gap-filling doctrines (Restatement (Second) of Contracts, 1981).
  • Liability for Spectator Injury — Discuss negligence, strict liability for abnormally dangerous activities, and vicarious liability for employees; analyze how personal and business liability exposure differs by entity and operational choices (Restatement (Second) of Torts, 1977; Prosser & Keeton, 1984).
  • Employment Types and Agency Relationships — Compare employees, independent contractors, and agents; assess advantages and disadvantages of each for control, cost, and liability, with special attention to fireworks as an inherently dangerous activity that can limit the protective effect of using contractors (Restatement (Third) of Agency, 2006).
  • Entity Recommendation and Rationale — Explain why sole proprietorship is inappropriate given unlimited personal liability, and recommend formation of an LLC with supporting reasons: limited liability, tax flexibility, managerial options, and better access to insurance and capital (IRS; SBA).

Governing Law: UCC or Common Law?

The UCC governs transactions in goods while common law governs service contracts (UCC §2-102). Fireworks displays are primarily a service (planning, setup, firing) with incidental goods (pyrotechnic items). Under the predominant purpose test, courts evaluate whether the essence of the bargain is goods or services; where services predominate, common law applies (Restatement (Second) of Contracts, 1981). Thus, Acme’s display agreements will most likely be governed by common law contract principles rather than the UCC, though sales of fireworks stockpiles for resale would be covered by the UCC (UCC §2-102).

Contract Formation Analysis

Under common law, enforceable contracts require offer, acceptance, consideration, capacity, and legality (Restatement (Second) of Contracts, 1981). The owner’s statement that the company “could fill such display orders” and the agreement on a price per display arguably constitute an offer and acceptance as to essential terms (parties, price, subject). However, courts require sufficient definiteness—time, schedule, duration, scope, and termination may be missing. If the parties intended a series of discrete contracts (one per display) with price and scope fixed, each display order may form a separate enforceable contract when accepted. If, instead, the agreement was preliminary and left material terms open, it may be unenforceable absent further negotiation. Gap-filling doctrines (e.g., terms reasonably supplied by courts) can rescue incomplete agreements when parties intend to be bound (Restatement (Second) of Contracts, 1981).

Liability for Spectator Injury

Fireworks displays involve significant risk. Tort liability may arise from negligence (failure to exercise reasonable care) or strict liability for abnormally dangerous activities (Restatement (Second) of Torts §519, 1977). The Restatement identifies factors such as high risk of harm and inability to eliminate risk by reasonable care—fireworks displays fit those factors, supporting strict liability for resulting harm regardless of the operator’s care (Restatement (Second) of Torts, 1977; Prosser & Keeton, 1984). Additionally, if an employee causes injury in scope of employment, the company may be vicariously liable (respondeat superior). For a sole proprietor, personal assets are exposed; incorporation or LLC formation limits owners’ personal exposure but does not shield against direct negligence by the owner or where personal guarantees exist (Prosser & Keeton, 1984).

Employment Types and Agency Relationships

Acme can engage staff as employees (W-2), independent contractors (1099), or hire licensed agents/operators. Employees offer greater control and training consistency, but their torts committed within scope will typically create vicarious liability for Acme (Restatement (Third) of Agency, 2006). Independent contractors reduce payroll costs and tax burdens but generally do not create respondeat superior liability—except where the activity is inherently dangerous (fireworks) or nondelegable duties exist, in which case the company can still be liable (Restatement (Third) of Agency, 2006). Agency relationships require clear agreements, training, licensing, and insurance. For Acme, reliance solely on contractors is risky because courts often impose liability for ultrahazardous activities regardless of contractor status (Restatement (Second) of Torts, 1977).

Why Not a Sole Proprietorship and Recommended Entity

Sole proprietorships expose owners to unlimited personal liability for business torts and debts and impede capital raising and risk management (IRS; SBA). Given fireworks’ high risk profile and the possibility of multimillion-dollar claims, limited liability is critical. I recommend forming a limited liability company (LLC). An LLC provides pass-through taxation (avoids double taxation), flexible management structures, explicit limited liability protections for owners, and simpler compliance than a corporation (SBA; IRS). Formation steps include filing articles of organization with the state, adopting an operating agreement, obtaining an EIN, ensuring adequate insurance, and complying with ATF/CPSC/OSHA regulations for fireworks handling (ATF; CPSC).

Practical Recommendations

1) Confirm contracts are definite—use written contracts that specify scope, safety protocols, insurance requirements, payment schedules, cancellation clauses, and indemnities (Restatement (Second) of Contracts, 1981). 2) Form an LLC and require commercial liability insurance with high limits and additional insured endorsements for clients (SBA; IRS). 3) Prefer employees for critical safety roles with rigorous training and certification; use vetted independent contractors only for noncore tasks and with contractual indemnities, though recognizing limited protection for ultrahazardous activities. 4) Implement written safety protocols and compliance with federal/state fireworks regulations to reduce negligence exposure (ATF; CPSC).

Conclusion

Acme Fireworks’ display agreements are most likely governed by common law because the contracts are predominantly service agreements. Whether enforceable contracts exist depends on the parties’ intent and the definiteness of terms; drafting clear written contracts is essential. Fireworks displays expose the company to strict liability and negligence claims, so limiting personal exposure through an LLC, strong insurance, and safety-focused employment practices is imperative. Careful structuring of workforce relationships and formal entity conversion will position Acme to scale responsibly and reduce catastrophic financial exposure (Restatement (Second) of Torts, 1977; Restatement (Third) of Agency, 2006; SBA).

References

  • American Law Institute. (1977). Restatement (Second) of Torts. American Law Institute.
  • American Law Institute. (1981). Restatement (Second) of Contracts. American Law Institute.
  • American Law Institute. (2006). Restatement (Third) of Agency. American Law Institute.
  • Cornell Law School, Legal Information Institute. (n.d.). Uniform Commercial Code § 2-102. https://www.law.cornell.edu/ucc/2/
  • Prosser, W. L., & Keeton, D. B. (1984). Prosser and Keeton on Torts (5th ed.). West Publishing.
  • Miller, R. L., & Jentz, G. A. (2018). Business Law Today: The Essentials. Cengage Learning.
  • Internal Revenue Service. (n.d.). Sole proprietors. https://www.irs.gov/businesses/small-businesses-self-employed/sole-proprietorships
  • U.S. Small Business Administration. (n.d.). Choose your business structure. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
  • Bureau of Alcohol, Tobacco, Firearms and Explosives. (n.d.). Explosives & pyrotechnics compliance information. https://www.atf.gov/explosives
  • U.S. Consumer Product Safety Commission. (n.d.). Fireworks safety. https://www.cpsc.gov/Safety-Education/Safety-Guides/Fireworks

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