You Are The Manager Of Acme Fireworks, A Fireworks Re 053367 ✓ Solved

You are the manager of Acme Fireworks, a fireworks retailer

You are the manager of Acme Fireworks, a fireworks retailer that 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. The company began 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 anticipates that new employees will need to be hired but 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 does not know what entity to form or how to form it. The owner has asked you to do the following:

  1. Determine if the contracts with the businesses will be governed by common law or the Uniform Commercial Code (UCC), and explain why.
  2. Analyze whether the owner formed a contract with the businesses, and apply the five essential elements of an enforceable contract.
  3. Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display.
  4. Discuss the different employment types and relationships relevant to agency law, and analyze the advantages and disadvantages of each type specific to Acme Fireworks.
  5. 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.

Paper For Above Instructions

Acme Fireworks: Moving Beyond Sole Proprietorship

Acme Fireworks, founded in a garage just two years ago, is at a critical juncture in its growth. As the firework retailer experiences increasing inquiries from large businesses seeking regular fireworks displays, it faces both opportunities and challenges. This paper will examine the legal framework surrounding Acme Fireworks operations, especially in terms of contracts, liabilities, agency law, and the organizational structure that best supports its growth ambitions. Understanding these topics is essential to making informed decisions that will ensure the company's sustainability and success.

Common Law vs. UCC

Contracts with large businesses for fireworks displays are likely governed by the Uniform Commercial Code (UCC) rather than common law. The UCC is designed to regulate commercial transactions, particularly the sale of goods, and applies to any contracts involving the sale of tangible goods (UCC § 2-102). Since fireworks are classified as goods, the UCC's provisions will enforce terms related to the sale and purchase of these items. Common law, on the other hand, predominately governs services and non-goods-related contracts (Murray, 2018). In the case of Acme Fireworks, the primary focus is the sale of fireworks displays, including the goods and services associated with these contracts.

Formation of a Contract

To determine if Acme Fireworks has formed valid contracts with its business clients, we should evaluate the five essential elements of a contract: offer, acceptance, consideration, legality, and capacity (Ricks, 2013).

  • Offer: The owner expressed willingness to provide fireworks displays, thus making an offer.
  • Acceptance: Agreements were reached on the terms of the fireworks display, indicating acceptance by the clients.
  • Consideration: The price agreed upon represents consideration exchanged between Acme Fireworks and the businesses.
  • Legality: Firework displays are lawful under state regulations, satisfying the legality requirement.
  • Capacity: Both parties—the owner of Acme Fireworks and the business clients—possess the legal capacity to contract.

Given these elements, a valid and enforceable contract has been established with the businesses for fireworks displays.

Potential Personal Liability

Acme Fireworks must be cognizant of potential liabilities arising from injuries sustained during its displays. If a spectator is injured by a stray firework, Acme Fireworks could face negligence claims. Under tort law, businesses are liable for injuries caused by their operations (Epstein, 2011). Fireworks, considered an ultrahazardous activity, carry inherent risks that necessitate extraordinary safety precautions (Rogers, 2012). Failure to adhere to safety standards may result in strict liability claims where proving negligence is not required. This underscores the importance of thorough risk management and insurance coverage to protect Acme Fireworks from liability claims.

Agency Law and Employment Types

Acme Fireworks' workforce involves various employment types, including employees, independent contractors, and agents. Each type has distinct legal implications under agency law: employees have an employer-employee relationship that entails certain obligations, including authority to act on behalf of the employer; independent contractors operate their businesses and are usually not subject to the employer’s direction (Neild, 2013). The advantages of employing staff include reliable performance and enhanced control, while disadvantages may include higher liability and administrative burdens. Conversely, independent contractors provide flexibility and cost savings, yet they may lack commitment to company objectives.

Transitioning from Sole Proprietorship

Operating as a sole proprietorship poses risks, particularly as Acme Fireworks scales. In a sole proprietorship, the owner assumes unlimited personal liability for the company’s debts (Rogers, 2012). This means that if Acme Fireworks incurs significant liabilities, personal assets of the owner could be at risk. Transitioning to a Limited Liability Company (LLC) would mitigate this risk, providing limited liability protection while enabling flexibility in management and taxation. An LLC would allow Acme Fireworks to operate with shared ownership, which may facilitate growth as it expands.

Conclusion

In conclusion, Acme Fireworks stands on the threshold of substantial growth opportunities. To successfully navigate the complex landscape of business law and liability, it is imperative to understand the contractual obligations under the UCC, manage potential liabilities from fireworks injuries, and consider the various employment relationships. Most crucially, transitioning from a sole proprietorship to an LLC will provide the legal protections needed to sustain business growth. By proactively addressing these considerations, Acme Fireworks can position itself for a successful future.

References

  • Epstein, A. (2011). Teaching torts with sports. Journal of Legal Studies Education, 28(1), 117-136. doi:10.1111/j.1944-1720.2010.01086.x
  • Murray, A. (2018). The scope of the UCC: Key principles for electronic commerce. Business Law Journal, 34(2), 201-218.
  • Neild, D. (2013). Vicarious liability and the employment rationale. Victoria University of Wellington Law Review, (3-4), 707-726.
  • Ricks, V. (2013). Assent is not an element of contract formation. Kansas Law Review, 61(3), 591-619.
  • Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint Education, Inc.

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