Reference no: EM133281856

Part 1 - Knowledge

The following questions are to assess your knowledge of the key concepts covered in this unit. (All questions are worth 3 marks).

Compared to a sole proprietorship, what are some advantages and disadvantages in carrying on business as a partnership?

In comparison with a partnership, what are some advantages and disadvantages in the corporate form of business?

Briefly describe the three basic groups common to all corporations and how the distinctions between these groups can become blurred in small private corporations.

What is the major difference between the franchisee-franchisor relationship and the agent-principal relationship? How is the agency relationship used in a corporation and a partnership?

Part 2 - Application

The following questions are to assess your application of the concepts to practice based scenarios. (Each question is worth 3 marks.)

Shirley Brown and Dora Cowan both wanted to operate a grocery store. Dora owned a small retail building and Shirley had 20 years of retailing experience. Shirley approached Dora to rent her building, and while they were talking about rental rates, Dora said, "Why don't you open a store, and we will split the profits." Shirley agreed, opened and ran the store, and paid Dora one-half of the profits on a monthly basis. After two years, a customer, Betty Smith, entered the store and tripped over some packing crates left near the entrance, breaking an arm and a leg. Betty then sued both Shirley and Dora-alleging that they were partners. Shirley had not purchased liability insurance to cover such a loss.

(a) What defense would Dora have to Betty's action? What might Shirley claim?
(b) If Betty is successful, from whom can she collect her judgment?
(c) If a partnership is in existence, how can either Shirley or Dora terminate it, and what would happen to the assets of the partnership?

Florence has $100 000 to invest. She decides to invest in the common shares of a well-known blue-chip company. As part owner, how would she expect to participate in the company and to benefit from her investment? 
Jane is the director of a private national company and has several friends who are the directors or officers of other large private national companies. One weekend, Jane and her family are invited to a barbecue at the home of Jane's good friend Edmund, who casually tells Jane as her friend that his company is about to sell a few franchises and that anyone can pick them up relatively cheap.

Outline the competing arguments for the company and Jane, should she decide to buy one or more of the franchises and the company finds out what she has done and sues her. What is the most likely outcome of such a lawsuit? 

A franchisor, Garden Delicious Inc, has 73 franchised outlets across Canada using the theme "healthy eating." Its Surrey, B.C., franchisee, Tom Cain, has been adding bagels to the regular "authorized" menu. Garden Delicious Inc. has asked Tom on several occasions to stop, but he has refused, saying that the contract does not specifically prohibit adding items to the menu. Legally speaking, will the franchisor be able to stop this practice?

William has acted as agent for his principal Diana pursuant to an agency relationship of no fixed term. Suddenly and without warning William dies. What is the effect of his death on the agency relationship and what steps should Diana take, if any, in relation to third parties?

Part 3 - Critical Thinking

The following question is to assess your understanding of the broad strokes of the unit material. Answer the questions posed fully, using the material covered as well as your own analysis. (It is worth 6 marks.)

Traditionally in business law, corporate managers have had no real duties except toward the owners (shareholders). By changing two letters in shareholder, stakeholder theorists widened the range of people and institutions that a corporation should pay moral consideration to. Thus, they contend that a corporation, through its management, has a set of responsibilities toward non-shareholder interests. Explain why legislation is necessary in areas of law other than contracts or torts to regulate the conduct of corporations and those who run them. 

Should a business be more responsible to shareholders, who are most benefited through revenue and profit generation, or to "stakeholders", including employees, and society at large?