Introduction
It is in the best interest of Acme Fireworks to come up with a comprehensive business plan that will leverage its operations and create an enabling environment for business operation. As such, this will assist the company in expanding contracts with possible businesses that would like to buy the fireworks. The areas of business that the management needs to assess include the possibility of changing from a sole proprietorship, contracts, liabilities, and increasing the employees as the firm seeks to move into new businesses. It is, however, common knowledge that the recruiting new employees and the expansion of the company's size could set the center-stage for additional risks. Therefore, it is only imperative for the company to gain the much-needed protection from personal lawsuits. Acme Fireworks, in a bid to grow as a business, will have to take several steps. They include using the Uniform Commercial Code (UCC) to govern contracts, considering aspects of contract enforcement, taking care of personal liability loopholes, employee relationships, and forming a limited liability company (LLC).
Governing Of the Contracts
First, it is essential to differentiate between common law and the Uniform Commercial Code (UCC). Traditionally, common law deals with business aspects such as real estate, insurance, employment contracts, and assets. The common law is primarily concerned with the making of rules using court decisions. On the other hand, the UCC is premised on three fundamental aspects. First, it seeks to modernize, clarify, and simplify laws that govern commercial transactions. Secondly, it uses a wide array of strategies to promote the continued expansion of business practices through usage, customs, and the agreement established between parties (McKendrick, 2014). Thirdly, the UCC is determined to ensure that uniform laws are developed across various jurisdictions. As the manager of the company, I believe that the most plausible way to manage contracts is through the UCC. The UCC covers several areas of business, including the sale of goods, security interests, and banking. As previously shown, the UCC has managed to harmonize business laws in all the 50 states in the US. Therefore, Acme fireworks will significantly benefit because it will have the much-required impetus to conduct business with partners from various jurisdictions. Interstate commerce remains one of the most fundamental business practices in the US (McKendrick, 2014). However, over the recent past, the transactions would occasionally crumble due to the problem of having to deal with different legal requirements.
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The UCC would also benefit Acme Fireworks because it guarantees a sense of market stability. One of the most critical considerations of the provision is that it requires contracts of commodities worth over $500 to be in writing. As such, this promotes a sense of commercial stability (McKendrick, 2014). Due to the fact that the agreements are in writing, the possibility of any disputes is markedly reduced. The company should also consider UCC based on the fact that it provides a platform for international trade. The standardization of the laws has enhanced efficiency and effectiveness in the process of exportation and importation, thereby bolstering global trade. Relying on the common law to govern the contracts would be a bad move for the company. The courts can perpetuate bad rulings, which affect the health of a business. Once a court has made such a decision, it will remain law unless a higher court overrules it. It is, however, essential to note that it is not the habit of the court to overrule their own decisions. Therefore, there is a possibility that bad decisions will remain laws for an extended period. Therefore, the best way for Acme Fireworks is to rely on the UCC which create an enabling environment for trade and removes unnecessary obstacles to trade both at the local and international scenes.
Aspects of an Enforceable Contract
As regards to the elements of the enforceable contract, the company must remain mindful of the five aspects, including offer, acceptance, consideration, legality, and capacity. The offer is arguably one of the most significant elements of a contract. It demonstrates a clear and unambiguous promise or commitment to enter into a contract. The offer must contain reasonable terms and must be initiated by the promisor to the promisee. Several large businesses are on record requesting huge orders of fireworks from the company. Acme Fireworks, on the other hand, has placed itself in a pole position to ensure that all the orders are accomplished. After the offer, the aspect of the contract is acceptance. Rogers (2012) says, "It must be clear from the offeree's words or actions that he/she intends to accept the offeror's offer under their terms." When the management of Acme Fireworks says that it can complete the large orders, the offer has been accepted. Rogers (2012) defines consideration as essentially the price of the contract. It, therefore, includes whatever that is being exchanged. In a bid to purchase the fireworks from the company, a price has to be agreed upon between the Acme and the large companies.
Another essential tenet in this regard is the legality. It assesses the extent to which a contract meets the laid down legal tenets. It should also abide by laws and all the applicable statutes. Most fundamentally, it should not contain any illegal expectations. It is almost conventional that parties engaging in a commercial transaction must have an unwavering intention to establish a legally binding contract (Singh, 2010). Therefore, if the large companies ordering for fireworks at the company reneged on the contract, Acme will be in a pole position to seek legal redress by suing them in court. The last aspect of the creation of an enforceable contract is known as the capacity. Roger (2012) discusses two fundamental elements that might arise when assessing contractual capacity. The first one is age, and the second one is the mental competency. For Acme Fireworks, this means that any person under the age of 18 or having a mental disorder is not considered eligible to enter into a contract with the company. Any contracts that the company establishes with a person lacking the required legal capacity will be regarded as voidable. Acme must demonstrate its fidelity to the five essential elements of contract creation when dealing with its business partners. In case one of the tenets is not fulfilled to the latter, the implication is that the contract is not legally binding (Singh, 2010). The top priority of Acme is to remain free from any possible lawsuits.
Personal Liability to Injuries
Companies can suffer potential personal liabilities when the products they sell to their customers end up causing injuries. As such, this could lead to lawsuits in the form of torts laws which can have far-reaching consequences on the reputation of the company. A similar thing could happen to Acme Fireworks suppose a spectator is injured during a firework displayed courtesy of the products sold by the company. Such a manufacturing flaw means that the company would be held liable, meaning that it could be sued for negligence. According to Rogers (2012), the law is clear when it states that every person has the duty to act reasonably with a sense of care to avoid causing undue harm on others. Acme Fireworks will need to create fireworks that are safe for public use. It is also the responsibility of the company to ensure that all the customers using the products understand any adversities associated with the use of the fireworks. The company should also consider assuming the status of a limited liability company. As such, this would allow the management to operate the company with an increased sense of liability protection.
Acme Fireworks must place an increased focus on following every possible precaution. All products should have labels demonstrating all the applicable warnings and regulations. As such, it would be difficult for Acme to receive any liability cases in its ranks. In the event that spectators are injured with the fireworks at a show, Acme would be held responsible for negligence. The victims will, therefore, have the much-needed impetus to recover any damages from the manufacturer. Other than the manufacturer, other entities that could possibly be held accountable include the local retail seller and the importers of the fireworks. Medina, (2012) narrates a situation involving a $4.75 million liability slapped on a Virginia-based fireworks company known as Schaefer Pyrotechnics. The plaintiff, Kathryn Hollis, was injured with the fireworks while celebrating Independence Day. Some of the injuries she sustained included a fractured arm, burn, perforated eardrums, and brain damage, among others.
Acme should, therefore, place more emphasis on reducing any form of vulnerability by creating platforms for security. The company would consider having a reliable insurance cover. Most importantly, it will need to inform the large business of its intention to keep away from any possible lawsuits. The value of the insurance as far as preventing personal liability is concerned cannot be underestimated. The insurance would oversee the storage, firing, and transportation of the fireworks, especially in larger shows. Obtaining the insurance would be a smart business move for Acme as this would prevent the potential of lawsuits that could drive the company into bankruptcy (Wolford, 2012). The company would also consider paying more attention to the Consumer Product Safety Commission (CPSC), which provides essential safety regulations as regards the operation and safety while using the fireworks devices. It is illegal for any business to sell any fireworks products that go against the provisions of CPSC (Howells, 2018).
Employment Types and Relationships
The two fundamental relationship types that I would consider in this case include the principal-agent and employer-employee relationships. I would recommend that the company hires new employees in the capacity of independent contractors. The relationship could be set up in the form of an agency/principle. According to Rogers (2012), the agency is regarded as a fiduciary relationship based on values such as trust, honesty, and faith. The agent, therefore, performs their duty to the principal diligently with an increased sense of efficiency. Other attributes that the agent owes their principle include obedience, loyalty, notification, performance, and accountability, among others. In this dispensation, Acme would act as the principal while the contractors would fill the position of the agent. Also, this is important for Acne, especially if there is an accident involving one of the customers by making the company less liable. Acme would also have the option of not using the independent contractors in case the business is experiencing slowdowns. The company will also regulate its expenditure if it decides to hiring independent contractors rather than employing people (Cohen & Eimicke, 2013). Acme would not need to pay worker compensation, social security, and disability insurance, among other aspects of compensation.
Despite the benefits that come with hiring independent contractors, several disadvantages must also be taken into consideration. Acme will potentially have less control over its hires. The independent contractor has a direct impact on the outcome of the work, including the processes and tools involved. However, not many businesses, including Acme, would be willing to give up a sense of autonomy, especially with the tough legal and competitive environment in business today (Cohen & Eimicke, 2013). The company will mostly need to hire an independent contractor on a short-term basis. As such, this could potentially lead to high rates of turnover and a reduced sense of loyalty on their part. The constant rotation of employees would potentially have a disruptive effect, thereby adversely impacting the business. The second business relationship that I would consider is the employer-employee relationship. The advantages of this relationship include the company's ability to assert control, loyalty, and commitment on the part of the employees. However, on the negative end, the business will have a bloated budget given that they will have to remunerate the employees, including possible benefits that come with the work.
Why Acme Should Not Operate As a Sole Proprietorship
For Acme, the best thing to do would be to move from a sole proprietorship to a limited liability company (LLC). Such a dispensation will provide the business with an opportunity for growth in terms of size and production. An LLC is an attempt to unify the best features of a corporation and the best features of a partnership. First, the formation of an LLC is easy and does not require many steps. Taxation does not affect the business but rather the members on their respective earnings (Mancuso, 2015). As an LLC, the business will be shielded from any possible personal liabilities that could affect the stability and sustainability of the business. In case of any eventuality, the owner's personal assets will be protected from the lawsuit. An LLC would also be important in the wake of the growth that the business continues to experience. As a result, the business would also consider leasing or renting a spacious warehouse to handle the growth positively. Roger (2012) discusses several disadvantages associated with the sole proprietorship business. First, it has few options as far as raising the capital is concerned. It has no limits on liability for any business debts. Therefore, an LLC would be essential in an attempt to avoid the owner from settling the business debts.
As the company moves from a sole proprietorship to an LLC, it should have liability insurance. The essence of the insurance is to cover any lawsuits or claims brought about by other entities that might have suffered damages due to the company's products. Operating under a sole proprietorship is not only risky for the business but also for the owner who might end up having their assets frozen in case of a lawsuit (Mancuso, 2015).
Conclusion
Acme Fireworks, in a bid to grow as a business, will have to take several steps. They include using the Uniform Commercial Code (UCC) to govern contracts, considering aspects of contract enforcement, taking care of personal liability loopholes, employee relationships, and forming a limited liability company (LLC). The UCC is best for business because it removes legal hurdles that hinder trade both at the local and the international level. The five elements of an enforceable contract should be considered to the latter to avoid unnecessary lawsuits. Personal liability loopholes emanating from injuries caused by the fireworks could set the center-stage for legal showdowns that could adversely affect the company. In this regard, steps such as moving to LLC and adherence to the underlying legal provisions will play a critical role. Several employee relationships, such as the principal-agent and employer-employee relationships, should be appraised based on their strengths and weaknesses. Lastly, Acme should move to an LLC to avoid personal liabilities resulting from the fireworks and most importantly, to accommodate future growth.
References
Cohen, S. A., & Eimicke, W. B. (2013). Independent contracting policy and management analysis. http://www.columbia.edu/~sc32/documents/IC_Study_Published.pdf
Howells, G. G. (2018). Consumer product safety. Routledge.
Mancuso, A. (2015). Form Your Own Limited Liability Company: Create An LLC in Any State. Nolo.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Medina, M. (2012) Claim Management “When fireworks GO from Ooh’s and Aah’s to “Oh My God” Retrieved from http://clmmag.theclm.org/home/article/When-Fireworks-Go-from-Ooh%E2%80%99s-and-Aah%E2%80%99s-to-Oh-My-God
Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint Education, Inc.
Singh, A. (2010). Business and Contract Law. London: Thorogood Publishing Ltd. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=nlebk&AN=398995&site=eds-live
Wolford, R. (2012). Risk business for owners: your personal liability for the debt. Grand Rapids Business Journal, 30(3), 8. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=f6h&AN=71618234&site=eds-live
