Legal issues in business organizations

Part 1: Accountants’ Liability

The arguments for each party

The argument that Silver committed negligent misrepresentation, which is fronted by Chrysler Limited Company, can be justified on the premise of the exaggeration of the profitability done on the building that is owned by Garnett Food Service Inc. Overstatement of the accounting information is a mistake that is not allowed in the corporate world. In this case, therefore, the accountant breaches the duty of care owed to third parties. According to Twomey, Jennings and Greene (2016), the act of negligent misrepresentation of facts by any accountant contravenes the provisions of GAAP and GAAS regarding the high level of professionalism that is required of all accountants and auditors when reporting about company financial performance in its statements of finance. 

The defense that Silver gives in this case in relation to the privity of the contract may be justified on the basis that she had entered an agreement to work with Garnett Food Service Company only hence owed the duty of care exclusively to this company, but not the third parties. Evidence for this claim may be the signed contract that both Silver and Garnett Food Service Company made before she started to do the auditing job. Therefore, it is vital to note that the privity of contract makes Silver to be exempted from being ruled accountable to the third parties.

The known user rule and the foreseeable user principle make Silver and her accounting firm to be liable for the damages caused to Chrysler Company. Chrysler incurred damages as a result of the reliance on the audit report done by Silver. In business law, it is assumed that while doing the auditing work, Silver understood that Garnett Food Service Company would use the report given in convincing Chrysler Company to buy the building.

Part 2: Sureties and Guarantees

Bank’s choices if the enterprise faults the loan claim

The financial institution has the right to claim the outstanding loan that Chrysler Company has, from Chuck Wagon as surety of the credit. Twomey et al. (2016) observes that such a right would be premised on the suretyship relationship that exists between the bank and Wagon. Therefore, it can be held that Wagon is liable to make payment of a sum of $100,000 and the interest accrued on the loan to the bank when Chrysler defaults to pay the loan back.

In addition, the bank has the right to claim the security interest on the building that was purchased using the loan given to Chrysler. The right to possess the building is expressed in the loan contract signed by the bank and the restaurant. To ensure money given to Chrysler as loan is recovered, the bank can take over the building. 

Reason why the bank favors surety

The prominent reason for favoring the surety is the direct proceeds rights that are linked to suretyship relationship among the involved parties. This idea is exceptional to suretyship relationship. The guarantee relationship does not entail this right. It is the reason the bank prefers the surety so that it can reach the surety directly at the point the principal debtor defaults to repay the loan.

Part 3: Secured Transactions and Bankruptcies

Harrell’s right if company files bankruptcy

Taking possession of the two refrigerators at Chrysler is one of the fundamental rights of Harrell as a creditor in the event Chrysler Company files a bankruptcy issue. Creditors have to right to take possession of the hire purchase items for purposes of security on their unpaid money. Twomey et al. (2016) posit that the right of creditors to possess assets or commodities of the debtor is enshrined in article nine of the Uniform Commercial Code. Harrell Restaurant Supplies can use the respective article nine of this code to get the assets of Chrysler once it is declared bankrupt. However, it is very important to understand that there is a formal procedure to be followed when claiming the possession of the commodities. Strict compliance to the set procedure is what makes the process of possession to be legal. Harrell Restaurant Supplies has to write a formal letter notifying Chrysler about the intention to possess the items. 

Harrell has the right to have the court help it acquire possession of the two refrigerators (McDonnell, Coogan, Hogan and Vagts, 2015). The court must protect Harrell throughout the process of recovering the intended item. This is the only way the supplies company can recover the amount for which items were supplied to Chrysler. 

Harrell’s right if company sold the two refrigerators

Harrell has the right to recover the net installment amount of the sale of the two refrigerators, in the event they were sold before the declaration of bankruptcy. Harrell can rightly go ahead and repossess the refrigerators from the third party who bought them from Chrysler. According to Twomey et al. (2016), this repossession is provided for in business law on hire purchase. In this case, the court may hold that Chrysler sold property, which it did not legally own. It has to be understood that in hire purchase, the buyer does not get the right of ownership of the property, but only possesses it until the time the whole selling price is settled through the installments. Therefore, in hire purchase and prior to the full settlement of the selling price, the right of ownership over the property remains with the seller while the deposit amount paint only grants the buyer the right to possess the asset or commodity over the period in which installments are paid. Therefore, the buyer is not supposed to sell the asset before the money is paid for the property in full. Chrysler sold refrigerators at a time when they still belonged to Harrell Restaurant Supplies Company.

Another right for Harrell Restaurant Supplies is compensation for the damages caused through the recovery of the refrigerators from a third party. Harrell may incur costs in the claim over the refrigerators from the third parties. Costs may include payment of legal fees in the court because the company must seek its intervention in order to recover the assets. Moreover, there is the issue of time lost in the process of claiming the refrigerators back. There is also the damage of foregone opportunities for selling the refrigerators because Chrysler took them with the intention of buying them. Chrysler must pay for all these damages.

Moreover, Harrell can also acquire ownership of the private properties of Chrysler through auctioning, in order to recover the amount of the refrigerators. There are chances that the sold refrigerators may not be traced by Harrell or be found in a bad condition. In this case, Harrell has no option but to simply go for the private properties of Chrysler, which are equivalent to the worth of the two refrigerators. 

Failure by Harrell to file a financing statement

Failure to file financial statements may have major setbacks on the part of Harrell in its bid to recover the amount of the refrigerators. It can make Harrell to lose of perfection over the two refrigerators sold on hire purchase terms. This loss of perfection is enshrined in article 9 of the Uniform Commercial Code. It requires every seller who has security interest over the commodity or property sold on hire purchase must file a financing statement within the recommended time frame (Twomey et al., 2016).

It also has to be understood that failure to file the financing statement makes Harrell to lack credible evidence that can prove its legal ownership of the assets sold on hire purchase to Chrysler, before a court of law. With the absence of the financing statements, there is no effective communication to inform the public regarding the security interest of Harrell over the two refrigerators. It is difficult for Harrell to recover the whole sell price of the refrigerators, if there was file of the financing statement. 

Part 4: Employment Discrimination

Probable grounds Lopez might have for a discrimination lawsuit and contentions to counter each claim

The first possible ground on which Lopez may file a lawsuit against Chrysler Company is age discrimination. Lopez is over 40 years old hence it may have happened that she was denied the job because of her elderly nature. This is a form of discrimination that is prohibited by the law. Employers are not supposed to base on a person’s age when recruiting employees in a firm. Lopez only needs to prove this fact by showing that the candidate who was considered for the job got it because of the age discrimination factor, but not qualifications for the work. To this end, the company can make a counter-argument in its defense to the effect that the recruitment process was not based on age, but on traits such as education and experience of a candidate. Such an argument presented by Chrysler Company may absolve it of any liability relating to age discrimination. 

Another ground that Lopez may base her accusation of Chrysler on is the issue of sex discrimination within the process of hiring. Labor laws do not condone any form of discrimination within the process of hiring employees for organizations (Sexton et al., 2014). Lopez can argue that she was denied the job because of her gender. She can submit that considering the fact that she was already qualified for the job, more than even the candidate who was given the chance, sex discrimination must be the only thing that made her lose the chance to be employed at Chrysler Company. She must prove that the company has had some element of favoritism towards the opposite sex in recruiting employees to many of its positions. However, the company can counter this claim by proving that it has been considering applicants of both sex hence cannot be accused of gender discrimination. Chrysler may argue that since it has employees from both genders, it has sufficiently been complying with the requirements of Equal Employment Opportunity Commission in its process of recruitment. Chrysler may even present the ratio of female to male employees to demonstrate its innocence over the accusations of sex discrimination within its process of recruitment.

Change of answer if the restaurant only employs a total of 12 people

In the event Chrysler employs a total of only 12 workers then the lawsuit made by Lopez would be premised on the competence requirements of each shift manager in the organization. The quality of the candidate as well as negligent hiring would inform the lawsuits by Lopez. 

The restaurant would, in this case, argue that Lopez was readily disqualified. The first disqualification for Lopez would be lack of experience as a shift manager. Lopez only had the experience of working as a cook and waitress for a period of 20 years. Additionally, based on the duty of quality services that the restaurant owes its customers, it would not have engaged in the risk of hiring an unqualified person into such a sensitive position. This would have amounted to an act of negligent recruiting. Hiring somebody who did not have the right experience as a shift manager would have been tantamount to putting the lives of the customers of the company into a huge risk.

Part 5: Insurance and Agency

Liability of each party

Mitch is liable to restore the car of Nick Smith to its original good condition before it crashed, in this case of a rear-ended accident. The cost of restoring Nick Smith’s car to its original good condition squarely lies on Mitch because the insurance cover is only limited to taking care of the insured and his vehicle. Considering the kind of insurance cover, which Mitch has undertaken, he has the obligation of bearing the full cost of repairing Nick’s car as well as paying all the medical costs incurred by Nick as a result of this accident.

Nick Smith, on the other hand, has no liability in this accident. The nature of the road accident shows that Nick was not involved in any wrong doing. The rear-ended took place because of the sole mistakes of Mitch. 

The Nationwide Insurance Company is liable for the payment of the damages on the vehicle of Mitch. The insurance cove contract that Mitch has with the Nationwide Insurance Company provides that the damages covered include bodily injuries as well as property destruction for the insured. Therefore, the car damage is covered for Mitch and has to be compensated. 

For Chrysler Company, it is liable for the actions of Mitch as long as they were committed while in the line of duty. Chrysler is the principal of Mitch and they have an agency contract. Therefore, the restaurant can be held liable for ensuring compensation of the third party, in this case Smith, for the injuries suffered as a result of the accident caused by Mitch, its agent.

Part 6: Agency

The arguments for each party

The Cross Security Service Organization is justified in its argument that West attacked a female patron because there have been many cases of theft witnessed in the area. Considering the form of the incident, it can be argued that West tried to steal from the female patron while she was unlocking the car. Part of the duties of the Cross Security Service is maintenance of security in this area. Furthermore, the fact that the female client had difficulties in unlocking her car justifies Chrysler’s accusation that West attacked the female patron. It is the imminent attack by West that made the female patron to become confused and unable to even unlock her car. This, Chrysler can argue that this attack on the female patron made it to shoot and kill him as a matter of defense. West’s mother can argue against the incident of shooting and killing by Chrysler as well as the negligence and reluctance of Cross Security Service. 

Restaurant’s best defense

The best defense for the restaurant would be the duty of care, which it owes its customers. The clients of Chrysler must be assured of their security. Therefore, with this threat by West on the security of the customers of the restaurant, the company felt prudent to shoot and kill as the only way to maintain the safety of the many customers, apart from the female patron. 

Part 7: Consumer Protection

Relevance of state and federal consumer protection decrees

Dickens can seek redress for the unfair business practice based on the corporate ethical codes within the United States. Pirtle can also present the case of consumer fraud based on the corporate ethical codes within the United States. There are consumer protection laws that safeguard customers, particularly in the hotel industry. 

Winning party

Chrysler is likely to win both cases because it is not required in law for all restaurants to offer menus for their clients. The accusation by Pirtle is not in tandem with the provisions of the consumer protection law because Chrysler only delays the bill, but does not increase the net worth of the client’s expenses.

Part 8: Recommendations

There is need for the restaurant to avoid lawsuits because they tarnish its reputation among clients. Chrysler should publish food and drinks menus for it clients. It should develop bill invoices for customers. The company should also revise its contractual terms with agents so that it clearly states the restaurant will not be liable for the actions done on the third parties. 

References

McDonnell, J. B., Coogan, P. F., Hogan, W. E., and Vagts, D. F. (2015). Handling Distress Loans: The Law of Lender Liability. Secured Transactions Under the UCC , 1 .

Twomey, D., Jennings, M., and Greene, S. (2016). Anderson’s Business Law and the Legal Environment, Comprehensive Volume . Cengage Learning.

Sharkey, C. M. (2013). Agency Coordination in Consumer Protection.

Sexton, J., Walawender, M., Waldman, J., and White, D. W. (2014). Employment discrimination law .