Question

Tobias, Michael, and Gob are hanging out one night at their favorite margarita restaurant and decide that it would be fun if they could spend more time together. The three friends decide to open Go Buy Us Some Coffee. They each contribute some capital to start the business and divide responsibilities based on their strengths—Michael handles the finances, Gob deals with customers, and Tobias manages the employees.

Go Buy Us Coffee is an overnight success and the team quickly decides to expand. Michael mentions to his Uncle Oscar that the business is looking for a new restaurant site. Oscar has had some recent financial troubles and he offers to sell Michael a plot of land for $20,000. Michael quickly accepts because the land is worth more than $40,000. Rather than purchasing the land in the name of Go Buy Us Coffee, Michael buys the land personally, then sells the land to Go Buy Us for $30,000.

Go Buy Us then decides to expand again. Michael is supposed to close a deal for another plot of land (this time he is buying it in the name of Go Buy Us Coffee), but he has an emergency and cannot attend the meeting. Without telling Michael, his assistant Kitty goes to the real estate closing and signs the papers to purchase the land. Kitty has never purchased land before—her usual responsibilities are answering the phones and making photocopies.

Meanwhile, Tobias is busy hiring new baristas. He interviews Buster, who has recently lost a hand in an accident. Buster is very personable and has 10 years experience as a barista. Overall, he is a stellar candidate, but Tobias does not hire him because Go Buy Us would have to purchase a special modified espresso machine (a $15,000 cost) in order for Buster to be able to prepare drinks.

Questions:

1. Based on the above facts, what kind of business form is Go Buy Us Some Coffee? Briefly explain your answer.
2. In the event that Gob, Michael and Tobias have a disagreement about their business, what laws, statutes, or rules would be likely to govern and why?
3. Gob and Tobias are upset when they find out that Michael personally made $10,000 from the sale of the land that he purchased from his Uncle Oscar. Michael thinks he did nothing wrong and he comes to you for legal advice. What advice do you have for him about his possible legal rights and responsibilities with respect to the land deal?
4. Assume that Gob hires a local builder to help renovate the coffee shop. The renovations are going well, until one day the builder (who was still drunk from partying the night before) is driving to the restaurant when he runs over and seriously injures a pedestrian. Assess Go Buy Us Coffee’s liability, if any, for the injuries of the pedestrian. Briefly explain your answer.
5. After Michael finds out that Kitty signed the papers at the real estate closing, he decides he wants to cancel the land deal. Can he do so? Explain why or why not, citing the specific legal principles you used in arriving at your answer.
6. Michael decides to fire Kitty for executing the land deal without his knowledge or permission. Kitty is angry and wants to know what legal recourse she has against Michael for firing her. What do you tell her? Cite the specific legal principles, laws, or statutes you used in formulating your advice.
7. Buster is upset that he did not get the barista job at Go Buy Us Coffee. He comes to you for advice. Does Buster have any legal recourse in this situation? Why or why not? When answering the question, make sure to cite the specific laws, statutes, and/or legal principles relevant to the situation.

Answer 1

Ans1. Based on the above information and facts, "Go Buy Us Coffee" is a partnership firm (private). In this only 3 people are involved who have chipped in some capital and divided the key responsibilities among themselves.

Ans2. Following conditions would be applicable:

Legal Status: Not a Legal entity

Agency: All Partners are agent for each other and the firm

Distribution of profits: As per the rules finalized in the partnership deed

Extent of Liability: Liability of all the partners is unlimited

Property: The firm's property is the Joint Estate of all the members

Transfer of shares: A share can't be transferred to anyone without the consent of all the partners

Management: If no agreement is formed, all partners all entitled to participate in the control

Duration of existence: If no contracts are formed, dissolution of firm happens in case of death, retirement or insolvency of any partner.

Audit: Not Complusory

Ans3. As per rules, Michael should have bought the and in the name of the firm "Go Buy Us Coffee" itself. Now, the profit which he have earned for the land, should be equally distributed among the other 2 partners in order to settle the issue.

Ans4. Now it depends on the type hiring done for the local builder, if there is any such clause that in case of any harm caused by the builder is to be borne by the employer, then any case arises otherwise "Go Buy Us Coffee" is not at all liable to pay anything in this situation which is completely the fault of the local builder.

Ans5. Yes, Michael can cancel the deal, as clearly he has given no authority to Kitty to sign on his behalf.

Ans6. Kitty has committed a very serious mistake of signing the papers without Michael's consent, so him firing her is justified as these kind of work is not at all Kitty's work. So, only one thing can be done by Kitty now, go and be sorry for her doing and request Michael to take her back.

Ans7. Buster's disappointment is correct just to himself, although "Go Buy Us Coffee" have not done anything wrong with him. Hiring buster would cost them extra cost of a separate machine so this is completely their decision to the same or not. Buster don't have any legal rights in this case.