Assume that Del Rey files a lawsuit against La Grande Enchilada, claiming that his franchise was wrongfully terminated. What is the main factor that a court would consider in determining whether the franchise was wrongfully terminated?

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Small Businesses and Franchises

Carlos Del Rey decided to open a Mexican fast-food restaurant and signed a franchise contract with a national chain
called La Grande Enchilada. The contract required the franchisee to strictly follow the franchisor’s operating manual
and stated that failure to do so would be grounds for terminating the franchise contract. The manual set forth detailed
operating procedures and safety standards, and provided that a La Grande Enchilada representative would inspect the
restaurant monthly to ensure compliance.
Nine months after Del Rey began operating his restaurant, a spark from the grill ignited an oily towel in the kitchen.
No one was injured, but by the time firefighters were able to put out the fire, the kitchen had sustained extensive dam-
age. The cook told the fire department that the towel was “about two feet from the grill” when it caught fire. This was
in compliance with the franchisor’s manual that required towels be placed at least one foot from the grills. Nevertheless,
the next day La Grande Enchilada notified Del Rey that his franchise would terminate in thirty days for failure to fol-
low the prescribed safety procedures. Using the information presented in the chapter, answer the following questions.

1. What type of franchise was Del Rey’s La Grande Enchilada restaurant?

2. If Del Rey operates the restaurant as a sole proprietorship, who bears the loss for the damaged kitchen? Explain.

3. Assume that Del Rey files a lawsuit against La Grande Enchilada, claiming that his franchise was wrongfully terminated. What is the main factor that a court would consider in determining whether the franchise was wrongfully
terminated?

4. Would a court be likely to rule that La Grande Enchilada had good cause to terminate Del Rey’s franchise in this
situation? Why or why not?
Debate This . . . A partnershi

What must Janet do before filing a petition for relief under Chapter 7? How much time does Janet have after filing the bankruptcy petition to submit the required schedules? What hap- pens if Janet does not meet the deadline?

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Creditor-Debtor Relations and Bankruptcy


Three months ago, Janet Hart’s husband of twenty years died of cancer. Although he had medical insurance, he left
Janet with outstanding medical bills of more than $50,000. Janet has two teenage daughters to support. She has worked
at the local library for the past ten years, earning $1,500 per month. Since her husband’s death, she has also received
$1,500 in Social Security benefits and $1,100 in life insurance proceeds every month, for a total monthly income of
$4,100. After making the mortgage payment of $1,500 and paying the amounts due on other debts, Janet has barely
enough left to buy groceries for her family. She decides to file for Chapter 7 bankruptcy, hoping for a fresh start. Using
the information presented in the chapter, answer the following questions.

1. What must Janet do before filing a petition for relief under Chapter 7?

2. How much time does Janet have after filing the bankruptcy petition to submit the required schedules? What hap–
pens if Janet does not meet the deadline?

3. Assume that Janet files a petition under Chapter 7. Further assume that the median family income in the geographic area in which Janet lives is $49,300. What steps would a court take to determine whether Janet’s petition
is presumed to be “substantial abuse” using the means test?

4. Suppose that the court determines that no presumption of substantial abuse applies in Janet’s case. Nevertheless, the
court finds that Janet does have the ability to pay at least a portion of the medical bills out of her disposable income.
What would the court likely order in that situation?

Would a court be likely to consider Holcomb a merchant under the UCC? Why or why not? Did the parties have a valid contract under the UCC? Were any terms left open in the contract? If so, which terms? How would a court deal with open terms?

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Sales and Lease Contracts


Guy Holcomb owns and operates Oasis Goodtime Emporium, an adult entertainment establishment. Holcomb
wanted to create an adult Internet system for Oasis that would offer customers adult-theme videos and “live” chat room
programs using performers at the club. On May 10, Holcomb signed a work order authorizing Thomas Consulting
Group (TCG) “to deliver a working prototype of a customer chat system, demonstrating the integration of live video
and chatting in a Web browser.” In exchange for creating the prototype, Holcomb agreed to pay TCG $64,697. On
May 20, Holcomb signed an additional work order in the amount of $12,943 for TCG to install a customized firewall
system. The work orders stated that Holcomb would make monthly installment payments to TCG, and both parties
expected the work would be finished by September.
Due to unforeseen problems largely attributable to system configuration and software incompatibility, the project
required more time than anticipated. By the end of the summer, the Web site was still not ready, and Holcomb had
fallen behind in his payments to TCG. TCG threatened to cease work and file a suit for breach of contract unless the
bill was paid. Rather than make further payments, Holcomb wanted to abandon the Web site project. Using the infor–
mation presented in the chapter, answer the following questions.

1. Would a court be likely to decide that the transaction between Holcomb and TCG was covered by the Uniform
Commercial Code (UCC)? Why or why not?Commercial Code (UCC)? Why or why not?

2. Would a court be likely to consider Holcomb a merchant under the UCC? Why or why not?

3. Did the parties have a valid contract under the UCC? Were any terms left open in the contract? If so, which terms?
How would a court deal with open terms?

4. Suppose that Holcomb and TCG meet in October in an attempt to resolve their problems. At that time, the parties
reach an oral agreement that TCG will continue to work without demanding full payment of the past due amounts
and Holcomb will pay TCG $5,000 per week. Assuming the contract falls under the UCC, is the oral agreement
enforceable? Why or why not?

Suppose that Sun Farms contacts every basil grower in the country and buys the last remaining chemical-free basil anywhere. Nevertheless, Sun Farms is able to ship only 1,475 pounds to Val’s. Would this fulfill Sun Farms’ obligations to Val’s? Why or why not?

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Contract Performance, Breach, and Remedies


Val’s Foods signs a contract to buy 1,500 pounds of basil from Sun Farms, a small organic herb grower, as long as an
independent organization inspects the crop and certifies that it contains no pesticide or herbicide residue. Val’s has a
contract with several restaurant chains to supply pesto and intends to use Sun Farms’ basil in the pesto to fulfill these
contracts. While Sun Farms is preparing to harvest the basil, an unexpected hailstorm destroys half the crop. Sun Farms
attempts to purchase additional basil from other farms, but it is late in the season, and the price is twice the normal
market price. Sun Farms is too small to absorb this cost and immediately notifies Val’s that it will not fulfill the con–
tract. Using the information presented in the chapter, answer the following questions.

1. Suppose that the basil does not pass the chemical-residue inspection. Which concept discussed in the chapter might
allow Val’s to refuse to perform the contract in this situation?

2. Under which legal theory or theories might Sun Farms claim that its obligation under the contract has been dis–
charged by operation of law? Discuss fully.

3. Suppose that Sun Farms contacts every basil grower in the country and buys the last remaining chemical-free basil
anywhere. Nevertheless, Sun Farms is able to ship only 1,475 pounds to Val’s. Would this fulfill Sun Farms’ obligations to Val’s? Why or why not?

4. Now suppose that Sun Farms sells its operations to Happy Valley Farms. As a part of the sale, all three parties agree
that Happy Valley will provide the basil as stated under the original contract. What is this type of agreement called?

Did Amstel’s bid meet the requirements of an offer? Explain. Was there an acceptance of the offer? Why or why not? How is an offer terminated? Assuming that Durbin did not inform Amstel that he was rejecting the offer, was the offer terminated at any time described here? Explain.

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Formation of Traditional and E-Contracts


Shane Durbin wanted to have a recording studio custom-built in his home. He sent invitations to a number of local
contractors to submit bids on the project. Rory Amstel submitted the lowest bid, which was $20,000 less than any
of the other bids Durbin received. Durbin called Amstel to ascertain the type and quality of the materials that were
included in the bid and to find out if he could substitute a superior brand of acoustic tiles for the same bid price. Amstel
said he would have to check into the price difference. The parties also discussed a possible start date for construction.
Two weeks later, Durbin changed his mind and decided not to go forward with his plan to build a recording studio.
Amstel filed a suit against Durbin for breach of contract. Using the information presented in the chapter, answer the
following questions.

1. Did Amstel’s bid meet the requirements of an offer? Explain.

2. Was there an acceptance of the offer? Why or why not?

3. How is an offer terminated? Assuming that Durbin did not inform Amstel that he was rejecting the offer, was the
offer terminated at any time described here? Explain.

Why might a corporation’s managers agree to pay a large fine rather than to be indicted and proceed to trial? How does a manager determine the optimal amount of legal research to undertake to prevent her or his company from violating the many thousands of federal regulations?

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The Criminalization of American Business


What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs have in common? All paid hefty fines for purportedly misleading investors about mortgage-backed securities. In fact, these companies paid the government a total of $50 billion in fines. The payments were made in lieu of criminal prosecutions.Today, several hundred thousand federal rules that apply to businesses carry some form of criminal penalty. That is in addition to more than four thousand federal laws, many of which carry criminal sanctions for their violation. From 2000 to the beginning of 2017, about 2,200 corporations either were convicted or pleaded guilty to violating federal statutes or rules.

Criminal Convictions
The first successful criminal conviction in a federal court against a company—the New York Central and Hudson River Railroad—was upheld by the Supreme Court in 1909 (the violation: cutting prices) Many other successful convictions followed.One landmark case developed the aggregation test, now called the Doctrine of Collective Knowledge.b This
test aggregates the omissions and acts of two or more persons in a corporation, thereby constructing an actusreus and areus and are us men srea out of the conduct and knowledge mens rea out of the conduct and knowledge mens rea
of several individuals.Not all government attempts at applying criminal law to corporations survive. In 2013, for example, Sentinel Offender Services, LLC, prevailed on appeal. There was no actual evidence to show that the company had acted with specific intent to commit theft by deception.c In 2014, FedEx Corporation was indicted for purportedly illegally shipping prescription drugs ordered through Web sites. FedEx has chosen to proceed to trial in the U.S. District Court for the Northern District of California in San Francisco.d Many companies, however, choose to reach settlement agreements with the government rather than fight criminal indictments.

Many Pay Substantial Fines in Lieu of Prosecution

More than three hundred corporations reached so-called non-prosecution agreements with the government from 2000 to the beginning of 2017. These agreements typically involve multimillion- or multibillion-dollar fines. This number does not include fines paid to the Environmental Protection Agency or to the Fish and Wildlife Service.According to law professors Margaret Lemos and Max Minzner, “Public enforcers often seek large monetary awards for self-interested reasons divorced from the public interest and deterrents. The incentives are strongest when enforcement agencies are permitted to retain all or some of the proceeds of enforcement.”

Business Questions

1. Why might a corporation’s managers agree to pay a large fine rather than to be indicted and proceed to trial?

2. How does a manager determine the optimal amount of legal research to undertake to prevent her or his company from violating the many thousands of federal regulations?

Would the name Hallowed receive protection as a trademark or as trade dress? Explain.Hallowed receive protection as a trademark or as trade dress? Explain.Hallowed. If Trent and Xavier had obtained a patent on Hallowed, would the release of Halo 2 have infringed on their patent? Why or why not?

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Intellectual Property Rights


Two computer science majors, Trent and Xavier, have an idea for a new video game, which they propose to call Hal–
lowed. They form a business and begin developing their idea. Several months later, Trent and Xavier run into a problem
with their design and consult a friend, Brad, who is an expert in designing computer source codes. After the software
is completed but before Hallowed is marketed, a video game called Halo 2 is released for both the Xbox and the Play–
station systems. Halo 2 uses source codes similar to those of Hallowed and imitates Hallowed’s overall look and feel,
although not all the features are alike. Using the information presented in the chapter, answer the following questions.

1. Would the name Hallowed receive protection as a trademark or as trade dress? Explain.Hallowed receive protection as a trademark or as trade dress? Explain.Hallowed

2. If Trent and Xavier had obtained a patent on Hallowed, would the release of Halo 2 have infringed on their patent?
Why or why not?

3. Based only on the facts described above, could Trent and Xavier sue the makers of Halo 2 for copyright infringement? Why or why not?

4. Suppose that Trent and Xavier discover that Brad took the idea of Hallowed and sold it to the company that produced Halo 2. Which type of intellectual property issue does this raise?

What properties do these two systems share? What properties are different? Which one would be faster? Which one would result in long- lasting changes?

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week 5 Discussion


-Examine Figure 3.14, illustrating the effects of sympathetic nervous system activation in your e-textbook.
 How would all of these things play into the fight or flight response?

-Chemical messengers are used in both the nervous system and the endocrine system. What properties do these
two systems share? What properties are different? Which one would be faster? Which one would result in long-
lasting changes?

-As you have read and the class discussed/covered Chapter 3. In a reflective summary, what were some highlights
or areas that resonated with you about Chapter 3? Make notation of 3 things/concepts you have discovered from this
chapter.

-Review some of your classmates responses upon submitting your own, and provide a reflection and feedback
based on your review of other classmates post, responding to 2 of your classmates.

Would a person who adheres to the principle of rights consider it ethical for Stilton not to disclose the potential risk of cancellation to investors? Why or why not? Under utilitarianism, are Stilton’s actions ethical? Why or why not? What difference does it make if most of the policies are legitimate?

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Business Ethics

James Stilton is the chief executive officer (CEO) of RightLiving, Inc., a company that buys life insurance policies at
a discount from terminally ill persons and sells the policies to investors. RightLiving pays the terminally ill patients
a percentage of the future death benefit (usually 65 percent) and then sells the policies to investors for 85 percent of
the value of the future benefit. The patients receive the cash to use for medical and other expenses. The investors are
“guaranteed” a positive return on their investment, and RightLiving profits on the difference between the purchase and
sale prices. Stilton is aware that some sick patients might obtain insurance policies through fraud (by not revealing the
illness on the insurance application). Insurance companies that discover this will cancel the policy and refuse to pay.
Continues Debate This . . . Executives in large corporations are ultimately rewarded if their companies do well, particularly as evidenced by rising stock prices. Consequently, should we let those who run corporations decide what
level of negative side effects of their goods or services is “acceptable”?
Stilton believes that most of the policies he has purchased are legitimate, but he knows that some probably are not.
Using the information presented in this chapter, answer the following questions.

1. Would a person who adheres to the principle of rights consider it ethical for Stilton not to disclose the potential risk of cancellation to investors? Why or why not?

2. Using Immanuel Kant’s categorical imperative, are the actions of RightLiving, Inc., ethical? Why or why not?

3. Under utilitarianism, are Stilton’s actions ethical? Why or why not? What difference does it make if most of the policies are legitimate?

4. Using the Business Process Pragmatism一 steps discussed in this chapter, discuss the decision process Stilton should
use in deciding whether to disclose the risk of fraudulent policies to potential invest

How do you motivate them to make loans a priority when it is only 1 of 110 different services they offer? How do we motivate a huge corporation to build a different companies products into their own?

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Motivating B2B Relationship

If you are a loan company that has a partnership with a major insurance company how to you motivate them to make loans a priority when it is only 1 of 110 different services they offer. They offer auto insurance, life insurance, rental dwellings, homeowners and investment services. Even though they make more money when they write a home loan considering it only takes 15-20min and it pays a lot in one lump sum. Their argument is that when they write insurance it pays them for as long as they have insurance. They are also nervous about hurting a relationship they have with someone in their book of business. The insurance companies even know the more services they enroll a client in the stickier they become and the less likely they are to cancel any of the services. How to we motivate a huge corporation to build a different companies products into their own.

Another problem we have is motivating. These people are already rich. They are business owners who have multiple staff members.

Another problem is getting the team members to ask loan questions during insurance opportunities since they cannot get paid it is against the law. It is hard to motivate someone to do something extra if they are not getting paid. How do you keep someone engaged for no pay.