Business Contracts

The business contract is considered as the common legal transactions most business people get involved to ensure the activities run smoothly. When a person understands the contract law, he/she is good to create a sound business agreement. However, the agreement would be legally enforceable in case something bad happens. As the manager of Acme Fireworks, I was requested by the owner to determine which law between common law and the Uniform Commercial Code (UCC) will govern the business. According to Sheleff, (2013), the common law controls the majority of contracts that include intangible assets, employment, real estate, services, and insurance. On the other hand, the Uniform Commercial Code (UCC) governs contracts for the securities and sale of goods (Meiklejohn, 2008). Therefore, the contract between Acme Fireworks and the retailers would be governed by Uniform Commercial Code (UCC).

There are various articles in the UCC and specifically, Article 2 deals with the transaction of goods. The statute in the article stipulates precisely the regulation of sales to consumers and other classes of buyers. Acme firework is a retail outlet that deals with the sale of fireworks and also displaying them. It will enter into a contract with other large businesses to produce large quantity on a regular basis, and it would be governed by UCC. It is because, the UCC requires and focuses on the quantity as part of its terms and conditions. Similarly, the UCC requires a merchant to make an offer as opposed to requesting to support the offer made (Gilson, Sabel, & Scott, 2013). Lastly, the UCC contract law can be changed without any additional consideration and also, the two parties can discharge the contract in case of impracticability.

Analysis of the Contracts

For a contract to be formed, the parties involved should accept the offer made. The owner is trying to advance his sole proprietor business by making a contract with other businesses. The outside businesses had inquired if Acme Fireworks could sign an agreement with them on creating several fireworks displays regularly. The agreement between the two parties does not necessarily mean that they have sealed a contract. However, Acme Fireworks agreed with the other retailers that they are in a position to fulfill their request. Moreover, the parties agreed on a price per display. Therefore, it entails an implied contract with the retailers. To ensure the activities move smoothly, it would be ideal that a simple contract is drawn for each of the businesses and signed by the relevant people. According to Rogers (2012), a contract is a legally enforceable agreement.

However, the following are the vital steps contained in each contract. Also, without them the contract would not be considered valid. First, an offer entails a statement by one party who is willing to make a contract under certain conditions keeping in mind that it shall be accepted. Second, acceptance gives a picture of the agreement to the terms offered. According to Rogers (2012), acceptance is considered valid when, (1) it is made by an individual to whom the offer was directed, (2) it is unequivocal, and (3) it is communicated to the offeror. Third, consideration encompasses the terms of the contracts between the parties. Therefore, consideration gives a person a concrete distinction between a gift and a contract. Fourth, capacity in a contract entails the age and mental capacity of the parties involved at the time of the agreement. Rogers (2012) state that, “To have a valid contract, both parties, at the time of the contract is made, must have sufficient mental competence to understand the nature and circumstances of the transaction. It does not necessarily mean they would understand every clause of legalese in a long, complicated written contract, but does not require that they know basically what they are doing.”

Lastly, legality describes if the contract provided to the parties is valid and unenforceable. Taking each of the Acme Fireworks contracts and apply the five essential elements, we can determine if the contract is legal. Considering the future contracts that Acme Fireworks may enter with the large retailers, it is vivid that the business (Acme Fireworks) may sign the contract in its own name.

Personal Liability

The company needs to ensure that its customers are aware of the following two critical things. They include warnings and their personal liability. The customers should vividly aware that when they consume the products of Acme Fireworks they are liable for any damage accrued by the firing of the fireworks. Therefore, it is not the responsibility of the company to take care of such damage. It is hard for a company to control the people who watch its fireworks display. Similarly, it ‘s hard to determine the individuals who might file a case against the company if the fireworks display causes any harm to their bodies. Fireworks liability is very complicated; however, people are advised to take a custom fireworks insurance plan to cover the injuries or property damage the fireworks might cause (Xinsurance, 2009).

According to Title 16 of the Code of Federal Regulations, the labels of the products must have the following printing to safeguard the consumers. The firework devices must have words such as CAUTION or WARNING. Also, a statement describing the dangers associated with the usage of the devices that include EMITS SPARKS OR FLAMMABLE. Lastly, the products should have labels describing how to store, use and handle the devices. The integrity of Acme Fireworks must not be compromised, and therefore, the company should ensure that clear moves are made to protect the consumers. However, when the consumers purchase and use products from Acme Fireworks, they are fully liable for any damage they may

Types of Employment

The owner of Acme Fireworks expects to hire the new employee because of the increase in the workload. Employment of workers in any organization is done by the human resource manager. Therefore, I will team up with our Human Resource department and start hiring additional employees. The process will start with advertising for jobs, set time for the interviews and selection of the qualified people for the respective positions. Also, the jobs description for the various positions would be provided. Similarly, more advertisements will be placed online through the local online job agencies. Moreover, the company’s Local Employment Agencies would do the pre-screening of the applicants. Discriminating the employees is something that is against the law; therefore, the company will ensure that they comply with 1964 Civil Rights Act. Scheduling for the employees is also another aspect that needs to be considered during the hiring process. The company should comply with the Fair Labor Standards Act of 1938 which encompasses hours worked, employee breaks, and minimum wage. Similarly, it would be ideal if the Occupational Safety and Health Act of 1970 is followed. It will ensure that the safety and health of the company are under control (Rogers, 2012).

Acme Fireworks can choose the following types of employment; run as just-cause employment or an at-will employment (Kalleberg, 2013). The company will select these employees because they are concerned about the outcome once the initial orders are fulfilled. The at-will employment gives the employer permission to fire the employee for no reason and also the employee has the freedom to end their employment. Therefore, the employee can choose not to continue with working. Precisely, the company will do the firing of the employees with fairness and good faith communication. On the other hand, the just-cause employment refers to the situation whereby there must be a reason or cause for the termination of the employee’s contract. Before the employee is fired, the employee will have to follow certain guidelines as giving warnings and write-ups. Justice can be considered as the main difference between the two types of employment (at-will and just cause). According to Pride, Hughes and Kapoor (2012), organizations use fairness for decision making since it depicts meaning to human dignity and also, it allows for healthy interaction between the employees and the employers.

Recommendation

At the moment, Acme Fireworks is operating as a sole proprietor. Therefore, it is neither registered with the respective state as a limited liability company nor a corporation. For years, the owner has kept on operating the business as a sole proprietor without changing it. In a sole proprietorship, the owner and the business are one thing. Paying the taxes is easy to the owner since he only files one form yearly. The file contains the business and the family. Similarly, the owner has control over the decision-making process in the business. However, I would advise the owner as the manager of Acme Fireworks to stop operating as a sole proprietor because it has the following shortcomings.

Sole proprietor form of business portrays unlimited liability. The owner and the business do not have the legal separation. Therefore, the owner can be held accountable for the debts and any other business-related activities. In other words, the statement means that, if the business loses a lawsuit or does not pay debts of the suppliers, and then the owner will have to cover for them. Similarly, the consumer goods and products used at the working place are all covered by the product liability law. In case an individual is injured by stray fireworks, he/she can decide to sue the owner of the business. Second, a sole proprietor has limited funds to operate the business since it is hard to raise enough capital. Most lending institutions consider sole proprietor as untrustworthy hence they would not be given credit. Additionally, very few investors or even none would put their resources in a sole proprietor business. Therefore, the situation renders the business financially unstable.

In the business world, there are four main types of business structures namely, sole proprietorship, partnership, limited liability company (LLC), and corporation. It would be Ideal if I thoroughly analyze the businesses and recommend one that is suitable for Acme Fireworks. The owner of Acme Fireworks has for a long time considered to changing the business entity. However, he has never come to a successful conclusion about the best business entity. The above business structures have different steps of formation, tax rules, and personal liability. After looking at all, as the manager I would recommend to the owner of Acme Fireworks to go for Limited Liability Company (LLC). Particularly, the business should be a single owner limited liability company. A limited liability company has the structure of a partnership but entails the limited liability features of a corporation. Similarly, the owner can be one or more individuals.

An LLC is termed as a separate entity from the owner, and hence it exhibits a limited liability concept. The owner of the business is separated from the business, and he cannot be liable for the debts and business-related activities of the company. The choice of taking this kind of business would cover the life and savings of the owner’s family since they would not be disturbed if anything bad happens to the company. The federal government does not tax LLC as a separate business entity. However, the members will report their profits and losses through the federal tax returns. In case, the company does not have members, the owner of Acme Fireworks would do the same. Additionally, the owner can choose any person to be the member so that they share the profits and the responsibility of ownership. In an LLC, members are guided with few restrictions on the way they should share their profits. However, the contributions of the members might be different, but it is up to them to decide the proportions of profits and losses each will get. Ultimately, when we compare between an LLC and S-corporation, we shall find that an LLC has less recordkeeping. The owner(s) of the company will be much at ease if the business exhibits less registration of paperwork and also if the start-up costs are less. All these features are portrayed by the Limited Liability Company.

Conclusion

The paper has covered each and every part the owner of Acme Fireworks had requested me to address. Also, I hope the areas I have covered within the short period I was given would be beneficial to the company as we prepare to change the business entity. Therefore, I again recommend to the owner to use the information in this paper and help the business prosper. Moreover, the company is growing in the right direction, and we should ensure that the consumers are protected by knowing their rights. Our products need to follow the US Federal Regulation Title 16 by having proper labeling. Recommending for a Single Owned Limited Liability Company was the better option that I had ever made. Lastly, with this kind of business, the owner would be able to protect the family and the company.

References

Gilson, R. J., Sabel, C. F., & Scott, R. E. (2013). Contract and innovation: the limited role of generalist courts in the evolution of novel contractual forms. NYUL Rev., 88, 170.

Kalleberg, A. L. (2013). Book review symposium: Response to Reviews of Arne L Kalleberg, Good Jobs, Bad Jobs: The Rise of Polarized and Precarious Employment Systems in the United States, 1970s to 2000s. Work, Employment & Society, 27(5), 896-898.

Meiklejohn, A. M. (2008). Redressing Harm Caused by Misleading Franchise Disclosure: A Role for the Uniform Commercial Code. Entrepreneurial Bus. LJ, 3, 435.

Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2012). Business. Mason, OH: South-Western Cengage Learning.

Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint Education, Inc.

Sheleff, L. S. (2013). The future of tradition: Customary law, common law and legal pluralism. Routledge.

Xinsurane 2009, Event Home Fireworks Liability Insurance, retrieved on August 11, 2014 from http://www.xinsurance.com/blog/event-home-fireworks-liability-insurance/

 
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