Acme Fireworks

Acme Fireworks

Acme Fireworks is a retail business that sells fireworks. The business began as a sole proprietorship but has been gradually growing due to increased productivity. This growth has seen the business move from being run solely by the owner to hiring of 15 other workers. Moreover, the recent inquiries from large businesses into the firm’s capability of creating regular several fireworks display set the sole proprietor thinking and he now considers changing the form of the business from sole proprietorship to another form; maybe limited liability company, partnership, or cooperative, to cater for the increasing demand of the fireworks display. Having said that, the thesis of this paper is to establish the most appropriate form of business that the sole proprietor can change to, the laws governing formation of such a business entity, and the laws governing the contractual transactions entered into by such an entity, whether common law or Uniform Commercial Code (UCC) laws.

Law governing the contracts with the other businesses

            In this case, the common law will govern the firm’s contracts with the other businesses and not the UCC laws. Common law regulates contractual businesses with insurance, service provision, real estate, employment, and intangible assets. On the other hand, UCC regulates contractual transactions dealing with goods and tangible objects only, for example, purchase of a car (White & Summers, 2010). This, among many others, is a distinguishing factor between contractual transactions in common law and UCC laws. Acme Fireworks agreed to fill the fireworks display and agreed on a price per display. Besides, setting of the fireworks display meant the manager would hire more employees for as long as the businesses would need the fireworks displayed. This is a clear justification that this contract will be governed by nothing other than common law.

Whether a contract was formed or not

            There’s absolutely no doubt that a contract was formed between the owner of Acme Fireworks and the other businesses. Basically, there are five key elements of a contract that makes it enforceable, namely; issuance of an offer, acceptance of the offer, consideration of the offer, capacity to contract, and the legality of the contract (Burnham, 2016). To delve deeper into these elements, first and foremost, an offer is some sort of demand made by the person in need of it to the person offering it, which in this case, Acme Fireworks becomes the latter while the businesses is the former. The businesses are in need of regular display of fireworks and have just made their offer to Acme Fireworks to consider providing them with such services.

            Secondly, acceptance implies consenting to the terms of the presented offer. In some instances, the service provider may not consent to the terms as proposed but can instead; present a counteroffer for consideration (Burnham, 2016). Either way, with or without a counteroffer, as long as the offerer and the offeree agree, it becomes a contract. In this scenario there was no counteroffer. The owner agreed to the offer.

            Thirdly, there comes the element of consideration. This is what the service provider receives in exchange for the services provided. It is often in monetary compensation (Burnham, 2016). The owner of Acme Fireworks gave a consideration to the offer and quoted the cost of producing the fireworks display as well as what the cost entailed.

            Another element is the capacity to contract. This is an element of common law that states those eligible to enter into contracts. For instance, the party should not be a minor, mentally incompetent or intoxicated at the time of the contract (Burnham, 2016). The owner of this business started the business two years ago as a sole proprietorship. This implies that he undertook all the necessary and legal steps, which entail showing a copy of one’s national identity card only possessed by those of the majority age, to get a business license before commencing operations. This is an indication that the owner is definitely not a minor and therefore, has the capacity to contract. Moreover, at the time of consideration, the owner was able to issue a cost price for the delivery and even go further to explain what the cost would cater for, thereby ruling out any possibility of mental incompetence or lack of sobriety at the time of contract.

            Finally, the last element is the legality of the contract. This requires that the purpose of the contract should be within the confines of the law and not against the law (Burnham, 2016). Provided there were no statutory amendments rendering the owner’s business illegal, then the contract had a legal standing at the time it was entered into. This is because Acme Fireworks has been in operation for two years with legal trading license as required of sole proprietorships and therefore no need to cast doubts on the contract.

Potential liability to third party in Fireworks accidents

            In actions of tort where a third party sustains injuries due to alleged fireworks mishandling, compulsory non-suits should be filed only when there’s certainty that the plaintiff has failed in proving the case, and if only the plaintiff has been granted the advantage of all the favourable inferences and evidences to his grounds of action (Smail, 1961). However, the plaintiff might want to prove the liability of the defendant with regards to such incidents drawing from one of these three theories; the first theory being absolute liability, the second one exclusive control, and the third one, direct proof of negligence.

Upon application of the doctrine of absolute liability, Acme Fireworks would be liable for any harm resulting from its ultrahazardous activities whether utmost care has been exercised or not. Activities such as blasting have generally been litigated upon on the basis of this doctrine (Smail, 1961). However, this doctrine has had to be considered by most jurisdictions whether it extends to fireworks displays or not, and some of these jurisdictions have denied the doctrine by requiring some positive proof of negligence by the defendant. In the jurisdictions where absolute liability has been imposed regarding fireworks exhibitions suits, the fireworks must have either been in the nature of a nuisance or illegal.

The second theory of defendant’s liability by the plaintiff could be that of exclusive control which is more or less similar to the doctrine of res ipsa loquitor, which is sometimes only applicable to liability arising between the two contracting parties but not between a fireworks firm and a third party (Smail, 1961). This doctrine would be applicable to indemnify the third party if the injury from the accident and the circumstances surrounding its occurrence can sufficiently raise a presumption of negligence by Acme Fireworks, and hence shift the burden of proof to the defendant (Acme Fireworks) to establish their freedom from fault. When the injury results from things that are under the defendant’s management and the accident is such that does not ordinarily occur if proper care is used by the management, it forms the basis of reasonable evidence without the defendant’s explanation that the accident was as a result of lack of care. This doctrine has widely been applied in several varying factual circumstances.

Finally, the liability of Acme Fireworks to third party could also be argued on the doctrine of general rules of negligence which asserts that the happening of an accident does not necessarily imply negligence by the fireworks firm since negligence can never be presumed just by occurrence of an accident (Smail, 1961). To avoid liability in this case, Acme Fireworks would have to exercise utmost care of like that of a reasonably prudent man under similar situation to protect any possible injuries of spectators. With regards to this doctrine, when a spectator suffers an unintentional injury in the course of a lawful act, there is no recovery unless the spectator shows the defendant’s negligence, thus shifting the burden of proof to the plaintiff.

Types of employment and relevant relationships to Agency law                 

            The most basic types of employment are independent contractor, common law employee, and statutory employee. An independent contractor is an individual who pursues an independent business, trade or profession. They include accountants, contractors, lawyers, subcontractors, and other public service providers (Deakin & Morris, 2012). They are generally not employees since their employers can only control the result of their work but not the means through which they accomplished the work. The advantage of this is that the contractors only take responsibility for what they deliver and not how they deliver it hence can use diverse methods to accomplish their tasks without restrictions (Berman, Bowman, West, & Van Wart, 2012). Moreover, they cannot be discharged at the employer’s will as they are protected by the law of contract. Its major disadvantage is that sometimes the work might be overwhelming especially when contracted by several businesses thus leading to poor service delivery. Another disadvantage is that the contractor supplies the tools of work by himself. Acme Fireworks is an independent contractor and would therefore enjoy and suffer the above advantages and disadvantages respectively.

Common law employees are individuals working subject to the control and will of their employers, as to what to be done and how to do it (Deakin & Morris, 2012). It doesn’t matter whether the employees are part-time, full-time or hired just for a short period like Acme Fireworks would hire more employees to help in displaying the fireworks. The advantage of this is that all the tools of work and place of work are supplied by the employer thus the employee does not have to supply them by himself. It is however disadvantageous in that the employer can discharge the employees at will without notice (Berman, Bowman, West, & Van Wart, 2012). The employees of Acme Fireworks belong to this category and would therefore enjoy the above mentioned advantages while experiencing the disadvantages in equal measure.

Statutory employees are those that work for employers but are not employees as described above in common law. They include full-time sales agents, those paid on commission, and full-time travelling salespersons. The advantage is that their earnings are not fixed as they earn some commission on top of basic pay, for instance, the higher the sales, the more the commission (Deakin & Morris, 2012). The main disadvantage is that their jobs are often seasonal and not permanent thus suffer a heavy blow during off-peak seasons. This is where agent-principal relationship belongs.

The need for Acme Fireworks changing business entity     

            Since the contracting businesses require regular display of fireworks though not known for how long, it would be prudent that Acme Fireworks changes its business entity to a corporation. This is due to the fact that the demand for fireworks display was gradually growing thus necessitating the need for more employees and other facilities like insurance cover. The regular display of fireworks would probably attract more businesses which would similarly need such services beyond the capability of a sole proprietor. With such prospects, the firm would need to invite some more skilled individuals to meet the growing demands and even cater for future demands.

            Changing from sole proprietorship to Limited Liability Company would technically involve some processes which would need the guidance of an attorney. The owner of the old business (Acme Firework sole proprietorship) would draft sales documents bearing the old business name and transfer the ownership of the entire physical asset like buildings, vehicles, equipment to the new corporation. The owner would then draft purchase documents bearing the corporation’s name and make to himself, share transfers of the new corporation to pay for the assets transferred from the old business (Burnham, 2016). The owner would then fire all the employees of the old business and then hire them afresh in the new corporation.

Thereafter, all the bank accounts in the name of the sole proprietorship would be emptied and new accounts opened in the name of the new business. The owner would then notify the state and federal tax authorities of the changes so as to be issued with new state and federal tax identification numbers for the limited company (Burnham, 2016). Since the old business had insurance covers, the owner would contact his insurers to terminate the policies for purchase of new policies compatible with the limited liability company. The title deeds of all the vehicles and real property would then be transferred through the county clerk and DMV offices to the new corporation’s name, after which the clients of the business would be notified of the firm’s new development so as to change the already in place contracts to match the identity of the new business. In this form of business, in case of injuries to third parties or spectators, it is the firm that would be sued.

In conclusion, the paper has critically, openly, and independently addressed the demands of the questions. The paper gives a smooth flow from the laws governing the contractual relationship between Acme Fireworks and the businesses while asserting the essential elements of a contract. It defines the liability of the fireworks firm to third party in case of injuries from accidents resulting from the firm’s display of firework. The paper also defines the type of employments surrounding the firm’s operation with the businesses and the firm’s operations with its employees. The paper further affirms the thesis by proposing the suitable form of business for change and the process of changing to that kind of business entity.

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