Week 3 Chapter Assignment

Assignment:

"Issue Spotters" questions from the course textbook for chapters assigned this week

Assignment Overview:

Draft an original, two-to-three-sentece response to the "Issue Spotters" questions for all of the

chapters in this week's reading assignment. Citations are not required because the content must

be based on knowledge acquired through reading the textbook and supplemental research using

KU's ProQuest.

Instructions and Submission Requirements

• Draft responses to all questions in one document

• Number each response correctly to match the textbook (for example, 1-1A)

• Double-space the entire document

• Times New Roman or Calibri font, size 12, all black must be used

• Content is not to be formatted in any way (do not bold, underline, italicize, alter colors,

etc.)

• Save the document as a DOC or PDF file

• Proofread, use the SafeAssign Self-Assessment Originality Review, and edit before

submitting

• Click on"Week 1 Chapter Assignment" (the blue link at the top of the assignment page)

• A "text submission box" will appear but do not type, copy, or paste anything into the text

box

• Instead, click on the paperclip icon to attach/upload your DOC or PDF file

• Once submitted, the file will run through SafeAssign and the Originality Report will be

included as part of the grading process

• Do not worry about unusually high matching if you submitted your work through the

SafeAssign Self-Assessment

• High matching is only an issue if the content in the Self-Assessment submission was

plagiarized and not revised

• Because all work is self-generated and can be self-assessed prior to submission,

plagiarism cannot be an issue

• Therefore, responses with a full sentence (or more) "matching" any source will earn zero

points due to lack of originality

Chapter 25

Issue Spotters

1. Able Corporation wants to build a new mall on a specific tract of land. Able contracts with

Ofelia to buy the property. When Ofelia learns of the difference between the price that Able is

willing to pay and the price at which the owner is willing to sell, she wants to buy the land and

sell it to Able herself. Can she do this? Discuss. (See Learning Outcome 2.)

HIDE ANSWER

No. Ofelia, as an agent, is prohibited from taking advantage of the agency relationship to obtain

property that the principal (Able Corporation) wants to purchase. This is the duty of loyalty that

arises with every agency relationship.

2. Marie, owner of the Consumer Goods Company, employs Rachel as an administrative assistant.

In Marie’s absence, and without authority, Rachel represents herself as Marie and signs a

promissory note in Marie’s name. Under what circumstance is Marie liable on the note?

(See Learning Outcome 4.)

HIDE ANSWER

Marie would be liable on the note only if she ratified it when she returned. Remember that

ratification is the affirmation of a previously unauthorized contract or act. In this situation, the

unauthorized act was Rachel’s representing Marie when signing the promissory note.

Chapter 26

Issue Spotters

1. American Manufacturing Company (AMC) issues an employee handbook that states that employees will be discharged only for good cause. One day, Greg, an AMC supervisor, says to

Larry, “I don’t like your looks. You’re fired.” Can AMC be held liable for breach of contract? If so, why? If not, why? (See Learning Outcome 1.)

HIDE ANSWER

Yes. Some courts have held that an implied employment contract exists between employer and employee when an employee handbook states that employees will be dismissed only for good

cause. An employer who fires a worker contrary to this promise can be held liable for breach of contract. Firing Larry because of his looks alone is not for “good cause.” AMC is liable to Larry for breach of contract.

2. Erin, an employee of Fine Print Shop, is injured on the job. For Erin to obtain workers’ compensation, does her injury have to have been caused by Fine Print’s negligence? Does it matter whether the action causing the injury was intentional? Explain. (See Learning Outcome

2.)

HIDE ANSWER

No. Fine Print’s negligence is not a requirement for obtaining benefits under workers’

compensation laws. Yes. If Erin intentionally self-inflicted her on-the-job injury, workers’ compensation laws would not apply. Workers’ compensation laws establish a procedure for compensating workers who are

injured on the job. Instead of suing to collect benefits, an injured worker notifies the employer of the injury and files a claim with the appropriate state agency. The right to recover is normally

determined without regard to negligence or fault, but intentionally inflicted injuries are not covered. Unlike the potential for recovery in a lawsuit based on negligence or fault, recovery under a workers’ compensation statute is limited to the specific amount designated in the statute

for the employee’s injury.

The correct answer is available

Chapter 27

Issue Spotters

1. Ruth is a supervisor for Subs & Suds, a restaurant. Tim is a Subs & Suds employee. The owner announces that some employees will be discharged. Ruth tells Tim that if he has sex with her, he

can keep his job. Is this sexual harassment? Why or why not? (See Learning Outcome 1.)

HIDE ANSWER

Yes. One type of sexual harassment occurs when a request for sexual favors is a condition of

employment, and the person making the request is a supervisor or acts with the authority of the employer. A tangible employment action, such as continued employment, may also lead to the

employer’s liability for the supervisor’s conduct. That the injured employee is a male and the supervisor a female, instead of the other way around, would not affect the outcome. Samegender harassment is also actionable.

2. Koko, a person with a disability, applies for a job at Lively Sales Corporation for which she is well qualified, but she is rejected. Lively continues to seek applicants and eventually fills the position with a person who does not have a disability. Could Koko succeed in a suit against

Lively for discrimination? Explain. (See Learning Outcome 3.)

HIDE ANSWER

Yes. Koko could succeed in a discrimination suit if she could show that Lively failed to hire her

solely because of her disability. The other elements for a discrimination suit based on a disability are that the plaintiff has a disability and is otherwise qualified for the job. Both of these elements appear to be satisfied in this scenario.

The correct answer is available

Chapter 28

Issue Spotters

1. Sam plans to open a sporting goods store and to hire Gil and Art. Sam will invest only his own

capital. He does not expect to make a profit for at least eighteen months and to make little profit

for the first three years. He hopes to expand eventually. Which form of business organization

would be most appropriate? (See Learning Outcome 1.)

HIDE ANSWER

The most appropriate form for doing business for Sam may be a sole proprietorship. This is

because his business is relatively small and is not diversified, employs only a few people, has

modest profits, and is not likely to expand significantly or require extensive financing in the

immediate future.

2. Hal and Gretchen are partners in a delivery business. When business is slow, without Gretchen’s

knowledge, Hal leases out the delivery vehicles as moving vans. The vehicles would otherwise

be sitting idle in a parking lot. Can Hal keep the lease money, or does he have to account to

Gretchen? (See Learning Outcome 2.)

HIDE ANSWER

No. Hal cannot keep the lease money, and he must account to Gretchen for the profits received

from leasing the partnership’s vehicles. Under the partners’ fiduciary duty, a partner must

account to the partnership for any personal profits or benefits derived without the consent of all

the partners in connection with the use of any partnership property.

Chapter 29

Issue Spotters

1. Wonder Corporation has an opportunity to buy stock in Xience, Inc. The Wonder directors decide to buy the stock for themselves instead. On learning of the deal, Yves, a Wonder

shareholder, wants to sue the directors on the corporation’s behalf. Can he do it? Explain. (See Learning Outcome 5.)

HIDE ANSWER

Yes. A shareholder can bring a shareholder’s derivative suit on behalf of a corporation if some

wrong is done to the corporation. Normally, any damages recovered go into the corporation’s treasury.

2. The incorporators of Consumer Investments, Inc., want their new corporation to have the

authority to transact nearly any conceivable type of business. Can they grant this authority to their firm? If so, how? If not, why? (See Learning Outcome 2.)

HIDE ANSWER

Yes. Broad authority to conduct business can be granted in a corporation’s articles of incorporation. For example, the phrase “any lawful purpose” is often used. This can be important

because acts of a corporation that are beyond the authority given to it in its articles or charter (or state statutes) are considered illegal, ultra vires acts. The correct answer is available

Chapter 30

Issue Spotters

1. Glen is a director and shareholder of Diamond Corporation and of Emerald, Inc. If a resolution comes before the Emerald board to compete with Diamond, what is Glen’s responsibility? (See Learning Outcome 1.)

HIDE ANSWER

A director cannot support a business that competes directly with a corporation on the board of

which the director sits. Thus, Glen’s fiduciary duty requires him to fully disclose the conflict of interest, and he must abstain from voting on the proposed transaction.

2. Tandin is a director and officer of United Products, Inc. Tandin makes a decision about the marketing of United’s products that results in a dramatic decrease in profits for United and its

shareholders. The shareholders accuse Tandin of breaching his fiduciary duty to the corporation. What is Tandin’s best defense? (See Learning Outcome 3.)

HIDE ANSWER

The best defense for Tandin is the business judgment rule. As long as directors or officers act in

good faith in what they consider to be the best interests of the corporation, and with the care that ordinarily prudent persons would use in similar circumstances, they are not liable simply because

the decision had a negative result. The correct answer is available

Chapter 31

Issue Spotters

1. ABC Corporation combines with DEF, Inc. ABC ceases to exist. DEF is the surviving firm. Global Corporation and Hometown Company combine. Afterwards, Global and Hometown cease to exist. GH, Inc., a new firm, functions in their place. Which of these combinations is a

merger and which is a consolidation? (See Learning Outcome 1.)

HIDE ANSWER

The first combination is a merger. DEF Corporation absorbed ABC Corporation, and DEF is the surviving corporation. The second combination is a consolidation. Neither Global nor Hometown

continues after the combination, and a new firm (GH, Inc.) continues in their place.

2. Interstate Corporation asks its shareholders to vote on a proposed merger with Regional, Inc. Jill, an Interstate shareholder, votes against it but is outvoted by the other shareholders. Is there anything Jill can do to avoid being forced to go along with the transaction? Explain.

(See Learning Outcome 1.)

HIDE ANSWER

Yes. Shareholders who disapprove of a merger or a consolidation may be entitled to be paid fair value for their shares. The right of a shareholder to be paid fair value in this situation is known as

an appraisal right. The correct answer is available

Chapter 32

Issue Spotters

1. Joe contracts with Larry of Midwest Roofing to fix Joe’s roof. Joe pays half of the contract price in advance. Larry and Midwest complete the job, but Joe refuses to pay the rest of the price. What can Larry and Midwest do to get the remainder of what Joe owes? (See Learning

Outcome 4.)

HIDE ANSWER

Each of the parties—Larry and Midwest Roofing—can place a mechanic’s lien on the property of Joe (the debtor). If Joe does not pay what is owed, the property can be sold to satisfy the debt.

2. First National Bank loans $5,000 to Gail to buy a car, which is used as collateral to secure the loan. Gail has paid less than 50 percent of the loan when she defaults. First National could repossess and keep the car, but the bank does not want it. What are some alternatives? (See Learning Outcome 1.)

HIDE ANSWER

One alternative is for the creditor or secured party (First National Bank) to dispose of the car.

When collateral consists of consumer goods and the debtor (in this case, Gail) has paid less than 60 percent of the debt or the purchase price, the creditor has the option of disposing of the

collateral (in this scenario, the car) in a commercially reasonable manner. Another alternative involves Gail, as the debtor, exercising her right of redemption. Before the creditor’s disposal of the collateral, a debtor can exercise the right of redemption. This can be

done by tendering performance of all of the obligations secured by the collateral and by paying the creditor’s reasonable expenses in retaking and maintaining the collateral. The correct answer is available

Chapter 33

Issue Spotters

1. Ruth Ann borrows $175,000 from Sunny Valley Bank to buy a home. Federal law regulates the terms of the mortgage that must be disclosed in writing in clear, readily understandable language.

What are the major terms that must be disclosed under the Truth-in-Lending Act? (See Learning

Outcome 3.)

HIDE ANSWER

The major terms that must be disclosed under the Truth-in-Lending Act include the loan

principal, the interest rate at which the loan is made, the annual percentage rate (APR), and all fees and costs associated with the loan. These disclosures must be made on standardized forms

and based on uniform formulas of calculation. Certain types of loans have special disclosure requirements.

2. Tanner borrows $150,000 from Southeast Credit Union to buy a home, which secures the loan. Two years into the term, Tanner stops making payments on the loan. After six months without payments, Southeast informs Tanner that he is in default and that it will proceed to foreclosure.

What is foreclosure, and what is the usual procedure? (See Learning Outcome 4.)

HIDE ANSWER

Foreclosure is a process that allows a lender to repossess and auction off property that is securing a loan. The two most common types of foreclosure are judicial foreclosure and power of sale

foreclosure. In the former—available in all states—a court supervises the process. In the latter, which is available in only a few states, a lender forecloses on and sells the property without court supervision. The correct answer is available