Compensation, Discrimination & Influencing Shareholders
1. Barbara purchases a Radartel cellular phone. One of the
reasons she bought this was for security because she lives alone and often
travels alone. After using the phone for about a week, she noticed that the
rechargeable batteries (supplied in the phone by the maker) lasted a shorter
time than claimed by the manufacturer. One evening a few days later, Barbara
was in bed, but not yet asleep, and heard someone in her living room. She
picked up the cellular phone from beside her bed and attempt to make an
emergency call to 911, but the batteries were dead. She panicked and stayed in
her bed motionless. About five minutes later the burglar came into her bedroom,
at which point she screamed. As he then tried to climb out the bedroom window
she hit him with a lamp, but he kicked it back at her injuring her. The burglar
got away and was never caught. Barbara sued Radartel, the maker of the phone.
Prior to the lawsuit she returned the phone to the store where she bought it and
learned that the batteries were defective, at which point she was provided with
new batteries, which have worked properly since. Discuss the likely basis for
Barbara’s suit, the defenses that Radartel might raise, and the likely outcome.
2. Jenny has a checking account at Intrastate Bank. Jenny
loses her checkbook. Richard finds it and forges a check payable to himself,
endorses it, and properly negotiates it to Yummy Treats Restaurant. Yummy
Treats cashes the check at Intrastate. Jenny learns of the forgery and
complains to Intrastate. What are liabilities of each of the parties involved?
What other steps can Jenny take?
3. Beth entered into a guaranty agreement with a furniture
store in order for her sister, Sue, to be able to buy furniture on credit from
the store. There is a security agreement with the furniture pledged as
collateral. Sue ceases to make the payments because the furniture is defective.
Several months later Sue receives a bankruptcy relieving all her debts. Who
owes what to whom? What are the responsibilities of each party? The furniture
store, Sue, and Beth? Discuss the final result of this situation.
4. Sam is a sales representative for a pharmaceutical firm.
Sam frequently plays golf with his clients and potential clients. One summer weekend
when he is on vacation at his family’s home in Myrtle Beach, Sam runs into a
couple of his clients who are attending a medical convention. They arrange to
meet and play golf on Sunday. While on the sixth hole, another golfer tees off
prematurely and Sam is struck in the head by a golf ball. He is severely
injured and cannot work for an extended period of time. Can Sam recover under
workers’ compensation? What remedies are available to Sam?
5. Learned University is an exclusive university in the city
of Boston. This private school admitted only women until 1990 when it became a
coeducational institution. Two of the factors in the school’s success and
reputation have been its focus on service to its students and its hiring only
its own graduates whenever possible. The school has tripled in size since it
became a coeducational institution. Because of the increased number of
graduates available to work, the school has made being a graduate a requirement
for most of its positions. Are learned University’s policies legal or illegal?
Why? Discuss the employment discrimination aspects of this policy.
6. Sam operates a small business with 12 employees. Sam says
to his employees, “I?m not required to give you a pension plan. But, I
will do so. The plan is that if you stay employed with me until you reach age
65, I will give you a pension of $1,000 per year during retirement for each
full year you have worked. Because I believe so strongly in this company, if I
invest any money in the fund in advance, I will put half of it into stock of
this company. If you leave before retirement, you don’t get it. That way,
you’ll have more incentive to work hard and stay with the company.” Is
this plan legal? Why? As an employer of a company of this size, what type of plan,
if any, would you offer your employees? Why? Comment on the legal aspects of
this plan.
7. Jane wishes to create a corporation to operate an art
gallery. She completes the articles of incorporation and mails them to the
appropriate state office. Then, she leases space, hires a receptionist, buys
supplies and contracts with artists to exhibit their artwork, all on behalf of
her corporation. Sometime later, the state issues its certificate of
incorporation.
A. If Jane refuse to let the artists exhibit their artwork,
could she use the defense that her corporation was not legal when the contract
was signed? Why? Discuss the liability of Jane and the corporation with regard
to these contracts Jane has made.
B. Discuss novation based upon the facts of the above situation.
8. Donna formed a corporation several years ago by issuing
500 shares of stock. There are 10 shareholders with the smallest shareholder
owning 25 shares and Donna holding the most at 100 shares. The corporation
needs additional cash, but the current shareholders do not wish to have any
additional shareholders. What are their options and what additional factors
should the current shareholders consider in raising the additional cash? What
can Donna do to add additional shareholders, if anything?
9. Ted has just been elected to the board of directors of
Funfones Corporation at their January annual meeting. Ted has considerable
business experience and will be a valuable addition to the board. Ted was
heavily promoted for the board by Tim, the president of Funfones and owner of
24 percent of the shares of Funfones’ common stock. Tim and Ted were fraternity
brothers in college and have had business contact for almost 20 years. Less
than a week after being elected to the board, Ted and Tim end up in a dispute
over a bet on the Super Bowl . Tim properly gives notice for a special
shareholder meeting to vote to remove Ted from the board. Ted is voted off the
board and he objects. Does he have any recourse? If so, what? Discuss Ted’s
legal situation and what actions he can take.
10. Mary is an assembly line worker at a computer company.
Mary becomes aware that an improvement is being made in the company’s primary
computer that will significantly increase profits. Mary tells a friend to buy
stock in the company, but instructs her not to tell anyone else. The friend
buys stock, but tells two other persons to do the same. The company’s profits
increase greatly, and all three who purchased stock sell at a great profit. Is
what Mary did illegal? Have the three people who made money on this deal done
so illegally? Please compare this with the Martha Stewart case. How is it
similar or different? Discuss this situation and possible results.
ScholarMatic: Explanation & Answer
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