ESSAY: Acme Fireworks

You are the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. The company started as a sole proprietorship, and the owner has never changed the entity. The owner has informed you that the company has received inquiries from several large businesses wondering if the company could create several fireworks displays on a regular basis. The owner told the inquirers that the company could fill such display orders, and a price per display was agreed upon. It was discussed that most of the cost for a fireworks display is for skilled labor, insurance, and the actual service of setting off the fireworks. No other details were discussed. The owner is anticipating that new employees will need to be hired, but he is worried that if the large orders for fireworks displays do not continue, the company will not have the funds to pay the new employees. The owner is now considering changing the business entity, but he does not know what entity to form or how to form it.

The owner has asked you to do the following:

Determine if the contracts with the businesses will be governed by common law or the Uniform Commercial Code (UCC), and explain why.
Analyze whether the owner formed a contract with the businesses, and apply the five essential elements of an enforceable contract.
Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fireworks display.
Discuss the different employment types and relationships relevant to agency law, and analyze the advantages and disadvantages of each type specific to Acme Fireworks.
Explain why Acme Fireworks should not operate as a sole proprietorship. Recommend a new business entity, and provide rationale to support your recommendation.
For each task, be sure to analyze the relevant law, apply the facts to the law, and make a conclusion.

ANSWER

The Framework for Acme Fireworks

Introduction

Acme Fireworks operates as a sole trade form of business where it has gained trust of several large businesses. The new customers make requests if the company could engage in creating firework displays on a contractual basis.   To meet the requirements of an enforceable contract, an evaluation is fundamental to determine if the company can meet the demand and the resulting 1awsuit if they fail to comply. Therefore, it is important to assess the verbal agreement made by the two parties to determine if all elements of a contract are met. Besides, the increasing customer base may require the owner to consider changing the entity to a limited company in order minimize personal liabilities. In addition, it will be wise to increase the number of employees to handle the increased workload as well as embrace diversity within the organization.

Sole proprietorship is considered one of the simplest form of business to start. First, it does not follow lengthy legal requirements and it is very flexible. Acme Fireworks enjoy these privileges by serving customers at their door step hence offering exceptional services.  As a fireworks retailer, the owner is obliged to make major operational decisions relating to fireworks sales as well as putting on ground and aerial display fireworks. The owner has full control of the business operations and can formulate and implement any changes as he wishes.

However, the owner of Acme fireworks bears the full liability for the business’s debts, expenses, payables, and charges. Besides, the inquirers can take the owner’s personal property if he fails to honor his service delivery agreement or business ceases operations prior putting all on ground and aerial display fireworks. Therefore, it is disadvantageous to operate as a sole trader because there is unlimited liability for debts and losses. In addition, the sole trader has few options to raise additional capital, the business has no perpetual existence, and the owner bears all liabilities and losses alone.

Common Law or The Uniform Commercial Code (UCC)

The contracts made between the customers and Acme fireworks are feasible and common law will be applied to ensure compliance. This system of law emphasizes on making rulings based on prior court decisions. Therefore, the Uniform Commercial Code that evolved from common law may not be suitable in this case because it primarily governs commercial transactions, where goods under consideration are moveable (Clarkson, Miller, Cross & Clarkson, 2012). The UCC aim to unify and ease business transactions beyond one state and focus at solving problems affecting interstate businesses to remove trade barriers and improve efficiency.

In this scenario, the goods in question are the large display fireworks that the company intends to offer on regular basis. Acme concentrates on fixing firework displays, which may be immovable once fixed. Such services are usually governed by common law. The courts of law define such contracts as hybrid contracts because they involve both goods and services. Business agreements are generally enforced and governed by the laws in the country where the contracts were made. Based on the nature and the subject matter of the contract (creating fireworks displays), the agreement will be governed by common law. However, the law does not govern contracts relating to the sale of goods (sales contracts are governed by the Uniform Commercial Code). UCC have provisions that govern the law of….