Business Law and Ethics

Business Law and Ethics

Business Law and Ethics

Answer the following essay questions:  [No word count - no APA - treat questions like exam questions]  Your text book can provide helpful information.  Please don't provide DQ style answers or one or two sentence answers or you will not be awarded any points.  Pay attention to other cases posted by instructor. Ethics pay a huge part of the correct answer.

Essay #1      

 On February 25, 1982, Acme Construction Co. contracted with the United States Navy to remodel the engine maintenance shop at Mir Mar Marine Corps Air Station. The contract price was $750,500. The work included installation of heating, ventilating and air conditioning systems (HVAC). A chilled water system was part of the HVAC.

        In preparing his bid for the work, Acme solicited "budgetary bids" from subcontractors. These bids are used as the basis for estimating the component parts of the work and as back-up protection if other bids are not received.

        Coyote Sheet Metal (Coyote), had submitted a $94,000 bid to Acme for the HVAC exclusive of the chilling water system which would cost an additional $16,000 to the proposed bid.

         Acme contacted Roy Runner and told Runner that another subcontractor (E. Fudd) had put in a $86,500 bid to do the HVAC work and that this bid had a 20% profit margin, but for personal family reasons he could not sign a contract and go forward with the project.  Runner met with the president of Acme (Roger Rabbit) who related Fudd's assurance to him "there was a profit in it" and Runner signed that same day a contract identical to that turned down by Fudd.  Fudd later told Runner at the time he had not done "much examination" of the plans or specifications. He was asked for his opinion of the newly signed deal and after checking the job site and the plans more closely, Fudd told Runner the cost of the job "far exceeded" the contract price. The plans included the chilled water system in the HVAC which cost an additional $16,000 not contemplated by the contract. Runner promptly told Acme the $86,500 price would not cover the HVAC with the chilled water system and unless the parties modified the amount, he could not do the work.  Acme's Rabbit responded with the comment he would get another contractor and "sue [Runner] for the difference."

        Acme then turned back to Coyote Sheet Metal, awarding two subcontracts to Coyote; one for $94,000 and one for $16,000 for the HVAC with the chilled water system and sued Runner for the difference between his bid ($86,500) and the combined Coyote bids ($110,000).


What legal issues do you believe are raised by the dealings of the parties in this case?  Identify the issues and discuss what you believe will be the outcome of the case.

Essay #2        

In July 2008, Sarah P. Lynn learned that a boutique selling women's clothing and accessories located in a shopping center located in Beverly Hills was for sale.

         From the outset, Sarah was aware the business was substantially involved in the sale of counterfeit merchandise. On one of Sarah's visits to the store before she bought the business, seller, Katie Corey informed Sarah that "about less than thirty percent" of the sales receipts came from counterfeit merchandise such as fake Louis Vuitton and Gucci bags. Sarah testified she asked Katie, "Isn't this illegal?" and Katie responded that "while she was in business, she had no problems."

         Similarly, Cindy McCall, Sarah's agent, testified she informed Sarah that the business sold counterfeit goods. According to McCall she informed Lynn "that 30 percent of the sales volume . . . was based on counterfeit goods." McCall testified Lynn "was very interested in the counterfeits" and that Lynn intended to continue selling counterfeit goods after she purchased the business.

         On August 15, 2008, the parties entered into a contract for the purchase and sale of the business for $400,000, with a 10-month escrow.

         After purchasing the business, Sarah moved it to a different location within the same shopping center. In October 2008, investigators came to the store with a warrant and removed her counterfeit merchandise. On November 5, 2008, with business declining, Sarah closed down the store.


Sarah has sued Katie for breach of contract.  In your opinion is there an enforceable contract?  Articulate your reasons for your position.

Assuming that 50% of the sales volume was in fact based upon counterfeit goods; would this discovered fact be relevant to any issues to rescind the contract?  Explain your reasons for your opinions.

Week 4 Individual Grading Rubric

 Write a traditional essay answer to an examination question.

Purpose of Assignment

The assignment is intended to test student analytical skills and critical thinking abilities of the students. It emphasizes problem solving approaches to business/legal encounters. The answers to both questions are relatively speaking pretty straight forward.  

Remember this is both a legal and ethical essay exam; so ask yourself if the ethical conduct of any of the parties creates a legal issue. 

Resources Required

Essay questions

Material posted in Main News Group

Text - You should be able to cite your text book pages in your answer.  A "personal" opinion will normally not be sufficient.

Note:  The suggested word count (100 - 300 words per answer) does not count restating the essay question.  Your essay answer should cover the topic within the suggested word count