ASSIG #1 (225;393) FALL 2013 - Guide.pdf

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Manfred Schneider

FALL 2013 RSM 225/MGT 393 – ASSIGNMENT #1 GENERAL GUIDE – value 5%; General guide only. This is not intended to be a sample response nor a complete guide – but rather is intended to reflect the type of issues that should be included into the response. This guide does not have “depth” of analysis required - - only general concepts. [NOT PROOF READ] (given that the total page limit is 6 and part B has a max of 2 → marks could be allocated Part A out of 67; Part B – out of 33.) Hunter Hayees, is a creative and wealthy businessperson. Keith Urbane does not have much by way of assets but is highly skilled as a tailor – particularly when it come s to leather related products. Carrie Underwoode is a super salesperson “with an eye for style”. The three individuals are in their twenties and they all knew each other from back in grade school and high school – having remained close friends. All three grew up and continue to live in London, Ontario. The three decided to open up a retail store with a Country and Western “spin” . Within the store, each would “do their own thing”. Hunter would focus on importing high end men’s country sportswear, as that is where he had expertise. Carrie would focus more on young women’s – jeans and tops and Keith would make and sell custom-made leather cowboy boots. (info → have they formed a partnership? All elements are retail (similar); “do their own thing” – suggests not a collective venture (although could just be figure of speech) Hunter negotiated a five-year lease at a new mall that opened in Milton, Ontario. The lease is a gross lease with an annual rent of $120,000 per year. As Keith and Carrie are always worried about money, and never seemed to have that much, Hunter thought he would not raise their stress le vels – and so told them that the lease was “monthly” and could be terminated at any time with two months notice. This was not the case. (will be important – is the tenant Hunter alone; or if a partnership did Hunter act as an agent (binding the firm) ; will have a significant impact on who may have liability and the ability to collect damages . There is a difference between binding the firm and binding each partner if they are in a partnership. The basis of the firm’s liability is the fact that every one of its partners is an agent of the firm whose action binds the firm, but the basis of the joi nt and several liabilities of the partners is due to the nature of unlimited liability. Thus, subject to other specific factors, such as H taking on the business himself without the other two persons, the lease does not bind any individual partner to pay b ut rather the legal liability of the firm creates a joint and several obligation for them to pay. 6. Every partner is an agent of the firm and of the other partners for the purpose of the business of the partnership, and the a cts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he or she is a member, bind the firm and the other partners unless the partner so acting has in fact no authority to act for the firmparticular matter and the person with whom the partner is dealing either knows that the partner has no authority, or does not know or believe h im or her to be a partner. R.S.O. 1990, c. P.5, s. 6. May also be relevant as to how Hunter described the venture to OLI. If it was a partnership - -Hunter was not honest in his dealings with Keith and Carrie. If it was a partnership – this may not impact the joint and several liability of the three of them – but it may allow Keith and Carrie to make a claim as against Hunter. There is a fiduciary duty on each partner to render account and to act in good faith toward other partners. Here, not disclosing matters that affect the partnership, i.e. the terms of the lease, is a breach of such duty and will entitled he other partners to claim against H for his breach. When the store opened, a sign was erected out front that said – “UUH Country”. → would be useful to know if this name was registered as a business style on behalf of a partnership; sole proprietorship: may help to determine nature of relationship/entity. Note that the name consists of their three initials – which might be more indicative of a collective venture. The store was located in the lower level of the new mall – and consequently sales were slow as there was not that much customer traffic. After a long hot summer, Keith decided to pursue his country music interest – and one day did not show up the store. Instead he sent a note to Hunter that said, “I have left to go to Nashville to pursue m y dreams. Here is a cheque for two months rent - $6666 – close it down. Good luck” Without Keith being present, Carrie said, “I am leaving too.”. Was this a termination of the partnership? OR perhaps the three had some form of “association” – and Keith was just advising he was leaving. Hunter tried to run the store for a few more months – but the business model did not work. One day – he moved out the extra inventory, locked the doors and left the keys behind on the store counter. Would the fact that H unter continued to operate suggest that he saw this as his venture? OR – sole proprietorship; If it was a partnership – if it was in fact terminated – the fact that Hunter operated from this location for a few more months – would that have an impact on Page 1 of 3 liability of the three? What did OLI know ? The termination of a partnership does not affect the liability exposure of its partners in respect of liabilities incurred prior to such termination. Here, given that UUH entered into the lease before its termination, all three partners would then be liable regardless of whether the termination is effective or not. You, Bea Calm, are employed by Oxford Leasing Inc., the lan dlord. The lease is in arrears and efforts made to find new tenants have not been successful. The mall continues to have several thousand square feet of vacant retail space for rent. Your immediate supervisor, Luke Bryan, has asked that given your legal knowledge and background, you prepare a memora
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