Question 1: Jean had just finished her Bachelor of Business Administration degree and wanted to put what she had learned to use. She started a clothing business, selling branded t-shirts and sweatshirts. She called her clothing-line "Real East Life" and all the shirts were branded with those words and an anchor symbol. People seemed to really like the branding and sales were growing.
Jean wanted to start designing additional pieces for her clothing line and needed help. She reached out to an old roommate, Beverley, who had recently graduated with a degree in fashion design. In their free time, Jean and Beverley ultimately developed a whole branded clothing line. Sales of the clothing began to skyrocket after a celebrity was photographed wearing the clothes, with the anchor symbol visible.
Though they do not have any formal agreement, Beverley manages the design side of the business and Jean manages the financial side including invoicing, accounts receivable and marketing. This arrangement had been working well. But now, with the rapid growth of their business and the need for additional financing and help in managing the business, Jean and Beverley recognize that they may have to reconsider the form of business operation that best suits their needs.
(a) What form of business organization are Jean and Beverley currently operating? Explain your answer.
(b) Is there another form of business organization that might better fit their needs given their new circumstances? What are the advantages and disadvantages of your proposed form of business organization?
For the remaining questions in this section, assume that Jean and Beverley decide to form a corporation to carry on the business. They plan on operating in Nova Scotia and Newfoundland and Labrador for now, but may someday expand their operations to other provinces.
(c) Do you think Jean and Beverley should incorporate federally or provincially? Why?
(d) If Jean is appointed Chief Executive Officer and Beverley is appointed Chief Operating Officer of the new corporation what legal duties would they have in their new roles?
(e) What are Jean and Beverley's two main options for financing the corporation? What are the advantages and disadvantages of each form of financing?
Obviously, the brand and logo is of central importance to the corporation and Jean and Beverley want to make sure it is protected.
(f) What protection does the law afford for the brand name and anchor symbol and are there any steps Bertha and Beverley must take to ensure that it is protected nationally?
Question 2: Bora, a contractor, was looking to purchase a significant quantity of wood for upcoming construction projects. He went to a store owned by a company called "The Woods Ltd." There he chatted with a salesperson, Malcolm. Malcolm was authorized by The Woods Ltd. to negotiate with customers but was not authorized to sell lumber at less than $1,000 per board-foot. After some discussion, Malcolm, keen to close the deal, agreed to sell Bora the lumber he needs at a price of $950 per board-foot.
(a) Will The Woods Ltd. be bound by the contract entered into by Malcolm? Why or why not?
Bora ends up buying $30,000 of wood from The Woods Ltd., but it turns out that the wood sold to Bora is rotted/defective. He goes back to The Woods Ltd., but they refuse to give him a refund.
(b) What kind of claim could Bora bring against The Woods Ltd. and what do you think about his chances of success?
Bora has heard around town that The Woods Ltd. is in severe financial difficulty. It turns out the rumours are true. The Woods Ltd. owes $900,000 to its creditors and it only has assets amounting to $500,000. Despite this failed venture, The Woods Ltd.'s two shareholders, Sheilah and Morris, are still doing quite well for themselves.
(b) Bora instead decides to bring an action against the two shareholders of The Woods Ltd., Sheilah and Morris. Discuss the law and Bora's chances of success in this lawsuit. [2 points]
(c) Discuss The Woods Ltd.'s legal options for dealing with its current financial difficulties.