Warranties and Product Liability in the Organization - Assignment Example

Business Law - Applied Learning Paper Business Law - Applied Learning Paper Forming a business requires in-depth knowledge of pertinent issues that ultimately affect business operation and profitability, which is the essence of starting a business (Cheesman, 2011). Business proprietors must have knowledge of aspects with the capacity to affect the business entity adversely, as well as sufficient know-how to counter such events. Some of the most essential issues that affect business entities include entering into contracts, maintaining a nondiscriminatory work environment, adhering to state and international laws when conducting international trade and warranties and liabilities. This paper will examine these issues in detail, providing scenarios and remedies to probable issues that affect business entities. Companies must ensure complete adherence to the law to deter undue liability and legal action. Business Organizations and Contracts The purpose for my business is selling curios; the craft business appealed to me because of the massive untapped market in the state, and globally. The company will be a limited liability company (LLC) based in the city. An LLC is the best option since it encompasses the characteristics of different business forms like partnerships, corporations and sole proprietorships based on the number of owners. The primary features of LLCs are its greatest advantages compared to other business forms. These include limited liability, less administrative paperwork, intense protection from fire-sale acquisitions and pass through income taxation. In essence, the owner’s personal assets cannot be attached to pay company debts because state laws recognize that LLCs are separate entities from their owners or members (Cheesman, 2011). The pass through income taxation mechanism, on the other hand, provides that the company can elect to pay its taxes as a partnership or sole proprietorship, thus deterring the payment of double taxes. In addition, profit taxation only occurs at the personal member level rather than the company level. Compared to a corporation, an LLC involves less administrative paperwork and record keeping. Furthermore, the LLC business form is the well-suited for my curio business since I am the sole owner. The state allows the formation of an LLC involving a single natural person. In order to get the company started, a number of contracts must be in place. These include lease contracts renewable after one year. This agreement includes clauses on issues such as damage deposits, renewal options, rent adjustments, renovations, rent and operating costs, signing incentives, utility payments, land taxes payable by the tenant and the option to purchase. These clauses cover all pertinent issues concerning the office space. The company must also sign a parking contract with the premises owner detailing the deposit payable, term of contract, renewal, insurance information, risk coverage and termination (Cheesman, 2011). It is pertinent that the company sets up employee contracts for all personnel detailing working hours, remuneration and benefits, annual leave days, termination and appraisal. Since the company shall be sourcing materials from multiple suppliers, sales contracts are crucial to cover the company against delivery of faulty items, delays and specify mode and time of payment. In order to reach the entire market, the company shall set up a website allowing online ordering and instantaneous payment. Law for E-commerce According to Cheesman (2011), electronic commerce otherwise referred to as e-commerce is the sale and purchase of commodities and services through electronic channels like the Internet or other computer-based networks. In essence, electronic commerce draws on technologies like supply chain management, online processing of transactions, electronic funds transfer, online marketing and inventory management schemes. Different countries have distinct regulations and laws for e-commerce. In the US, the Federal Trade Commission (FTC) regulates certain e-commerce activities. The FTC regulates activities like online advertising, consumer privacy and the usage of commercial e-mails. The FTC requires that all forms of online advertising must be non-deceptive, and all companies using online trade mechanisms to maintain corporate privacy statements that include the protection of personal consumer information. The company should ensure strict compliance with the provisions of regulatory authorities to deter potential lawsuits. For instance, the company must conduct honest advertising and maintain customer privacy, particularly with regard to payment information. The company should also be aware of the e-sign act that recognizes the validity of electronic contracts entered using electronic signatures. Because the company will be conducting most of its business online, it is crucial to ensure that all contracts are legally enforceable and within the letter of the law. Since the company will be shipping its wares internationally, it is pertinent to note that the International Consumer Protection and Enforcement Network (ICPEN) protects cross-border customers and helps traders to exchange pertinent information for mutual benefit. In addition, the company has to cater for taxes. Taxation is a vital element in e-commerce across the globe. This is particularly so because engaging in global e-commerce requires the negotiation of web taxes in all the countries that the company conducts business (Cheesman, 2011). This includes national tax laws that have distinct provisions for foreign transactions and domestic taxes. Furthermore, most countries are currently seeking exceptional tax measures for Internet purchases, which establish a distinct category for regulations. Nations within the European Union tax e-commerce through value added taxes that act as consumption taxes, which reach up to 20%. The US, however, froze e-commerce taxes following the Internet Tax Freedom Act, which means selling company products in different US states will not demand payment of e-commerce taxes. Equal Opportunity in Employment The US Constitution provides for the maintenance of equal employment opportunity for all persons. The US Equal Employment Opportunity Commission ensures strict adherence to the law. The EEOC statutes illegalize bias against workers because of sex, disability, age, nationality, race and color. In addition, federal protection is accorded against bias on the foundation of marital status, sexual orientation and political affiliation among others (Cheesman, 2011). A company employee recently filed a grievance for unfairness on the basis of marital status. The employee argued that the company manager placed her in a secretary’s position since she is unmarried. The complainant believed the position was beneath her academic and professional qualifications, which made it possible for her to hold a supervisor’s position. The employee further argued she was given the position to help the company pull additional male clients. In order to remedy this situation, the company posted a notice to its entire workforce advising them on their legal rights under EEO and their claim to liberty from retaliation. The company manager also took significant corrective actions to correct the source of discrimination by placing the complainant in a nondiscriminatory position. The manager placed the employee in the supervisor position, which the employee perceived as the right nondiscriminatory position. Furthermore, the company paid the employee compensatory damages like a 1% stake in the company and back-pay with lost benefits. These measures had defused the adverse situation before the EEOC ruled whether or not discrimination had occurred. White Collar Crime About six months ago, the company was victim to a white collar crime. These crimes refer to nonviolent crimes that are financially motivated. One of the company’s former employees engaged in occupational crime against the company. The employee engaged in computer fraud in by hacking into the company’s sales data base and stealing confidential customer information such as bank information and credit card information. The former employee stole the identity of company customers before draining their bank accounts. Upon realizing that the crime had been committed, the company filed a case with the state police department. The Computer Fraud and Abuse Act (CFAA) protects companies and individuals against unauthorized computer access involving the retrieval of protected information. Although the law is largely a criminal statute, in 1994, the US Congress allowed the inclusion of a civil suit providing a private cause of action when violations of computer integrity cause damage or loss (Cheesman, 2011). The former employee was held civilly liable and made to pay injunctive relief and compensatory damages to the company and all affected customers. Since the company, as well as its customers, proved they incurred massive damages, which is all the law, requires showing that the defendant is culpable (Cheesman, 2011). In addition, because the 2008 amendment of the CFAA through the Identity Theft Enforcement and Restitution Act removed the need for plaintiff’s loss to exceed $5,000, the former employee was found to have committed a felony. This is because while the former employee stole $4,000 dollars through identity theft, the provisions of the law pursuant to the 2008 amendment hold that such theft still constitutes a felony. Breach of Contract Every day, business entities engage in activities that demand contractual obligations, even in instances where such contracting parties do not enter a specifically negotiated written contract. In essence, the contract is the engine that propels commerce through the provision of legally enforceable rights to both parties who enter into the contract. However, it is common for contracting parties to contravene the provisions of a contract. Failure to perform one’s side of a contract signifies a contract breach and can bear detrimental legal repercussions (Cheesman, 2011). Nonetheless, while contractual breaches adversely affect the wronged party of a contract, it is critical to realize that not any breach of contract is sufficiently serious to necessitate litigation. When the company dealt with a breach of contract, it initially evaluated the scenario to ascertain whether the breach was material and if it caused real damages and loss. A material breach is one that deprives the aggrieved party of a reasonably expected benefit. In terms of remedy for this form of breach, courts consider factors like the degree to which the wronged party can be compensated adequately, the degree to which the breaching party will bear forfeiture, the probability that the breaching party will remedy the failure and the degree to which the actions of the breaching party contravenes the standards of “good faith and fair dealing.” While courts can choose to order the breaching party to fulfill its contractual obligations, this scenario is rather rare. The usual course of action in litigation involving breach of contract is the grant of monetary damages. The court chose this verdict with the aim of making the wronged party (the company) whole as the breaching party (vendor) pays for sales, as well as any lost business that emanates from their breach of contract. However, before handing the verdict, the court ascertained that the company had covered itself sufficiently following the loss realized from the vendor’s failure to deliver. The company acted in “good faith and without unreasonable delay” by purchasing the products supposed to be delivered by the vendor (Cheesman, 2011). Therefore, the company was able to recover from the breaching vendor as damages the total difference between the cost of the goods purchased from another vendor (cover) and the entire contract price coupled with all consequential damages. Therefore, when the breaching vendor failed to deliver goods, the company found an alternative source and bought the goods from the new source. Warranties and Product Liability While warranties and return policies on products are a sure way of attracting additional customers and maintaining the current market share, it is disadvantageous for the company to offer a warranty and return policy (Cheesman, 2011). This is because warranties entail plenty of paper work. This is essentially a substantial disadvantage as it increases costs. In addition, in offering a warranty and return policy, the company becomes highly liable for legal action from unhappy customers who experience displeasure with the curio products sold to them by the company. In some instances, customers choose to enforce a warranty following product damages as a result of negligence. In such cases, the customer may demand a refund or product substitution and may seek legal action claiming the company sold defective goods. These legal tussles are often long, costly and repel potential and current customers. Therefore, in order to avoid these adverse scenarios, it is pertinent that the company does not adopt warranties and return policy agreements in its sales strategies. Furthermore, offering product warranties and return policy makes the company susceptible to unnecessary costs such as shipping product replacements or repaired items. Considering that the company deals in crafts such as curio items, which are highly susceptible to transit damages, damages from wear and tear and adverse weather, the company could be at a disadvantageous position if it offered warranties and return policies. Reference Cheesman, H. R. (2011). Contemporary business and online commerce law (7th ed.). New Jersey: Prentice Hall. Read More