Question

4 - Big Bumping Burgers and Rory, an owner, are in trouble. At one of it's Branches, an employee mixed a batch of burgers that contained bacteria. The burgers were not cooked enough to kill off the orgasms. As a result, 40 people became gravely ill and 4 of them died. The Municipal Health Unit shut them down. The business is going to be fined a large sum of money and there are civil suits by victims whose combined claim is in the millions of dollars. What will the financial consequences be for Rory if:

A - The branch is a franchise and Rory is the Franchisor?

B - The business is a sole proprietorship?

C - The business is a Partnership?

D - The business is a corporation?

Answer 1

A. If Rory as a franchisor declared or given public notice during the time of contract with franchise that it does not have significant control on day to day business operations of the franchise and their is an agreement that franchise is solely responsible for its business operations then Rory cannot be held vicariously liable financially for acts of negligence committed by franchise.

However, otherwise since franchise was using the brand and reputation of the franchisor to forward its business, the franchisor has a moral obligation to monitor the business operations. Further the public does not understand the difference between the two. They purchased food based on brand's value and experience, so if such acts of negligence does take place it means Franchisor has failed in its duty and will be equally responsible.

B. If Rory is in a sole proprietorship business , then the business carries unlimited liabilty. He will be fully responsible financially if he is charged and convicted of negligence.

C. Under partnership business if a deed exists stating business partners have limited liability (LLP), then Rory will not be charged for his partner's negligence. Further claimant can recover damages only from the partner engaged in wrongdoing or negligence.

However if partnership is a general one or has unlimited liability then, Rory will be held accountable for negligence aling with all of the partners.

D. If the business is a corporation then works on separate entity principle. The business as a whole will be financially responsible for civil acts of tort. If the plaintiff's case is won then the corporation assets and revenues will be used to pay for damages. Further Rory will be questionable to shareholders for their share values plummeting due to civil suit.