Question

Please give me a variety of hypothetical scenarios. For each scenarios, explain the reasoning behind your answer. (a). You are the owner of a new cauliflower pizza crust manufacturer. The pizza crusts are made primarily of cauliflower and brown rice flour. Your factory supervisor takes the initiative and decides to place an order for more brown rice flour from one of your suppliers while you are out of town. Since the brown rice flour was necessary for keeping operations going while you were gone. You happily pay the supplier for the order when you get back in town. The same employee starts to place new orders for brown rice flour anytime supplies are low, and even though you never gave him formal permission to do this you keep paying the supplier. However, one day you notice that the price that the supplier of brown rice flour is asking is higher than the going rate with other suppliers. You call the supplier and ask for a reduction in price, because you assert that the employee, the factory supervisor, was not authorized to place the order in the first place. Do you think the supplier might insist on getting his original price even though you say the employee was not authorized to place the order? Explain (b). You are the owner of a beachside restaurant, and you have fallen behind for many months on your loan repayments to the bank (you owe a total of $100,000). The bank has become fed up and now wants you to hand over all of your remaining company funds to pay back the loan. However, the summer tourist season is coming up in a few months and this is where you typical do 60%-70% of your business for the year. Without your company funds you will not be able to pay your rent and pay your staff, so you will not be able to pay back the bank until after the summer season. If you end up needing to file for bankruptcy, what type do you think would be most appropriate for this situation? (c). Now suppose that you decide to open up a full-service 24-hour auto repair shop. Your shop is the only one that is open 24 hours a day in your home town. In fact, you are pretty sure it is the only 24-hour auto repair shop in the state. Your business is now a great success, but you had a great deal of trouble finally finding an auto mechanic willing to work the late shift. You are now concerned that this mechanic can leave you at any time and go open or help someone else open up a 24-hour shop. You decide to make him sign a noncompetition agreement saying that if he ever leaves your shop he cannot work as an auto mechanic anywhere in your state for the next seven years. He looks at you and says, "Are you out of your mind?" What alternative terms of a noncompetition agreement do you think would be more reasonable?

Answer 1

a)

When the employee ordered for brown rice for the first time, as the owner of the pizza manufacturer we should have told him about authority and created clear boundaries. However, since we did not and he kept on ordering the product from supplier, it has created an apparent authority for the employee. Naturally this means that the supplier is entitled to the original price (higher than the market price) that was agreed between the pizza manufacturer and them.

b)

In this case, you do not want to liquidate your business. You want to pay the bank but do not have the money right now. In such situation, the best approach is chapter 13 bankruptcy. It is also known as repayment plan. It reorganizes the debt so that your business can pay the bank back with some adjustment.

c)

Non-compete agreements can be thrown out in the court if they are very restrictive. In this case the scope of the agreement is too large (entire state) and too long (seven years). This will not be accepted in the court or enforceable by law. Hence the better approach will be to tell him that he cannot work in a 24/7 auto mechanic shop for the next two years if the other shop is within the city. This is fairly reasonable.