Assignment Task
Case Study
Scenario 1
1. Tim receives a catalogue in his email from GREAT GUYS store advertising laptops. The catalogue shows the various products on sale and their respective prices. He visits the store and selects Premium RZ1 laptop displayed on a shelf and approaches the counter. It has a marked price of $600. He tells the salesperson he will definitely buy it provided he can purchase the laptop with the headphone set for $600. The salesperson informs him that the best price he can give the laptop and headphones for was $620. Tim thinks the headphone set is overpriced and says he will continue to browse, looking at other laptops. He notices a Jell S1 laptop in a separate aisle and takes it to the counter asking whether the Jell S1 had the same functionalities and efficiency as the Premium RZ1. The salesperson advises him that the item is not for sale as it was the last one left and it was reserved for sale for another customer. The salesperson advises him that a new line- Star SR9- is available with lots of stock at the back of the store. He is told Star SR9 is ‘top of the line as far as laptops go and does not have the technical problems that some of the other lines do.’ Impressed by this, Tim asks whether it comes with a 2 year warranty and the owner confirms this. Tim asks to have a look at the Star SR9 laptop and the shop assistant responds that Tim has made a good choice, returning a few minutes later with the laptop. However, on observing the price of Star SR9 being $800, Tim said he needed time to think about it. The owner advised him ‘I will keep this offer open for one week. Let me know. Let me have your email address.’ 3 days later, Tim received an email from the store informing him that the laptop had been sold to another buyer. INSTRUCTIONS: Tim is unhappy and insists that surely there must be a contract in existence between the store and him. Advise him using the IRAC method. Please refer to relevant case-law in support of legal principles discussed.
Scenario 2
2. You are an experienced chartered accountant specialising in business structures. David contacts your office and makes an appointment with you. During your meeting with David, he advises you that he wants to set up a plumbing business. David anticipates that he and his wife Ruby will run the business jointly and are open to others joining their business as employees or to assist to manage their business as it grows. He wishes to be able to easily source capital in the future should the business expand. They want to keep their costs and tax burden low and want as minimal paperwork as possible in terms of running the business. They hope to use a low risk business structure where their liability if anything goes wrong with the business is kept minimal. David believes that he will need to invest $150,000 in the business and will do this by borrowing the money from his local bank. INSTRUCTIONS: David would like to understand the different ways his business can be structured. You should address at least 2 possible structures in your answer which might be suitable to him. In your advice please address the following concerns that David has.
How to set up the structure.
Is it a separate legal entity or not
Potential liability issues
Is the structure easily dissolved?
Tax burden
Reporting Burden
Ease of raising capital
Other pros and cons. Advise him using the IRAC method (Business Structures IRAC Grid- see Resources). Please refer to relevant case-law in support of legal principles discussed.
