Blaw paper Custom Essay

Take-home exam: Open book, open notes, outside sources allowed, but individual effort. By “individual effort” I mean that you are not to discuss the exam with anyone, from the time you open this document

until the time you turn it in. Include the Honor Code statement at the bottom of your document and “sign” it by typing “/s/” and then your name.

Be sure to cite any sources you rely on. (Wikipedia and Google are not acceptable ‘sources.’)

Please read the questions carefully, and make sure you answer each one. Focus your answers, so that you answer only the questions presented. Do not give me an encyclopedic discussion of the general area

of the law. I prefer you devote your effort to thinking, rather than writing. Please don’t exceed 4 pages, typed, double-spaced.

Something that’s been in the news lately, and on television, is the increasing number of teenagers injured in automobile accidents, driving while texting or talking on their cell phones. There are state laws and city

ordinances being debated and passed – some allow police to stop someone they see driving and texting. Others require a police stop for some other reason but the penalty for texting then becomes a add-on

to the original infraction.

What are concerned parents to do about this is an interesting problem I noticed one website that is combining education and public pressure and selling ‘stuff.’ Look at
http://www.textinganddrivingsafety.com/texting-and-driving-stats/

Scroll way down, almost to the bottom, and you’ll see some apps these folks are selling – “Technology for Parents.” Maybe there’s a business opportunity there. There is certainly a final exam question

suggested.

(What is written above is true. Everything below is fiction, made up for purposes of this exam.)

Let me appeal to the entrepreneurial spirit that Babson tries to foster. Afew days ago, I got a phone call from Bud Insky, a Babson College graduate (Class of 2004). Bud inherited a little money shortly after he

graduated, and he used what he had learned at Babson, and especially in the Foundations of Business Law that I taught back then, to start up several small business ventures. He told me about them – cell

phone apps or GPS apps which he developed, built up, and then sold to larger companies, for cash. He says that he was now interested in starting a real business. The website cited above is what got his

attention.

He has been having conversations with two friends. One is Natalie Drest, who is Vice President for Manufacturing in a small electronics company with its main plant on Route 128. The company makes the

motion detecting devices that turn on security lights and surveillance cameras. The other is Ray Gunn, who used to work at Apple – he had worked on the newer iPhones – 3, 4, 5 and (shh – it’s a secret) 6,

and he knows all about cellphone transmission stuff. But he quit a few months ago, looking for something to do outside the world of the giant corporate hierarchy.

Bud told us that when he had a conversation with Natalie and Ray about the website story (the link above) he had one of those ‘eureka’ moments – a flash of inspiration that every entrepreneur hopes to have

– one which produces a wonderful business opportunity. They had been talking about the major shortcoming of any app a parent would install on their kids’ phones to prevent texting while driving – kids these

days would quickly figure out how to disable such an app. Natalie and Ray think that they can design a small motion-detecting device that could be attached by a magnet, on the back bumper of a car, where it

would not be noticed. This device would intercept a cellphone signal, when the motion detector kicked in, and block the transmission of a text message. The fact that the device is hidden makes it tamperproof.

Bud thinks that parents of teenagers would be happy to pay a reasonable amount for such a device. One other key player on the team will be his old marketing professor from Babson (now retired), M. T.

Suit, who would be able to write marketing materials for an advertising campaign, easy-to-understand instructions for technically illiterate parents about how the device works, how to hide it on the car, and so

on.

Now Bud, Ray, Natalie and M.T. want to form a business to manufacture and sell the devices.

He tells us that the motion detection device is a rather simple piece of electronic hardware – something along the lines of what Natalie’s company already makes. He thinks we can buy these, at a special low

price, from Natalie’s company. We would install the signal-blocking software and then package and ship the devices to buyers.

He thinks that with the ongoing publicity about teenage drivers and the expected inexpensive price, these devices will be easy to sell by the millions.

Natalie will keep her current job because she can guarantee we get a special low price – 1% over their cost, which is a lot less than her company’s usual 30% markup. Ray will develop the blocking software

and make sure it is compatible with all types of cell phones. M.T. will work from home to develop the marketing materials and other stuff.

Bud has a business plan and is ready to make his move. Bud asked me if I could answer a few simple legal questions for him. I told him I was too busy, grading papers and so on, but I was happy to

recommend one of my top students – you. So Bud invites you (just you) out to lunch, and says he wants some legal advice from you. He says he knows you are only an undergraduate here at Babson, but

you’ve just completed my LAW 1000 course, so he’s confident you can help him. Here is the additional information he gives you and his questions:

Bud will invest $500,000, and Ray, Natalie and M.T. will each invest $100,000. Bud says that with this amount in capital and a loan of about $2 million from a bank he can get started. The first year or so will

be tough – he’ll have to get office space, line up an overseas manufacturer, develop sales literature, and hire and train some sales people. Bud thinks that the $2.8 million will be enough to cover operating

expenses through the startup period, before the sales revenue starts pouring in. Questions:

(a) What’s the best form of business organization for the company at the outset? Bud, Natalie, Ray and M.T. are the only owners at the beginning, but they will want to add some more investors in a year or so.

How would you allocate the ownership among the 4, and why do you recommend this particular form of business organization as opposed to some others? (20 points)

(b) Bud wonders if there’s any potential legal liability arising from Natalie staying at her current job while being part of this new venture. What sorts of questions do you have to have answers to, in order to tell

him about possible legal risks? (20 points)

(c) Bud says that in order to hold down the company’s costs and administrative burdens, he wants all of the sales people – the men and women who will be calling electronics stores – to be independent

contractors instead of being employees. What are some provisions he should include in the job descriptions or employment contracts that will help him should anyone ever raise a question about their status?

(20 points)

(d) Bud says the new company should adopt two HR rules. One is that, for the people who will be working in the company’s home office, the company will not hire any fat people. He thinks fat people are fat

because they lack ambition and self control. He says he doesn’t have a good definition of ‘fat person,’ but he knows when he sees one. The second HR rule is for the sales force – the company will not hire any

man who wears an earring. Bud believes that a man who wears an earring presents a very unprofessional appearance. Bud says he knows that once the company has more than 15 employees it becomes

subject to several federal employment discrimination statutes. Bud asks whether, if we were to adopt either of these two HR rules, we would be violating any of the federal statutes described in Chapter 22 of

the text. (20 points)

(e) M.T. Suit suggests that the company can benefit from the current publicity about the danger of teenagers driving while using their phones. He thinks that they can generate some interest and advance demand

for their device. He says he’s pretty sure their device will work even they haven’t actually made one and tested it. But, ‘never mind,’ he says – ‘we can test it pretty soon.’ M.T. immediately starts to advertise

their device on the Internet with the slogan: “Laboratory tested and proven effective.” What possible legal problems might follow from this advertising campaign? (20 points)