College of
Business
Administration
College of
Business
Administration
The Legal and Ethical Environment of Business
1. Harmon was the proud owner of a rolling coffee stand in downtown San Diego. He was interested in making the big bucks, so he decided to sell the stand and enroll in the SDSU EMBA program. He placed a “for sale” sign on the side of his stand. Vernon, an SDSU professor (Biology) in need of some extra cash to support his family, stopped for a short skinny and asked about the stand. “So what kind of volume do you have with your stand, Harmon?” Harmon replied, “I do very well, make me an offer if you are interested.” Vernon went back to his office at the school, fed his gerbil, and started preparing his offer. After several hours of work, he completed the offer: “I, Vernon Milktoast, hereby offer to purchase your rolling coffee stand for $5,000.” Vernon climbed back into his 1972 Ford Falcon and delivered the offer to Harmon. “So this is a real money maker?” asked Vernon as he handed Harmon the offer. Harmon nodded affirmatively and started reading the offer with a devious smile on his face. “This looks good to me!” said Harmon as he added the language “as is, where is” and signed the offer to indicate his acceptance. As it turned out, the coffee stand was not a big success. In fact, Vernon suffered a substantial loss. And much to his chagrin, he found out that the stand was only licensed to operate in a small two block area. Vernon’s dream of moving the stand to Mission Bay to rake in some summer money was dashed on the rocks of utter despair. Although normally a patsy and a dweeb, this made Vernon mad enough to file a lawsuit with the assistance of one of SDSU’s highly regarded Business Law teachers. The complaint alleged that Vernon had been defrauded regarding the profitability and use of the coffee stand, and he asked the court to grant rescission. In the alternative, Vernon asked for damages, including lost profits, on the theory of breach of express and implied promises. How successful is Vernon likely to be with his lawsuit?
2. BillyBob was anxious to get up to the slopes for some radical snowboarding. Although the road had a dusting of snow, he was taking the corners aggressively. Sadly, BillyBob’s Imperial Motors “SnowBeater” was unable to hold a turn and veered off the road and rolled over. The good news was that BillyBob was wearing his seatbelt. The bad news was that the roof dented in the rollover causing trauma to BillyBob’s head. BillyBob was going to survive (sigh of relief), but he was going to have to endure painful therapy and it was doubtful that he was going to be able to snowboard in the future for fear of re-injuring his head on a fall (sigh of anguish). As it turns out, BillyBob had a preexisting injury to his brain caused by years of glue sniffing (he told his friends that he was a model airplane enthusiast) which made the damage more severe than otherwise would have been the case. Apparently, the SnowBeater was designed in accordance with current industry practice in the U.S., but the design of cars built in Europe contained a roll bar to prevent roof dents on rollovers. Also, significant – perhaps – is that fact that the SnowBeater ads on TV showed the U.S. ski team cruising through deep snow, including corners, while the ski teams of other countries were stuck in the snow with their less effective vehicles. BillyBob has retained you to represent him in his litigation. What theories of recovery would be available, and what sorts of defensive strategies might Imperial Motors use? Finally, if you believe BillyBob will win the case, what kinds of damages is he likely to recover?
Return to Professor Dunn's home page.