Quiz 41: Types of Business Organizations

Business

Case brief: Four persons named J, SH, G and EL agreed to purchase a piece of land and decided to make it available for use as a playground for children. They called that playground with a name MDW. J and G improperly fixed a swing and due to that a child was injured. Can a law suit can be brought against playground. Unincorporated association It is a combination of two or more people for fulfilling a common purpose. The authority of unincorporated association is governed by contract law. It is not established by a statute hence it is not having any legal existence. It cannot sue or sued by other persons legally. Generally, the persons of this association are not liable for the liabilities. Opinion Here in this case scenario, the MDW was an unincorporated association the child unable to sue the playground because the owners did not incorporate the playground name. They merely named the playground. There is no legal existence for it. Therefore, it is an unincorporated association which cannot be sued hence, the damages cannot be recovered from it.

Refer to the case Federal Trade Commission (FTC) v Tiny Doubles Internationl to answer question as below: Facts to this case • A company sold "business opportunities". • These "business opportunities" made statues for customers. • The company claimed it was not a franchise and did not comply with franchise disclosure rule. • FTC sued for failure to comply with the rule. Case Issue The issue is whether the company has to comply with the franchise disclosure rule when they claim they are not a franchise. Relevant Terms, Laws, and Cases Franchise Disclosure - franchisors are required to provide to prospective franchisees material information regarding the franchise including lawsuits, finances, patents, etc. Opinion The court held for the FTC. • It didn't matter if the company claimed they were not a franchise, because they did business as one. • Since they did business as a franchise they are required to provide disclosure documents. • They failed to do so. Thus, the company was in violation of the franchise disclosure rule.

Facts to this case • W sold "business opportunities" in vending machines to people. • W gave false information to prospective buyers. • W did not provide a franchise disclosure and was sued by the FTC. Case Issue The issue is whether W "business opportunity" is considered a franchise. Relevant Terms, Laws, and Cases Franchise Disclosure - franchisors are required to provide to prospective franchisees material information regarding the franchise including lawsuits, finances, patents, etc. Discussion A franchise sold by a franchisor grants the exclusive sale of a product to a franchisee at a certain area. The following situation differs in whether it is a franchise or not • Sale of merely the vending machine is not a franchise , e.g. the owners can place it wherever they want. • Sale of the vending machine with territorial privileges will be a franchise because that gives them exclusivity of selling the vending machine products in an area. Franchise will fall under Federal law which requires franchise disclosures.

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