Question 1: (15 Marks)
Jack and Mary are university lecturers who have developed a new product they think will dramatically improve university classroom management. Their product is a classroom chair equipped with sensors which detect when students are not concentrating and send a mild electric current through the student sitting on the chair to get them to pay attention. Their friend, Will thinks the idea is great and would like to get involved in the business venture. Will has recently been released from jail after being convicted of theft and sees this as an opportunity to start a new life. Their intention is to start small, but they hope to eventually grow the business into a large provider of university and school classroom seating. None of them has much money, although their neighbor, Ken, is prepared to invest most of the money they need to get the business started.
Give Jack, Mary and Will advice on the most appropriate business structure for their proposed business.
Question 2: (10 Marks)
Assume the business was set up as a Victorian partnership – ‘Attento–Chair Industries’. Unfortunately, there are some problems:
(a) Jack buys some cheap sensors for the first batch of chairs and uses the savings to buy himself a new expensive suit and watch without telling his business partners.
(b) A number of the chairs malfunction after Jack uses the cheap sensors and cause serious burns to a number of students. The students plan to sue the partnership for compensation. The police are also investigating whether any health and safety laws have been broken;
(c) Ken has heard of the troubles and is demanding access to the business records and accounts and is complaining about not getting a say in the way the business in being run.
Give the partnership legal advice on each of the problems.
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