Business Law Case Study
Business Law Case Study
Issue
Is Walmart vicariously liable for the personally motivated acts of its cashier?
“A principal (employer) is not liable for the intentional torts of agents and employees that bare committed outside the principal’s scope of business; however, a principal (employer) is liable under the doctrine of vicarious liability for the intentional torts of agents and employees committed within the agent’s scope of employment” (p. 448).
Two main tests are normally applied by the courts: the motivational and work-related test. “Under the motivation test, if the agent’s (or employee’s) motivation in committing an intentional tort is to promote the principal’s business, the principal is liable for any injury caused by the tort” (Cheeseman, 2015, p. 448). “If an agent (or employee) commits an intentional tort within a work-related time or space, the principal is liable for any injuries caused by the agent’s intentional torts and the employee’s motivation is immaterial” (Cheeseman, 2015, p. 448).
Analysis
In this case, the court of appeal, using the motivation test, held that Walmart was not vicariously liable for Burley’s actions of hitting a customer and being hit back. The court’s reasoning was that the cashier’s conduct “substantially depart [ed] from a cashier’s normal methods of performance, and that the cashier’s actions arose not from work-related motivation but by her desire to pas time and release mounting frustration with her job (Cheeseman, 2015, p. 449).
Conclusion
Walmart could not be held liable for personal acts of the cashier as her conduct went beyond her work specifications and hence were purely personal thus had nothing to do with her employer.
Issue
Is Barr, the sole owner of The Stone Scone, personally liable for the unpaid debt?
“A sole proprietor has unlimited personal liability” (p. 459) for any failure to pay or default on loans and credit advanced to the business by creditors like banks. In addition, “an individual doing business as a sole proprietor, even when business is done under a different name, remains personally liable for all the obligations of the sole proprietorship” [as quoted in Cheeseman, (2015, p. 460)].
Analysis
As is evident from the facts of the case, Constance Barr, the plaintiff, was the sole owner of The Stone Scone business and having obtained a credit from Fleet Bank on the behalf of the entity, he was correctly held to be liable for the $91, 444 unpaid loans.
Conclusion
Since there was cogent evidence adduced before the court that proved that at the time of taking the credit from the Bank of America, Barr was the sole owner of the business, it was right for the court to personally hold him liable for any default in payment. The fact that the sole proprietorship was later converted into a limited liability company was therefore irrelevant as it would set a bad precedent for the court to allow individuals to escape liability by hiding under the veil of limited liability that was not there when the liability was assumed.
Issue
Is Fraioli personally liable for the debts of Triumvirate, a corporation of which he is the sole shareholder?
The general rule is that “they are liable only to the extent of their capital contributions and do not have personal liability for the corporation’s debts and obligations” (p.479). Further, Lord Welch in this case stated that “as a general rule, a corporation is a distinct legal entity, separate from the individuals who comprise them, and individual shareholders are not liable for the debts of the corporation” (Cheeseman, 2015, p. 480). This is a common law rule that has stood the test of time since it was established by the House of Lords in the landmark case of Salomon v Salomon and Co. Ltd (1896).
Analysis
Acknowledging the law of persons, Fraioli and Triumvirate are separate beings thus Fraoli cannot be held liable for the corporation`s debts. Being a separate legal entity Fraoli is not liable for Triumvirate debts.
Conclusion
As was unanimously held in Salomon’s case, shareholders of limited liability company or corporation is not to be held personally liable for the debts of the corporation over and above their capital contributions to the business. Hence, the court was right in finding for Mare Fraioli since he and Triumvirate Corporation were two separate entities under business company law.
Reference(s)
Cheeseman, H. R. (2015). Contemporary business law. Boston & Taipei: Pearson. Retrieved February 14, 2016, from http://www28.zippyshare.com/v/6oZT0hvI/file.html
