Part A Contracts and UCC Article Question Required: What law applies to this sales transaction? Does Mark

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Question:

Part A

Contracts and UCC Article Question

Required: What law applies to this sales transaction? Does Mark have a defense to perform the contract (buying the lot)? Why or why not? Explain. Would your answer change (and if so how and why) if Mark showed Cathy the plans for his home prior to entering the contract to purchase the lot and Cathy said nothing?

The law of contract (material transfer) applies to thus sales transaction where the requirements under the statute of frauds have to be met before a burden or benefit runs with the land. Where the covenants are contained in the deed itself, the acceptance of the deed constitutes the satisfaction of the statute of frauds in a manner similar to Mark actually signing the documents himself. These neighborhoods covenants may be permanent, have a term of existence or may expire naturally (Bright, 89). They are governed by a deed that transfers property with binding neighborhood contracts generated by written documents that in most cases refer to the covenants and incorporate them through references e.g easement of record. The covenants run with the land subjecting the property itself to the restrictions and not the current owners themselves. Hence the liability to perform a covenant passes with the land to the subsequent owner hence Mark does not have a defense in performing the contract (Bright, 87). My answer would not change even if Cathy says nothing upon being informed of Mark’s plan, because the covenant remains binding whether or not Mark has been advised of them.

Part B

Required:

1. What did journal entry (if any) Lobo make at the end of 2017 (make the entry)? Why (what conditions must be satisfied)? Was any disclosure required? (You must cite the applicable provisions of the ASC).

The court trial is not complete and Lobo Inc. is expecting an unfavorable outcome. In this circumstances, the form of subsection 450-20-25-2(a) of ASC will be attained since the information that is available to the business shows that the court will rule in favor of the city administration. An assessment of loss in the range of $3.5 to 5 million, meets the condition of paragraph 450-20-25-2(b) (Flood, 34).

Journal entries will be as follows

Expense

(Income statement) $4,300,000

Expense payable

(Balance sheet) $4,300,000

Paragraph 55-29

Paragraph 450-20-50-1 to 50-2 requires the revelation of the nature of the risk and based on this the situation may require the accrual sum to be disclosed (Flood, 34).

2. Now assume that Lobo properly made an accrual as a litigation loss of $4.3 million in 2017. In late-2018, Lobo entered into a full settlement with the City for a total of $2 million to cover the cost of the violation. What should journal entry (if any) Lobo make at the end of 2018? Why? Hint: What kind of change is this?

This is a financial loss that occurs arising past the financial statements date and it is presumed it is made before issuance of the financial statements. This is described in paragraph 450-20-25-6 through 25-7. The financial statements must not be misleading and where no accruals are required and disclosure is deemed essential; the following will be incorporated in the financial statements:

Nature of the financial loss contingency or loss

A statement of educated guess is needed about the progression of sum of probable loss or loss indicating that such an approximation cannot be arrived at. Where a financial loss occurs after the financial statements have been presented, the disclosure is best made through a supplementary financial statement through a sheet of financial information that indicates the financial loss as it had happened at financial statements date (Flood, 145). For Lobo Inc. its journal entries may appear as follows;

DR Expense payable (Balance sheet)

$4,3000,000

CR Bank

CR (Decrease in changes in estimates for Loss contingencies recognized in prior Periods )

$2,000,000

$2,300,000

Part C

1. What are the store's reasons for its policies? Your discussion should include the doctrine of respondeat superior and any other relevant points.

Through the doctrine of respondeat superior i.e. let the master answer states that the employer or master is the one responsible for vicarious liability for agents, staff or workers actions. This is true in a situation where there is negligent or tortuous action committed by an employee or worker in the course of their employment or agency. Hence the employer can be held liable for the actions of Heather and Blake. This is what has made employers to advocate for such a policy. Even though the law is clear, there is contention as to whether this policy of “not being a hero” should lead to such stiff penalties as people tend to favor people who stop the bad guys.

2. Do you think that the two situations (Heather / Blake) are equivalent violations of the "don't be a hero" (sometimes called a non-resistance) policy? Should they result in similar discipline? Remember to discuss the facts of each situation.

Yes, the two situations do fulfill the non-resistance policy that many organizations have put in place. Shoplifting and armed robberies are a reasonably common occurrence and the criminals eventually get caught by the police. Hence criminals should not be confronted in the mall they way the two employees did. The mall has a strict policy for employees not to follow in such a case yet Heather did chase the customer who snatched a bag all the way till outside the mall. This can have lead to a suit of false imprisonment being filed against the mall. Blake, on the other hand, went ahead and gave the customer who was shoplifting a tackle that could have resulted to a serious injury on the part of the customer or himself leading to a tort suit being filed against the mall. The reasoning behind this policy is that a robber may pull out a weapon and use it if confronted and the lives of employees and other customers may be lost (Bredeson, 58). Furthermore, the video surveillance offers a good chance for the robbers to be arrested hence the need for the “don’t be a hero policy”.

3. Suppose that the store terminates both employees. Do they have any legal recourse?

The store's policies can be backed up through the idea of employment at will. This means that the employees can be fired at any time and for any reason and the company does not need to have a good reason to terminate both employees as long as the employer has not violated any specific law. As is the case of Blake, there is no law that is in existence that gives workers rights when they are being rejected for because of the “don't be a hero policy.” Where a company has strict policies and an employee violates it then the management can discipline him in any way they see fit especially if the policy is important to the company (Bredeson, 23)

Works cited

Bredeson, Dean. Applied Business Ethics. Mason, Ohio: South-Western, 2012. Print.

Bright, Susan. Researching Property Law. Palgrave Macmillan, 2015. Internet resource.

Flood, Joanne M. Wiley Gaap 2018: Interpretation and Application of Generally Accepted Accounting Principles. New York, NY: John Wiley & Sons, 2018. Print.