Essay PDCV101: Foundation Legal Knowledge – Pinar Case Study – Law Assignment Help

Assignment Task:

Instructions: 

Answer the following problem question. Remember to clearly identify the relevant legal issues and support your answer by reference to the relevant legal principles and authority. Your answer should be presented in essay format and should present a clear and coherent argument. 

Scenario: 

Pinar decides to open a business but needs some financial assistance to get started. Pinar asks her friend, Armen to invest some money in the business. Armen agrees to contribute equally to the set-up costs, provided that he takes an equal share of the net profits and is kept informed about the business. Armen says that he is too busy to help with the day to day management of the business, so Pinar reassures Armen that she will take care of this. They establish a small retail business called ‘Invitation to Treat’ selling gifts and homewares. Over time, the business grows and Pinar begins employing sales staff. Pinar and Armen meet regularly to go over the books, talk about staffing and discuss expansion of the business. One of the new staff, Louise, is very assertive and assumes a lot of responsibility. Pinar notices that Louise has added the title “Senior customer relations manager” to her emails and other correspondence with suppliers but Pinar doesn’t say anything to Louise about it because she actually finds it amusing and doesn’t want to discourage Louise. Louise thinks that Pinar is missing some real opportunities with customers and sends out an invitation to customers to attend some after hours trading and gives them ‘vouchers’ to buy stock at reduced prices. Louise then opens the shop in the evenings after the usual close of business and sells stock to customers at reduced prices for the vouchers. Customers are thrilled with this and turn up in the evenings, buying a lot of stock. After one week, Louise’s after hours trading makes $5,000. 

Chris is one of Pinar’s suppliers. One day, when Pinar is away, Chris calls the shop and speaks with Louise. Chris convinces Louise to agree to Chris supplying goods to the business ‘exclusively’ for the next five years at a set price of $20,000 per year, which must be paid in two instalments in the first year. Chris tells Louise that this is the best way of securing a good deal for Invitation to Treat. Louise confirms in an email that this is great. Louise thinks Pinar should be impressed that she has saved the business money over five years and secured a good supplier. 

A few customers bring back stock they bought during the after hours trading for refunds. Pinar issues some refunds before she discovers that the stock was partially purchased using the vouchers that Louise has sent out. 

Chris makes the first delivery of goods and Louise forwards the first instalment invoice for $50,000 to the accounts staff, who report it to Pinar. 

Pinar is very unhappy with the decisions that Louise has made and tells her that she did not have any authority to make these decisions. 

Questions: 

1. Advise Pinar about the basis of her legal relationship with Armen and with Louise. 

2. Is Pinar bound by Louise’s actions and if so, in what capacity? 

3. Who is responsible for the purchases from Chris? 

4. Does Armen have any liability for the debts? 

5. Is Louise liable for the debts and, if so, to whom?